Posted in Operations & IT Articles, Total Reads: 1602
, Published on 08 December 2014
B2B, B2C, C2C or more recently H2H…human to human!
Every day the marketers are breaking the boundaries and identities of old practices. 4Ps, 7Ps then 4Cs, every passing day is challenging these concepts to give a new paradigm and to keep up with essence of the market which is - diversity of activities. The vultures are there to give wings to their entrepreneurial ambitions and use each opportunity to its fullest.
In the year 2007 Flipkart, now the India’s largest e-commerce firm opened a Pandora’s Box with its launch. The virus of online bazaar was contagious, it led to slew of launches such as Snapdeal, Myntra, Quickr, Paytm etc. The bazaar than attracted the biggest online retailer of world, Amazon to share a large pie of this market.
Image Courtesy: freedigitalphotos.net, Stuart Miles
Theodore Levitt in his famous article ‘Marketing Myopia’ explained how the short sightedness of the management can destroy a firm. The marketplace in which brand operates is undergoing a drastic change. Today digitization isn’t only an opportunity but is becoming a necessity for almost all the businesses. The consumers today are technology savvy, time-constrained and have easy access to massive amounts of data. They are looking forward for a buying process which is less complex and time consuming. These requirements need to be fulfilled through innovative and novel ideas. It has opened a new window of opportunity for producers on one hand and has given a basket of benefits to customers on other.
What Producers have in it for them?
With the market being mushroomed with similar products, price has become a deciding factor to decide a product’s lifecycle. Apart from the manufacturing cost there are mainly two external factors that decide the cost of a product - cost of setting distribution network and real estate cost.
1. Distribution network
Distribution network is necessary for a company to penetrate deep into the market. It helps in providing value added services to the customers and thus contributes to the long run expansion of the company. But what promise does e-commerce holds for new entrants?
Curious case of Motorola
Motorola while trying to re-enter in to the Indian market was puzzled on how to compete with already saturated mobile market of India. Laying the distribution network and then entering would have meant to shoot arrow in the dark i.e. entering into the market without knowing the customer’s sentiments.
Motorola thus decided to do what was never done and launched its Moto-series online on Flipkart, it drastically reduced its cost due to reduced commissions of national distributor, regional distributor and that of retailer. Analysts claim that, had Motorala chosen to build its own distribution network, the cost of their handset would have gone up by Rs3000-Rs5000. It helped Motorola to provide its targeted customers exceptional features at highly competitive price.
2. Real-Estate Cost
Space has become the biggest problem in setting up a business especially in Tier-1 cities. Setting up brick and mortar stores requires the companies to spend heavily on real estate. Sky-rocketing prices and regulations have added to their woes, it costs companies around 30- 35 % of their total initial cost of. This has become a prime motivation for the businesses to go online.
It is bringing a new era when companies are leaving behind the conventional idea of brick and mortar shops rather accepting the idea of so called ‘window shopping’.
What Consumers has in it for them?
Perfect competition has come out of ‘mandi’ to our screens. Online market is threatening the oligopoly culture of our industries. The marketplace model adopted by these platforms allows the B2C i.e. business to consumer interface. This drastically reduces the brand difference between different products when they are all under one roof of these e-commerce websites. This allows the consumers to have the best possible deals available on one hand and reduces the inventory cost for the e-commerce companies on the other. The amount saved is than passed along the value chain to its customers.
The stiff competition between the giants is forming new relations in this market and each one trying to outgo the other. One day Flipkart raises 1 billion, the other day Amazon infuses twice of it. Companies are ready to provide best of the services such as free home deliveries, 30-day return policies and exceptional customer services on any damaged deliverables, to retain the customer loyalty. Flipkart is even planning to provide the after sales service such as installation of the products on a given date to attract more customers to the electronics segment.
The biggest winner in this competition is the customer. With ever increasing competition there are even better deals in the coffin.
The Future Ahead
As per TRAI data India has only 238.71 million internet users out of its 1.21 billion populations. Internet penetration is low as compared to most countries in the globe. This it-self is a huge prospect of growth. Improving education and governments efforts to increase India’s computer literacy, through the National Computer Literacy Drives (NCLD), has made the industry all set for an exponential rise in future. Moreover the Indian demographics are going to play an intrinsic role in this growth. India has more than 50% of its population below 25 and these are the users of e-commerce platforms. These will remain the customers even when they cross the age of 35 or 40, a market segment by far untouched by this industry.
Metro cities are getting overcrowded by cars, the problem of infrastructure going to worsen in coming years, leading to more and more people resorting to home deliveries to make their life easier. In the coming time it will become more and more difficult for the conventional retailers to fight against the e-commerce websites, these businesses have to understand that they are serving the customers and without improvising it’s not possible. Tesco Homeplus Virtual Subway Store in South Korea is one of the examples which can revolutionize their services and buy them back their customers.
Internet is penetrating very fast in our lives; we are connected to this cloud more than ever. The increasing popularity of Smartphone and associated ‘Internet of Things’ will add to the pace. One can sell a car at Bangalore sitting in Delhi,send a gift to your sister from any part of the world. In the expanding universe our world is shrinking faster than ever.
As per Crisil estimation, e-retail is poised to touch $22 billion in five years where as e-retailers are projecting a market of $60 billion to $70 billion by 2020. E-retailers are out with all guns blazing and are opting for a long term strategy of market expansion rather than profitability. All this is going to bring more and more options for Indian customers
This article has been authored by Ankit Gupta from IMI New Delhi
1. Internet of Things ,the future is here: The Strategist(Aug 03, 2014)
2. Amazon Vs Flipkart: Financial Express (Aug 07, 2014)
3. In crowded marketplace, brands look to 'online only' route: The Strategist (Aug 03, 2014)
4. Charting New directions For Marketing: George S Day.
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