2014 was year of great discounts by online shopping websites. Everyone was in a hurry to grab the offer. Media space was occupied majorly by e-commerce giants. E-commerce attracted funding of more than $4 billion in 2014 & market pandits are forecasting the market share to reach $6 billion in year 2015. If we look at Tv commercials & customers response to discounted products, all seems to be happy family like Indian movies, but there are matters of some serious concern. Most of the e-commerce giants are investing money to the market just to grab the market chunk & not to make profit, at least for the moment. None of the major player seems making profit but only earning fame on investors money. No doubt they are attracting a lot of customers but not to realize profits. How long they are going to survive without taking care of bottom line is a thing to watch. We have seen the airline industry tumbling on its feet spite of heavy investments. Kingfisher is a gone case & spice jet is also not making any good news. Offcource, it differs from industry to industry but basics remain same, right? Lets just get it more clear from following example. One of my friend shifted from Delhi to Jaipur. He left his all business contacts in Delhi & was having nobody in his business circle in Jaipur. He came up with a brilliant idea of throwing parties to citys biggies to get in to touch & making his network robust. People accepted his invitations & joined him to his lavish parties. My friend burnt a lot of money to make his parties successful. Friend was thinking of himself as successful & was sure about that these contacts would eventually convert to a good business. After organizing some good parties & making contacts with enough number of biggies of the city, he met them personally with his products. But to his surprise , all of them were still looking for value of their money & no respect to contact or party they attended.
So the message of the story is that my friend made lot of hullabaloo in city but not profit by just throwing parties. Is it the same case with e-commerce industry in India. Companies are burning a good amount on discounts & advertisements & that in turn earning a name to them but what about bottom line? Customer look for value for money in terms of product quality & service, and this become very imperative in a price sensitive market like India.
No doubt e-commerce is the shining star of the moment but bottom line is bottom line. Now look at other scenario. I just came across a news articles published in economic times with heading “Ethnic wear cos emerge most profitable with no discount”. The news is about profit making story of retail chains Fabindia & manyavar this year. Both companies not banked on strategy of discount but focused on quality of products & operational robustness. This clearly shows that customer is more interested in quality than discounts. Offcource if you take care of quality of product & operational smoothness, you are left with a little budget for media spending but still customer will find quality product sellers. Customer may be willing to get discounts but not at the cost of quality. More astonishing fact is that these companies registered the profit at a recession hit year 2014 when top of the international companies like zara, Benetton couldn’t manage to mark. Despite of tumult of discounts in market these companies choose sustainability over instant fame & actually succeeded.
