E-commerce Apps Only: A Killer Move or a Fatal Error?
Posted in Marketing & Strategy Articles, Total Reads: 618
, Published on 29 November 2015
A sudden wave of online buying stumbled upon the psyche of the people in India sometime after the global recession showed signs of recovery in late 2008. The working class was enticed by the idea of placing the order with just few clicks and getting it delivered to your home. ‘Cash on Delivery’ only added fuel to rage. Indian E commerce market is growing at a CAGR of over 30% since 2009 (about $3 billion then) and is expected to touch $22 billion by 2015.
The primary reasons for growth in this segment can be attributed to the explosion increase in number of internet users (641 million users as of 2014), growing standards of living and ease of purchasing the product online. Another relevant factor that is propelling this growth is the rise in internet penetration which is about 19% as of 2014. No wonder this industry is still at nascent stage when pegged against China which has achieved over half of the internet penetration. The growth of demographic segments in terms of aspirations, peer pressure and encouraging fashion trends suggests that there will be immense rise in penetration as well as total internet users in India e commerce space.goo
The mobile internet users in India are pegged at about 300 million which almost doubled from previous year. At 19% penetration, the Indian populace still seems devoid of internet. This was obviously a lurking space for e commerce giants. It didn’t take them much time fly their apps out in all platforms, given the amount of infrastructure and expertise they had gained in these many years. Soon the apps brought in significant chunk of their revenue. Who knew this would be the revolution in Indian e commerce space?
The year 2014 saw Flipkart acquiring Myntra for whopping INR 2000 crore in May. The surprise move that left a loyal Myntra shopper in awe was when Flipkart decided to shut down the website of Myntra and continue its app only model. To some it made sense, while a not so frequent buyer was surprised by this bold move. Experts penned their logic in newspapers and blogs, yet the mass was not much convinced.
Some researchers as well as e commerce firms claimed that almost 50% of their traffic came from mobile based devices. Given the growth spree of mobile internet users, the number seemed quite realistic. A large number of people are already using mobile based taxi booking services like Ola, Uber and actively seek directions using Maps on their smart-phones.
The app only model brings down the operational cost of maintaining a website to bare minimal levels. Moreover apps give company an ownership in customer’s limited space where he particularly lands decides on which app to go for (Flipkart, Snapdeal etc.) and then choose the product whereas in desktop website, customers have a huge inclination to search the product first and then land on a website. Search engines, silently, plays a role of big daddy when customers want to know about the product. A dedicated app only model eliminates this expenditure where companies no more need to shell out hefty funds for advertising. It is proven that app based shopping gives location specific data of how consumers shop across different categories which proves to be a considerable edge over website analytics. Some websites have claimed that the conversion rate is high in apps as compared to websites. The customers usually know about the product when purchasing through app while in website, an analogy of window shopping could be applied.
Marketing on a website would usually consist of offering sales promotions or discounts. Flipkart’s Big Billion Day is a testimony on preference of discounts. But a website doesn’t give a targeted approach i.e. the whole of users the target customers for all its offerings. Whereas, a dedicated app will give you relevant offers through push notifications based on your previous purchase or buying trend in general.
The other side of the coin isn’t bright either. After Myntra switching to app only, the company reported a drop of over 10% in sales. The numbers surprised its parent company, Flipkart, as the projections had shown that 90% of traffic and 70% of sales were generated through mobile. One simple rationale over why consumers would still want a website pertains to product visibility. One can see about 7-8 products simultaneously on a desktop/laptop screen which increases the probability of purchase. The app which run on smart-phones definitely have a disadvantage when it comes to screen size resulting in view of only 2-3 products at a time. This results in customers to perceive lesser availability. This tells us there are still a large number of customers which are yet to definite about one approach.
The app only approach, led by Flipkart in India is yet to unveil itself completely. The growth prospects definitely weigh in favour of app approach but consumers would surely need time to adapt as it can be inferred when online buying was first introduced to them.
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Mallya, H., & Soni, A. (2015). From mobile-first to app-only, what makes Myntra confident of the future of m-commerce?. YourStory.com. Retrieved 20 August 2015, from http://yourstory.com/2015/05/myntra-app-only/
This article has been authored by Hitesh Takhtani from T.A. Pai Management Institute
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