Showing posts with label sosasta. Show all posts
Showing posts with label sosasta. Show all posts

Wednesday, August 31, 2011

Is Online Sales all about Discounts?

Sale upto 51% off - Shop Now

Early this week, I received a mailer on my inbox – that screamed a 51% Discount – just that I was confused if it was at their physical stores or on their website. While Shoppers Stop’s online avatar has been around for over three years now, all of a sudden there seems to be a high decibel discounts’ driven campaign. Not just this retailer which is India’s largest with over 40 stores across 20 cities and attracts over 5 million customers every year, but a quick look at most of the online e-tailers confirms that they have all been offering rather steep discounts of 30-70% on their  offering. Rather, the assumption is that higher discounts would attract more shoppers. In my opinion, this is a rather disastrous move. And here are my observations;

Pricing and Discounts

Most of the online retailers (or mere web companies) do not have the background of traditional retailers. If predatory pricing was the best way to attract shoppers, then the whole world would only have Discount Retailers selling everything on discounts all through the year! But this is not the case. Discounts  are a way of getting rid of older stocks and also a way to attract new shoppers into the stores (or websites). While this “P” can be played with once in a while, it is dangerous to keep it as a hook all the time. There should be a stronger reason for shoppers to shop online, than just discounts and price-offs. 

Image Courtesy: shopperstop.com

Merchandise offering

It’s myth that online retailers and their ilk propose a wider range of products (Read: Depth of categories and the number of SKUs) than physical stores – this is more a proposition than reality. By showcasing a wider range, the e-tailers are committing to the fact that they have a wider range, which more often than not is not the reality. I was looking for a famous auto-bio of a Retail business leader a few days ago for gifting my classmate. Since there wasn’t a “Crossword” or a “Odyssey” book store close to where I stay, I preferred to shop online. Tough luck. One e-tailer didn’t have the stock; another had it but would take 7-10 days to deliver; and yet another showed a “http syntax error!”. I gave up on my search and proceeded to the closest store to buy it. A famous fashion e-tailer who sends exciting emailers everyday had a bigger surprise in store. Most of the products they had advertised was out of stock! Insult to injury is that no one (internally) had even bothered to remove the images or those products temporarily (if stocks were awaited) or permanently if the stock wouldn’t return. On the section which boasts “Luxury Lounge”, there is a sleek note which says that the sales would return and the user would be informed. Bizarre!

Image Courtesy: fashionandyou.com

In my humble opinion, Online shopping is, and should be an experience. Let’s not forget that India has over 12 million retailers – across various formats and sizes, though mostly unorganized while the Organized Retailers contribute for less than 10% of the estimated business size of INR 200,000 Crores. Online Retail is a single-digit contribution to this, but is expected to reach a significant number over the next five years. If a potential consumer has to shop online, here are a few points why they would;

Convenience

First and foremost, its the convenience of shopping online from a preferred device – it could be a desktop, laptop, tablet, mobile phone, etc. The entire process should be quick and efficient. Although most e-tailers insist on the customer to create a user log-in, the transaction time and check-out should be faster, ideally lesser than the 2-3 minutes it takes at a physical store. Also, the web-pages should have limited graphics and high-end visuals – while the idea could be to present the site in a glamorous way, let’s not forget the dismal internet speed (could be worse if its on GPRS or even 3G) unless the user is using high bandwidth Broadband services. Therefore, simple JPEGs could be a better idea.

Ambience

The good-old grid layout is so boring! Almost all e-tailers are using this format because the most recent entrant used it. If physical stores could have various shapes and sizes, colours and backgrounds, then why not online? In fact online e-tailers could do even better since they have the opportunity to change as often as possible, usually at minimal or no cost. While the usual moments of truth that a customer experiences at the physical store cannot be provided online, what can be offered is the simplicity in approach. There are different ways of doing it, and it’s up to the company to decide depending on their user base.

Depth Vs. Width

A raging debate, even for offline Retailers, its quite tricky which is better. To have, say for example – 50 brands of shirts with fewer stock options or just 5 brands but will all options (including colour and size). Again, there is no correct way – just that the retailer need to position itself accordingly to attract relevant audience and footfalls (should we say fingerfalls!). Similar to various kinds of “offline shoppers”, online shoppers too would choose their preferred retailers accordingly.

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Image Courtesy: shopping.indiatimes.com

Customer Service

This point is, in my opinion more important online than anything else. Reason: In physical retail, the customer sees a person, interacts with him or her and there is a “touch and feel” during the entire transaction. In this case, there is none. Even after the payments are done, there is no assurance that the product would be delivered safely and on time as was promised. Most importantly, in case of a query, there should be someone whom the Customer should be able to reach out to. This is of utmost importance. If the “web” doesn’t have day or night, if the “internet” world never sleeps, then how can a Call Centre (of the online Retailer) work selectively?

On-time Delivery

This is one major area that most e-tailers are focussing on, apparently. And quite obviously. Unlike a physical retail store where the customer not just gets to see the product while buying, but also gets to carry it themselves, in this case, there is a wait time – from 1 working day leading up to a week or maybe more. And when the product arrives at the doorstep, it’s all about packaging and safe-delivery. It would be better to have a reasonable shipping time, rather than delay the delivery time. But having said that, it is important to stick to timelines and be reasonable about it. To take a week to ship a Book is not done! However, it’s better to “Under Promise, Over Deliver”.

