The pros and cons of eCommerce in India

Satish Meena/Forrester Research
09 Oct 2014

Big Billion Day” — was marketed by Flipkart extensively, both online and offline. The founders of Flipkart, Sachin and Binny Bansal, sent a personalized email to registered users announcing the date and mentioning their emotional connection with the number 610 (the number of the apartment from which they launched Flipkart in 2007). October 6 falls in the festive season of Diwali, a period that accounts for 40% of the total sales of key brands in India. Online and offline retailers are competing for a major share of sales during this year’s Diwali.

This has been a year of massive eCommerce investment in India. Flipkart raised $1 billion; Amazon announced it would invest $2 billion in its Indian subsidiary; and Snapdeal raised $234 million from private equity firms and an undisclosed additional sum from private investors. These three players are spending approximately 2 billion rupees ($33 million) this season on marketing — and a lot more on improving last-mile delivery and adding fulfillment centers to get a bigger piece of the sales pie.

Flipkart and Snapdeal each reported $100 million in gross merchandise value for the day, and it was Amazon’s single biggest day of sales ever. But the impact went beyond the impressive sales numbers — it worked wonders to increase the visibility of eCommerce as a whole, with customers looking for deals online before checking out in brick-and-mortar stores.

While Big Billion Day was a great success for Flipkart, it did expose two of the company’s major shortcomings:

  • The lack of a pricing strategy. Flipkart used an age-old trick: marking up prices before the sale started in order to exaggerate the Big Billion Day discount. While this works well in brick-and-mortar stores when customers have no way to compare prices, eCommerce customers can use apps to compare prices and see how they changed over time. Flipkart’s strategy backfired; many people posted images of price differences on social media and moved to competing sites that were piggybacking on Flipkart’s marketing. The failed strategy caused a loss of trust — as did the company’s removal of product feedback and its “no refunds, no cancellations” policy for products bought on this day.
  • Infrastructure issues. Flipkart’s website crashed when it couldn’t handle the increase in traffic — and not for the first time. The company suspended vendor accounts that reached a certain limit, claiming that it could not deliver the goods to buyers due to logistics issues. This led to canceled orders and buyers seeing out-of-stock notices for many products. Flipkart did not inform customers properly about the limited amount of the most deeply discounted products, which went out of stock very quickly. Finally, the company also cancelled confirmed customer orders, furthering the social media uproar.


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