"Indian customers do not have loyalty"
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With Flipkart marching ahead of competition to snatch Jabong via its fashion portal Myntra this week, the hustle in the ecommerce space has just got bigger with Amazon launching its much awaited Prime membership programme.
Anil Kumar, Founder and CEO, RedSeer Consulting, spoke to Entrepreneur explaining the impact of the changing dynamics of the e-tailing space and its impact on the consumer.
According to Anil there exists a space for more than one e-tailer in the Indian market as all of them have a different value proposition to offer and they have space for themselves. Talking about the ongoing deal frenzy in the market, Anil said, “A lot of these companies that are being acquired did not have any future on an independent basis. Consolidation will definitely happen and this is just the beginning,” he said.
Anil said that internally a lot of the funded companies are under a lot of pressure to showcase at least gross margin profit. Hence they would have to chart paths wherein break-even could be achieved faster, he said.
While Snapdeal has got into the service model , Jabong is going to be a high profit margin-booster for Flipkart as fashion is a high margin business category, he said
Is there a funding slowdown? Maybe not!
RedSeer is a research and advisory firm launched in 2009. Headquartered in Bangalore, RedSeer caters into market facing, research based consulting engagements with over 150 clients. The company works across multiple verticals with expertise in the e-commerce space.
When companies like Flipkart are seeing see-sawing valuations and the industry in general is in the middle of a slowdown in funds, Anil called the whole phenomena a “media hype”.
“If you compare amount-to-amount, I know that the funding has come down, as last year there were two to three very big deals. If you minus that particular impact, there is not much of a slowdown. If you see, the Series –A funding that hasn’t come down much. That has remained similar,” he said.
Anil said it’s a natural cycle for funds to invest and then step back to access the performance of the company and then move forward.
Decoding Indian consumer psyche
According to Anil, the biggest challenge for Indian e-tailers is that “Indian customers do not have loyalty,” unlike in the U.S. where consumers are loyal to some of the big brands like Uber, Amazon and other brick and mortar brands. Indian consumers have the tendency to tilt to the site which offers a bigger discount and not worship a single brand.However, according to him one can expect loyalty from 40%-50% of the customers by providing them with seamless shopping experience. Anil gave examples of subscription models offered by Netflix and Amazon Prime which provide seamless experience.