Payment & Security

I was reading recently that most shoppers are more comfortable to shop when there is a trusted gateway. Indeed. Frauds can happen more often offline than on the Net – we have recently come across cases where ATM Debit cards have been masked in Mumbai, waiters photo copying Credit cards and CVV number to use them later on, etc. So, the risk element exists and this is a reality. Online Retailers should have comforting information about online security policies and may even want to have an Insurance Company to be roped in – after all, what a better product to sell online!

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At the end of it, “Price” is not just the one factor that the shopper is looking forward to, while shopping online. It’s a wholesome experience. From a transactional activity to an experiential activity, it’s going to take some effort and time for e-tailers to entice shoppers to be active online. But I am sure, this would happen sooner than later. Watch this space.

Wednesday, June 22, 2011

A deal is a deal…

Unlimited Idlis and Dosas for only Rs. 149 at the reputed Mr.Idli! Multiple varieties to choose from!

What intrigued me was the headline that came to me as a mailer from SoSasta.com, a product of Groupon which is the worlds’ biggest group-buying site. Groupon was launched in November 2008, created by Andrew Mason who is also the current CEO of the company whose former employer Eric Lefkofsky provided him $1 billion “seed money” to develop the idea. The business model is that the site offers “group coupon” and the deal is valid if a certain minimum number of users (as predetermined by the company) buy it within a particular timeframe. Usually, there is one big “Deal of the day” and it is informed to registered users by emails and SMS. The discounts usually range between 30-60% but can go as high as even 90% in some cases. The offers are proposed on Health & Beauty, Cosmetics, Eyewear and even at Restaurants, Pubs, Cafes, etc. The company, which was valued at $1.35 Billion in April 2011, is expecting to make $1 billion in Sales faster than any other business, ever. Below is the Menu Card of the offer that was sent to me by email. I called up to enquire how this works and I was informed that by paying Rs. 149 on the site, one will get a voucher which can be redeemed by the user for unlimited number of Dosas and / or Idlis from 9-11am at their store. The spokesperson whom I enquired said that they expect a person on a average to consume not more than 3-4 dosas, the original cost of which could be around Rs. 200, but this kind of promotion could go viral, and hence may attract enormous footfalls into their store, many of whom could be first timers.

Apparently, Groupon gets 50% of the price that’s paid by the buyer of the coupon and the balance goes to the Retailer. But that would depend on the marketing ability of the site and the retailer who negotiate their best respectively. Similar to Groupon, there are over 500 such sites world over and more than 100 sites in the US alone. In India, several sites such as SnapDeal, MyDala, Taggle, Koovs and many more have swarmed the market over the months. Since January this year, Snapdeal has been growing its revenues at over 100%, selling unused inventories of everything from sunglasses, wallets and even travel packages, totalling over 10,000 discounted deals everyday. At 25, Kunal Bahl had quit his cushy Microsoft job based in Seattle and even convinced his IIT Delhi batchmate Rohit Bansal to take a leap of faith in 2007. In a recent interview to The Economic Times, India’s leading business daily, he says "We sold about 2,200 Reebok Sunglasses in a day, at an 80% discount deal. About 400 packages to Kerala were sold in February. Our model is to go after unsold distress inventory," says Bahl who along with Bansal had to shell out $3,000 for buying the Snapdeal.in domain name — an investment that's paying off well.

Here is how Groupon works, as explained in a video placed on their home page.

Video Courtesy: http://www.groupon.com/learn

Some of the key benefits for Retailers to tie-up with such sites are as follows;

  • Create new customers for a specific category / brand. The “deal” may appeal to first time users who may not have entered the Retail store / restaurant otherwise
  • Sell off unused or distress inventory – one that most product retailers would carry at some point in time. Typically one would find them at discount stores in the suburban areas or outskirts of the city, but this model is even better as they can be shipped out of the warehouse directly
  • Utilise the unused service time, typically at beauty salons, restaurants and pubs. What used to be Happy hours may be extended as “Happier hours!”
  • Viral Branding – While the cost of discounting may seem ruthlessly high, it also acts as a brilliant way of advertising – Cloud advertising!
  • Word of Mouth publicity is very high – typically works in colleges / office environments where people could share the deals and make purchases as a group. After all, shopping and dining is a fun activity and makes so much sense when done in a group. So, a set of 4-5 friends may all buy out coupons for unlimited F&B, so they all could spend a gala evening or may buy holiday packages as a group to enjoy over the weekend

So, what’s in it for Retailers after the second or third purchase or visit? Would such a business model be sustainable in the long run? Would consumer fatigue set in sooner than later? These are some questions that are best left unanswered as this column is published. However, I assure I will review this in a year from now again with results and feedback, but for now this is one model that’s going to drive innumerable footfalls to the Retail stores. If you are a Retailer, try talking to one of these guys and get your offer up and running, wait and watch the results. If you are a potential consumer, then just register yourself in one of those websites and look forward to some exciting offers soon. Whichever way, Happy Retailing…

Photo courtesy: sosasta.com