Decoding Motorola, Xiaomi's online flash sales: Why it's a win-win-win

Earlier this monthChinese smartphone maker Xiaomi's Mi3 went on sale exclusively on Flipkart and all 20,000 units sold out in 2.4 seconds - that's shorterthan it took to write this sentence. According to estimates, this would take Xiaomi's total India sales to over 50,000 units from four flash sales since its debut in the country on 22 July. What's worth noting is that all these sales have taken place exclusively online, with the phones being sold only via Flipkart.

Xiaomi is just the latest in a long line of brands jumping on to the online-only/ flash sale bandwagon. It all began with Motorola tying up with Flipkart in February 2014 to sell its Moto-E, Moto-G and Moto-X lines online. The unprecedented success of the endeavour (Motorola has sold over 1 million units) encouraged other companies like Microsoft, Samsung and Lava toexplore the online-only sale route.

Microsoft recently announced an exclusive partnership with Amazon India for the sale of Xbox One, Xbox 360, Kinect, Xbox Live, Xbox Accessories and all Microsoft-published Xbox game titles. Another Chinese phone manufacturer, Oppo, recently announced that all its India sales will now take place only via Flipkart.

It's a win-win for everyone involved - the e-commerce sites, the brands and the consumers.

Electronics and e-commerce: Made for each other?

Motorola's bet on smartphones for this model seems like a no-brainer now, but it was something of a disruptor. It was the first time the phone maker had decided to sell exclusively online, explained Amit Boni, general manager, Motorola Mobility - India.

"The online model allows us to bring our products to a far greater number of Indian consumers than the traditional retail model allows and Flipkart understands the pulse of the Indian market like no other," Boni said.

Michael Adnani, vice-president, retail and head, brand alliances, Flipkart, explained that alignment of brand values and strategy is the crux of any successful exclusive partnership. "It was very clear from the first instance that Motorola and Flipkart had a great deal in common when it came to "delighting the Customers" and offering a quality product at affordable prices," he said.

The success of companies like Motorola and Xiaomi shows that the electronics category seems to be tailor-made for this sale model. The reason for this, explained Ankur Bisen, senior vice president, retail & consumer products at Technopak consultancy, is that this category depends greatly on specifications. Consumers can read reviews and information about products online and don't need to have the 'touch-and-feel' experience before deciding on a purchase.

Bisen said the success or failure of a product also depends on a variety of other issues like the product range on offer, whether the offerings are in line with customer needs and whether the price line is right. The fact that the product is not available elsewhere also plays a factor.

According to Gaurav Gupta, senior director, Deloitte, brand names and new product launches are important elements of the success formula. "There has to be brand recall and people have to aspire to own the product," he said, explaining his point by citing the example of how the iPhone was earlier available on only certain telecom networks in the US, which caused users to switch networks to acquire the phone.

But while Gupta believed the online-exclusive model can transfer to categories like apparel, exclusive ranges and durable goods, Bisen wasn't so sure. "Soft categories like fashion require curation and inspiring customer interfaces," he said, adding that these verticals demand customisation since different sizes, colours and styles appeal to different customers.

Mutual benefits

So how do e-commerce sites and brands stand to benefit from such partnerships?

For sites like Flipkart, Amazon and eBay, thesedeals mean truckloads of traffic, to the extent of having their sites crash. When Xiaomi's third batch of Mi3 phones went on sale on 5 August, Flipkart's servers went down thanks to the surge in traffic.

It isn't ideal to have your site crash during such flash sales because that could result in loss of customers, which is why e-commerce platforms have been constantly working to develop strong back-end logistics. Vidmay Naini, business head - technology category, PaisaPay & PowerShip, eBay India, said, "Critical part of prelaunch or exclusive sales in general is to forecast demand. Based on the demand forecasted, and deep understanding of the Indian ecommerce market eBay has developed robust processes in planning back-end and onsite operations to ensure successful sale."

Since most e-commerce sites offer considerable discounts on items as opposed to their retail values in brick-and-mortar shops, such online-only partnerships also act as differentiators that set these platforms apart from their competitors.

The hope is also that once a customer begins associating an e-commerce site with certain brands or categories, he/she will come back to the site for future purchases as well, regardless of whether they are available elsewhere.

As far as brands are concerned, the benefits are manifold. The online route allows them to offer products at attractive prices, reach a larger audience and establish a market presence with minimum capital input as in the case of Xiaomi. And obviously, as was evidenced by the number of units sold by Motorola and Xiaomi, business isn't too bad either.

Motorola's Boni said, "With a rapid upsurge in the number of internet shoppers in Tier 2 and 3 markets, the Flipkart model guarantees contact with potential buyers anywhere in the country. If someone doesn't have access to the internet today, they can just use their smartphone."

E-commerce sites also take on a lot of the marketing in such deals helping brands cut costs. "We not only play a significant role in driving sales but also in building consumer awareness about products and educating them about the benefits of these offerings so that they are able to make smart purchase decisions," said Samir Kumar, director category management, Amazon India.

Customer is the king

Perhaps one of the biggest gainers in the whole process is the customer. Online shoppers have been growing exponentially, drawn to the digital shopping experience by discounts, offers and services like same-day and scheduled delivery.

Here's an idea of just how big online flash sales can be - before the first batch of Xiaomi phones went on sale in July, Flipkart received 1 lakh registrations for the phone, and this didn't even guarantee a unit to the customer. Which is why it makes sense for e-commerce sites and companies to do anything they can to keep their customers happy.

Flipkart changed its strategy following the site's crash during the Xiaomi sales - now instead of making the payment for the phone to complete the transaction, all a customer had to do was add the phone to his/her shopping cart and the payment could be made by midnight the same day.

Price-points are another place where customers score big.

"Our focus is on providing exceptional products at exceptional price points and selling the phones on Flipkart helps us save on overheads & other costs. All these savings are passed on to customers and that helps us to sell the phones at a lower price point." said Boni.

Updated Date: Aug 27, 2014 11:33 AM

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