Why wouldn’t consumers prefer to opt for online shoppingIJ They save on parking fee, transport, toiling at dirty markets. Another gain is that they save on losing small coins, that any day robs the consumer thousands of crores
The one-day massive sale success of Flipkart has unravelled the myth of the Indian market. Its products are highly priced. It leaves a leeway to sale the products at lower costs.
The fundamental of business is to sell products at low profits. If products are sold with 30 per cent to 50 per cent profit margins, it opens itself up for competition. That can be sometime too stiff and might wipe out the larger ones with ease.
This is what has rattled big Indian and foreign companies and a host of other manufacturers operating in the Indian market. Some of them first reacted sharply saying that they might not extend warranty on such e-sale products. later, realising the folly of their approach, they retracted.
It is not important to know whether it was a $100 million sale or a billion. That is the result. It needs a scrutiny why Flipkart, which is now being followed by Amazon and Snapdeal, is attracting buyers.
There is one simple answer. The products are available at 30 per cent to 60 per cent lower price than the MRP at the so-called company or factory retail shops. A mobile could be purchased at almost one-third the price, a shoe at less than 55 per cent of its marked price, a television at least at prices 25 per cent to 35 per cent lower than what is available in the showroom. Many bought a television for Rs26,000, which would have cost Rs48,000 or more, a mobile for Rs1,000 against a price of Rs4,000 to Rs10,000, a pair of shoes for Rs1,300 against a market price of Rs4,400. Similar is the case with garments and apparels. Sometimes, you end up paying the Janpath price for a branded garment.
So why won’t the buyers flock to e-shopsIJ They also save on parking fee, transport, toiling at dirty markets, spending on unnecessary food and drinks. Another gain is that they save on losing small coins, that any day robs the consumer thousands of crores. Above all, the product is delivered at their doorstep for their wise decision to spend less.
The success has raised many eyebrows of the small retailers. Their Diwali sale has been hit. It also has impacted the large retailers who thrive on the notion that ‘for quality goods, one has to shell out more’.
It robs the so-called high-end shops of their mystic glamour. If someone steps into these shops and enquires about the price, the salesmen are trained to give a demeaning look at the customer. “His dignity is deliberately hit to make it obvious, you are unwanted as you can’t pay our price”, a salesmen at one such shop told this writer.
The Flipkart-like event is a small opportunity to work on the consumer psyche. Consumers also need to beware that once such e-tailers settle down and possibly eliminate many of the rivals, they too could behave like the cartelised malls. Maybe Amazon, Snapdeal and others could create a new cartel. In the Indian situation, with the least protection for the consumers, this could be not a good development.
The Flipkart sale is not the panacea. It only calls for strong measures to fix the prices. A liberalised market is not a licence to sell products at three to four times the actual production price. Indians are paying through their nose. They forget that not so long ago a footwear company, Phoenix, was wiped out of the market for pricing products at the highest possible end. Many apparel companies have met a similar fate.
The e-tailers are working on loopholes that big marketers create. Consumers do not mind paying five to eight per cent extra than the production cost. But if it exceeds that, it creates the leeway for entrance of competitors. Unethicality has no place in the Indian market.
large retailers have cartelised to boost their sales in an unethical manner. They are also now planning to hit back at Flipkart-like companies.
Such e-tailers should know that the market is much wider. One of the largest consumer producing companies almost created a monopoly by merging, acquiring and edging out competitors. They have virtually more than doubled prices of products like soap cakes, toothpaste tubes and other cosmetics. A soap cake that used to cost around four rupees in 2010, today is sold at not less than Rs10; toothpaste which was priced at five rupees or less costs more than Rs15. So, e-tailers only have to think of selling larger number of products to become market leaders.
Small retailers have a challenge. Should they move out or something should be done to create the competition — a hated word for the manufacturersIJ Consumers have to wake up to safeguard their own interests. The Government has to help in building that system. There has to be a mechanism prior to going to consumer courts. Moreover, products must display addresses of producers prominently and not in obscure fine prints.