Indian E-Commerce Business Is Gaining Pace Cash-Back Is The Key Success Formula

In recent years it has been very usual when you see host of pop-ups & banner ads splashes right in front of you during dedicated hours of browsing with tempting sales message. And on your part, you cannot resist clicking, rather do a little window-shopping or add items to your online shopping carts (if you have accounts).

With cash flow from recent fund-raising efforts made Indian e-commerce companies lineup with big flash sale, discounts, exclusive merchandise, and cash-back schemesover the year. Indian market viewed it as an opportunity to sell more and gain more market share and forces a tough time for the brick and mortar stores for the festive season in 2018.

Today, Indian e-commerce industry is no more nascent rather it has grown up to a $3-billion e-commerce industry, ready to cash the opportunity and make a dent in offline sales channel. Festive season that begins in September at India with Onam, Dussehra & Diwali usually ends in January with harvest festivals in Southern States. This season is going to capture a large, high, valuable and captivating sales slope gradient.

Online shops are growing as a favorable option in the Smartphone era as it allows shopping decently from crowd of brands, no need to shop physically and glue to exclusive offers sitting back at home. Shopaholics of today has convinced the online retailers since the beginning of the year 2014 that this Festive Season would be the best ever, making them expect to double sales with clothes, accessories, home appliances, electronics, etc.

Indian e-commerce to reach $35 billion by 2019

Indian e-commerce sector’s growth looks strong and is expected to reach $35 billion (Rs 2.27 lakh crore) by 2019, says a report. “The growth of India e-commerce remains strong, tracking our expectations of reaching $35 billion by 2019,” Nomura said in a research report. The report, however, noted that the focus needs to move towards the roadmap to profitability, where “some progress is visible but a lot is still in the works”. It further said that there are areas where significant progress needs to be made and that includes diversification of categories, less discounting, improved logistics and benign legislation like GST. On these fronts, there is “still work in progress and remains big areas of investment”, the report said.

According to Nomura, the festive sale season kicked off with a bang for Indian e-commerce players, but still is lower in comparison with China and the US. In China, Alibaba during its ‘Singles Day’ on November 11, 2014 sold goods worth $9 billion (Rs 58,473 crore), while in the US, during Cyber Monday (Monday after Thanksgiving) and Black Friday, sales of around $3 billion (Rs 19,491 crore) each were recorded in 2014. In comparison, the quarterly expectations for India’s holiday sales are closer to $4 billion (Rs 25,988 crore).

Typically the festive season (October to December) accounts for about 35-40% of annual sales for the e-commerce firms. According to Technopak, e-commerce in India recorded around $7 billion (Rs 45,479 crore) in annual sales in FY15, and is expected to generate about $10 billion (Rs 64,970 crore) in FY16, leading to sales expectations of around $4 billion for the e-commerce firms this festive season.

Cash-back the new king in Indian e-commerce

“Cash-back is the reigning king of Indian e-commerce market,” says Saurabh Vashishtha, vice-president, business, Paytm. While discounts attract shoppers, there is little that they do for customer retention. Between three top players, a consumer will identify the platform offering maximum rebate and shop there. However, there is nothing to ensure that this transaction moves on from being a one-time interaction to something more permanent.

Vashishtha adds that the cash-back scheme on Paytm has a further advantage vis-a-vis other online marketplaces. “Unlike other platforms where a cash-back earned on a purchase must necessarily be used for another similar purchase, on Paytm users have myriad possibilities for using that cash,” he contends. “The second transaction could be need-based or an impulsive buy but the chances of it taking place are almost 100%,” he claims. Vashishtha’s confidence is borne out by Abhishek Pandey and Shivani Gupta. The husband-wife duo in Delhi visited GrabOn, an online coupon and deal site, bought grocery worth Rs 15,000 from PepperTap, an online grocery app, and paid the amount from their Paytm mobile wallet. To their surprise, the duo got a cash-back of Rs 5,000 and now plans to shop more by using the windfall.

Gupta, a 26-year old homemaker, will buy apparel with that from Kaaryah, a brand of western, non-casual wear for women. “This is the best thing about cash-back. The shopping never ends as your wallet never gets empty,” she says. Her husband nods in agreement. “Cash-back saves me from giving money to my wife,” he says cheekily.

The focus of the cash-flushed e-commerce players, who have tried every trick in the book to acquire more customers, has now shifted a gear -from wooing to retaining them and ensuring they come back again and again. Retail analysts point that on an e-tailing landscape dotted with promiscuous, deal-hunting buyers, cash-back stands a better chance than discounts in instilling some sense of loyalty in consumers and plugging the ‘leaking bucket’ problem of acquiring and losing users quickly.

Arvind Singhal, founder of consultancy firm Technopak, says disloyalty is inevitable in online shopping simply because most of the products consumers want are freely available and they will buy them from the marketplace that’s offering the best deal. However, this doesn’t guarantee repeat buying nor does it promise brand allegiance. The muted success of couponing (redemption of a coupon for a rebate on a purchase) in India bears testimony to this fact, he says. “Cash-back is potentially a better way of engaging with consumers. It’s like building a loyalty programme in an indirect manner,” reckons Singhal. In a recent study, industry body Assocham said online sales would cross Rs 52,000 crore during the festive season, which goes on till December-end. The study added that e-commerce sales would register a fivefold increase this festive season over the 2014 corresponding period. Though it’s too early to judge the success of cash-back, for the time being it seems that it’s doing its bit to spur online sales.

Considering the experts’ opinion

Economists predict that this is the “year of the retailers”. The e-commerce websites are going to perform better, compared to last year. With the presence of optimistic e-commerce marketing overview and consecutive sub 5 percent growth in last three years, country seems to scale new heights with GDP of 5.7 percent in the first quarter. Further with the launch of ‘Make in India’ campaign Indian manufacturing sector tends to attract more of foreign investors, which is likely going to favor the growth of the Indian e-commerce market. (At present, foreign investment is only permitted in the wholesale market and not in retail e-commerce)

Experts believe that we made the big e-commerce move and have the zeal to serve the best, but we need to consider the higher Internet penetration, rise in the number of Smartphone devices and users, and computer literacy. (Some eminent factors that could make or break e-commerce sales funnel) E-commerce is big supply chain and in a country of population 1.25 billion, potential growth of such industry is high if you can analyze the buying trends and behaviors of the shoppers.

To be successful, the online shopping carts must strengthen and exhibit three pillars of success:

  • Powerful Product/Service Proposition – e-Commerce websites must offer unique products and services that stand out.
  • Potent Supply Chain – Must enable a robust supply chain, ensuring the shortest time between purchase and delivery.
  • Phenomenal Customer Service – Not just a good customer service, but try to stay obsessed with it.

So if you join the move, then you need to fix those bugs or revamp your sluggish website to grab the festive market.

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