Senior executives of leading sites Amazon,
"This is probably the first time that e-commerce biggies are talking about margins and profitability," said the sales head of a leading Japanese consumer electronics brand.
"They have informed us that there won't be any deep discounting for the big brands since they want to earn healthy profit margins too, with e-commerce sales expected to double this year," said the sales head. Abhishek Ganguly, managing director at Puma India, one of the largest brands selling online in India, said, "They might make the same noise and spend as much marketing money but discounts will be lower."
Sales won't be affected by the curbing of discounts as the number of vendors and product categories has risen as more Indians take to online shopping.
"Snapdeal saw a tremendous surge in sales during Diwali last year, recording 15x increase in traffic," said Srinivas Murthy, senior vice president, marketing. "This year, we expect Diwali to be a bigger success and are upscaling the platform to manage increased traffic. Our customer as well as seller base have grown phenomenally in the last year and we expect this base to further expand exponentially during the Diwali 2015 season."
Last year's discounts were needed to build awareness, said Manish Sharma, managing director at Panasonic India. "This season, lesser discounts and offers are expected to be floated as compared to last year as there needs to be more focus on tightening delivery systems and processes," he said. "E-commerce channels will keep their advertising and discounting measured, and address both the front-end and back-end infrastructure capabilities necessary to handle the demand surge the season brings."
The festive season starts with Durga Puja next month and goes on to include Karva Chauth and Bhai Dhuj, with Diwali in November. The period traditionally marks an upsurge in consumer spending, accounting for at least a third of sales for big brands — although some of the fervour has been muted of late due to the sluggish economy.
To be sure, there will be some bargains available. After all, industry estimates suggest e-commerce companies will together spend Rs 2,000 crore this year on marketing and offering discounts to consumers during the festive season.
While online discounts will be limited to 5-15% during the festive season on major brands on average, the substantial price cuts will be on online exclusive brands and private labels, which in any case have bigger margins. Also, price cuts won't be focused on just a few products as before.
The promoter-CEO of a leading merchant who sells on Amazon said: "Discounts will be spread across categories this year unlike disproportionate focus on core categories like smartphone and apparel," said Online companies used to discount products even when they weren't getting any price-offs from suppliers, said J Suresh, chief executive of Arvind Lifestyle Brands, which operates stores that sell Gap, US Polo and Calvin Klein. That seems to have changed.
"Now margins seem to be their focus," he said. "Also, we don't have enough unsold inventory to clear through discounting." Retailers offer heavy discounts, especially online, when they are saddled with large volumes of unsold stock. But in the last few months, brands have either got better at predicting demand or have seen sales rise so stock hasn't been piling up as much.
"Retailers have been planning well in terms of buying and sourcing merchandise which leaves little room for unsold products," said Jacob John, deputy CEO at Lifestyle department stores. "Also, heavy discounting comes at a risk of eroding brand imagery and positioning."
No comments:
Post a Comment