Festival season online sales: Firms claim big numbers but questions over discount model continue to haunt

Ashish Gupta, a 35-year-old from Delhi, is an avid online shopper. He does not recall when he last went to a physical store to shop. When the pre-festival sales on all e-commerce platforms were advertised, Gupta and his wife Arti Singh, were scouring them for a ‘good discount’ for a laptop. They found an Apple MacBook Air at a ‘real deal’ price of Rs 40,000 but Singh decided to wait thinking that the next sale online between Dussehra and Diwali might offer an even deeper discount. However, he found the price was Rs 59,000 once the sale was over. “I wished I had bought it earlier,” Singh says. Has repeated online sales led to jaded buyers like Gupta and Singh who are regular online shoppers? Even casual observers of online commerce platforms are aware that discounts will be available on some product category or the other. It is never a ‘no-discount’ day on e-commerce platforms. Yet. [caption id=“attachment_4083763” align=“alignleft” width=“380”]  Reuters[/caption] Festival sale discounts have garnered in consumers though, according to a report from RedSeer Consulting. E-commerce companies generated sales of an estimated Rs 9,000 crore (US $1.5 billion) in the festival sale offered last week on most platforms. “E-tailers generated their highest ever sale performance over the five festive days from September 20-24, 2017…For these festive sale days, RedSeer analysis shows that the e-tailing industry managed to generate Rs 9,000 crore/ US $1.5 billion of sales,” the report said. Remember, no e-commerce platform is listed and hence their financials are not known. Retailers offer huge discounts on some product category online and e-commerce platform advertising and promotion spends are huge, but are there any margins from the products sold, asks Arvind Singhal, chairman and managing director of Technopak Advisors, a retail industry consulting firm. “My belief is that the amount of money spent on mega advertisements and the decibels they create will only show diminishing of returns even during the sale period. There are no authentic figures being put out by company,” he says explaining his stand. Even though there are deep discounts that are advertised by e-commerce platforms, the fact is shoppers are not inclined to shop or splurge unless they want a product. How many times does one scour a e-commerce platform just for the sake of surfing and end up buying a product every time? Rarely. With demonetisation and goods and services tax (GST) having impacted spending patterns, say analysts, shoppers are cautious about splurging. “When e-commerce platforms talk of huge sales during the festival period, I don’t doubt the sales figures,” says Paula Mariwala, partner, Seedfund, and Co-Founder, Stanford Angels. She believes that a buzz is created by e-commerce platforms and it might lead to an increasing number of shoppers buying products. But are the margins profitable or are the e-commerce companies bleeding to lure in shoppers, she asks, adding that online sales and discounts have become an ‘overkill’. Online retail in India is only a small slice of retail in general and is expected to be at par with physical stores only in the next five years. The e-commerce market in India is expected to reach $220 billion in terms of gross merchandise value (GMV) and 530 million shoppers by 2025, led by faster speeds on reliable telecom networks, faster adoption of online services and better variety as well as convenience, according to an Indian Brand Equity Foundation survey. Though e-commerce claims to attract customers, the bald fact is it does so only after luring them with discounts. There is no customer loyalty as such. If there was, where is the need to offer discounts every time, ask analysts. Shoppers are inclined to shop during the festival time and tend to indulge themselves. It is this ‘weakness’ that e-commerce are playing upon, says Satish Meena, senior forecast analyst, Forrester Research. He says it is not only online platforms that announce and offer discounts but offline retail too give deep discounts because festive season accounts for 40 percent of their total sales. But, he too is skeptical about the figures put out by e-commerce companies that talk about their sales as he says even with the figures they tout they don’t reach their targets or are even on the path to profitability. Customers are not looking for discounts every time they shop, say analysts. It is a strategy that retailers selling on e-commerce platforms adopt to create a market for themselves online. That, says Meena, is one of the reasons many e-commerce companies have had to merge or shut down. “Discounts cannot be the name of the game,” he said.