Flipkart puts spotlight on e-tailers
Home-grown online retailer Flipkart appears to have
lost more than what it has gained from the Monday’s ‘big billion day’
sales extravaganza.
Flipkart claims that it had hit
the 24-hour sales target inside 10 hours on that day. If success is
defined only by numbers, it has reason to cheer.
Clearly,
Flipkart was the talk of the town that day. It was so far all the
negative reasons, however. So much so, the founders have to come out the
very following day to publicly say sorry in a lengthy email to angry
customers, who felt cheated. Flipkart founders sought to assuage their
feelings by acknowledging their failure to anticipate the glitches when
the sales commenced Monday morning, leaving many frustrated and furious.
Predictably,
the Flipkart fiasco has galvanized the offline retailers to close
ranks, and even demand regulation of e-commerce, which is just beginning
to gain some toe-hold in the Indian retail space.
The Monday sales extravaganza of Flipkart has raised several issues, which will have far-reaching social implications.
Not a new trend
Freebies,
deep discounts, and attractive offers – they aren’t the recent trend.
We have seen how, in the 90s, the non-banking finance companies of
unincorporated kind had caused havoc, putting many a gullible investor
to permanent misery and even forcing the Reserve Bank of India to
tighten the screws on them.
The NBFC industry is
still recovering from that shock. More recently, we have been witness to
a no-holds-barred ‘sky war’, causing huge disruptions in the airline
industry. In the first instance, unsuspecting investors were the
casualty. In the second one, the public at large is indirectly paying
since the public sector banks have lent heavily to the airline industry.
‘Customer
is the king’, it is often said. The so-called king of free market was
virtually taken for a free online ride by Flipkart. It is not just the
question of access to the site. It is also not about the inability to
buy intended goods on offer. It is not even about technical glitches. It
is all about the intention. What is the intention? Is it just about
hitting a particular sales number by somehow?
In a
close-ended offer of this kind, one does anticipate a big rush. With a
kind of ad blitzkrieg unleashed by Flipkart on Monday morning, it was a
sure invitation to stampede. The limited offering in each product – even
at deep discounts – means the loss is defined upfront for Flipkart.
Perhaps, the online retailer expected the gain in terms of brand
awareness to outweigh loss due to `discounted sales’.
The
other issue is about servicing the products bought online at such deep
discounts. Big white goods makers have already reportedly logged off
Flipkart for its distorting act of offering predatory pricing. Some have
even threatened to take legal route to stop online retailers from
offering such deep discounts.
The single-day
product-wise limited offerings has indeed helped Flipkart get the
desired number and also visibility. What has surprised a lay observer is
that these e-commerce firms have elicited huge PE (private equity)
interest. Many PE players have rushed in to place heavy money on them.
No free lunch
There
is nothing like a free lunch. These PE players will take out more than
what they have invested in these e-commerce firms sooner than later. In
the modern day, perception often times determines the valuation, which
may be disproportionate to the age, size and sales number of a firm.
The timing of the big bang sale by Flipkart could not be wished away,
coming as it did in the wake of a high-profile visit of Amazon boss to
India a few days ago. What is the differentiator in the e-commerce
world? Just the competitive deep discounts! In the game of
one-upmanship, the ‘big billion day’ may have helped Flipkart drive its
market value up.
The moot point, however, is: Does
the end justify the mean? Flipkart has opened up a fresh debate, and the
world of e-commerce has suddenly come under intense scrutiny.
