This festive season is going to be a bonanza for both consumers and sellers, all of whom are all gearing up to cash in on the pay hike to central government employees as per 7th Pay Commission and a good monsoon that is expected to bring a lot of cheer and cash to rural and agricultural households this year.
In keeping with recent trends of increasing online purchases in Tier I, II and III markets in India, online giants like Amazon and Flipkart are going in for ‘exclusive tie-ups’ with manufacturers of consumer electronics and mobile phones to corner significant market shares and boost their topline.
Why are ‘exclusive’ tie-ups so attractive?
FDI rules mandate online companies to not influence pricing trends through heavy discounts. In the recent past, there have been vociferous protests from brick-and-mortar retailers who had been complaining of unfair discounting structures being offered to e-commerce platforms, that was adversely impacting their revenues.
Omni-channel brands were being retailed through both online and offline platforms, but offline retailers were losing out due to high operational costs and the significant discounts that were being offered to various e-commerce companies.
So now online majors like Amazon and Flipkart have adopted a new strategy of focusing on exclusive tie-ups with leading brands to take advantage of special schemes and discounts being offered exclusively on their platforms.
Discounts through exclusive tie-ups
These discounts are offered directly by the brand owners and not by the e-commerce platform, as was the practice earlier with omni-channel brands. This results in higher margins for online retailers, while low prices and deals boost their topline. It’s a win-win for brand owners, online retail companies and, of course, the consumer, who gets the best possible deals, not available else where.
So to push home the advantage, Amazon and Flipkart are gearing up to go all the way in extending top priority for promoting these brands across their platform through targeted advertising, specially designed banners, innovative pop-ups, upsell offers and even cross-sell deals.
Smartphones and Consumer Electronics to drive online sales
Mobile companies have been riding the boom in mobile penetration, with smartphones driving growth in almost all segments of buyers.
From omni-channel marketing, mobile phone retailers quickly saw the advantage of exclusive tie-ups and therefore, current leading brands have entered into exclusive marketing arrangements with players like Amazon, Snapdeal and Flipkart.
The advantage of an exclusive tie-up is obvious, since 75% of all smartphones sold online come from exclusive tie-ups. Companies like Motorola have followed a dual platform strategy by entering into exclusive tie-ups with both Amazon and Flipkart for different models of smartphones, thus getting the best out of both majors.
CDIT not far behind
Seeing this trend, television and consumer electronics manufacturers are also betting big on exclusive tie-ups with these majors. Till now, leading brands in this segment have largely followed omni-channel marketing, but have continued with brick-and-mortar retailers.
How this ‘exclusive online’ strategy of brands will impact relations with these brick-and-mortar sellers, going forward, remains to be seen. If sales are significant though e-commerce channels, expect vocal protests from off-line retailers. But for now, consumers remain all set to get the best of offers delivered right at their doorstep this festive season.
Emerging trends in consumer preference
Recent surveys have shown that Indian consumers are increasingly turning to online purchasing of several products that they traditionally have been buying offline.
Online platforms have been around for some time and have been mainly driven by fashion and related accessories. While they continue to grow, some of the fastest growing segments now are FMCG. Perishables like vegetables and fruits are also increasingly being purchased online.
Companies like Amazon have been witnessing 400% annual growth rates in groceries, 300% in personal care and health, 250% in beauty products. What is interesting to note is that almost 50% of sales are coming from outside the eight major cities in India, mainly from Tier II and III towns.
Amazon gears up ahead of festive season
Taking first mover advantage, Amazon has introduced proven business models in international markets and is trying to open up new segments here in India. Successful initiatives like ‘Amazon Pantry’ and ‘Subscribe and Save’ are being well received.
The latter offers consumers incentives for subscribing to monthly purchases of frequently purchased items on staggered deliveries, as per their convenience. This enables customers to avail higher discounts and staggered deliveries based on convenience and need, while Amazon enjoys confirmed sales and lower transport costs in the last mile, as more subscribers sign-up.
Amazon Pantry allows customers to purchase daily essentials like groceries and get them packed in any size, not exceeding 15 kg, and have them delivered to their doorstep the next day, at an additional delivery charge of Rs 20 only. This takes away the need for people to walk or drive to their local grocery shops frequently and carry large grocery bags from their local store to home.
E-commerce in India accelerating growth
And if this online trend continues, India will witness a major shift in how consumers shop and will result in India emerging as a major market for online sales.
Thanks to companies like Amazon, Snapdeal and Flipkart, the gap between metros and rest of India is narrowing in terms of consumer choices and access. From fashion to electronics to health and personal care, all consumers now have an equal access and opportunity to buy the best products at the best price.
With incomes rising in semi-urban and rural areas, online purchasing can only get bigger. Be prepared to get pampered with a plethora of deals this festive season, as online companies gear up with their exclusive brand offers. It’s raining deals.