With festive season around the corner, e-commerce players in India are gearing up to make most of the festivities- which kicks off in August and goes with Onam, the Malayali harvest festival, in early September, and peaks during Diwali, Christmas, and New Year’s Day – to register highest sales on their platform.
The Diwali quarter typically accounts for a majority of the sales at e-commerce companies, whose valuations are based on their ability to consistently deliver high sales growth.
While other e-commerce players are preparing with announcing marketing spends and loan facilities for sellers, Amazon India is all set to launch the Onam store on its website in the first week of September.
In an email to its sellers, Amazon India has encouraged merchants to participate in the event by configuring discounts on various products from categories including Apparel, home, large appliance, Jewellery among others. The company has asked sellers to give discounts as much as 50-60 per cent on items like furniture, power banks, small appliances and speakers, among others.
This year’s festive season is crucial for India’s e-commerce players, as funding has remained a lackluster affair for homegrown biggies – Flipkart and Snapdeal. India’s poster boy Flipkart has struggled to hold its position amidst internal management changes, valuation markdowns, and several high profile employees exits. The company has reportedly approached various investors with no success.
Now compare this with its arch rival Amazon, which got an investment commitment of $3 billion dollars from its Founder & CEO Jeff Bezos earlier this year. This comes after the company exhausted its earlier investment pledge of $2 billion this year.
Not only in terms of investment, the company is also appearing to pipe Flipkart down from its cherished status as India’s largest e-commerce firm. As per a report, Amazon India reported gross sales or gross merchandise value(GMV) of more than Rs 2000 crore in July this year, while Flipkart reported GMV of less than Rs 2000 crore. For Snapdeal, the numbers were much lower than its rivals. The company reported gross sales numbers of roughly Rs 600 crore in July – a fall of more than 50 per cent from the sales it had been generating until the end of last year.
How are they Sale-ing through?
Along with a funding freeze, the e-commerce players also have to deal with two important riders in the foreign direct investment(FDI) rules for online retail in India during this year’s Diwali sales.
The government said in March this year that online marketplaces cannot influence the pricing of products and services on their platforms and only companies and sellers on such platforms could mark down product prices. And second, no one seller can contribute more than 25 per cent of the sales of any marketplace.
Online marketplaces have since been thinking of ways to comply with the new rules and yet offer good deals to drive traffic and sales. The recently concluded Independence day sales have seen the glimpse of former’s preparedness for big festive season battle.
For instance, e-commerce companies have for the first time carried disclaimers in print advertisements stating that deals and discounts are offered only by the sellers.
To be sure, Amazon’s Onam store has also asked seller’s to decide the discounts on the platforms and has mentioned that the company has no role to play in discounts on the platform.
In order to encourage sellers on the platform, the companies are also coming up with ways to offer working capital loans to merchants. For instance, ShopClues recently announced it plans to disburse Rs.5,000 crore worth of loans to merchants selling on its platform under its financing initiative Capital Wings. Of this, Rs.200 crore will be disbursed ahead of this year’s Diwali festival.
Similarly, Flipkart’s Growth Capital program for sellers has also crossed Rs 125 crore milestone recently. In just a year of its launch, the program has successfully disbursed loans amounting to over Rs 125 crore to more than 800 sellers on its platform.
While this is just a begging of festive season discount war, the coming months will be interesting to watch as they will clearly segregate the top performers from the struggling players.