Deep discounting strategy on various product categories have been the biggest motivating factor of purchase for Indian buyers in Ecommerce space over the last few years, with the focus solely being on achieving higher growth. Every online retailer through their fundings (VC’s) has spent heavily to fund discounts to acquire and lure customers.Custmer Loyalty is the major problem in this scenario. In the year that ended March 2016, the cumulative loss of Flipkart, Snapdeal and Amazon.in stood at Rs. 5,500 crores with Flipkart posting nearly a loss of Rs. 2500 crores and Snapdeal reporting a loss of Rs 1,638 crores.
"Pure Greed was the sole reason. Everybody though that the last person takes the pie and hence were on a very aggressive note to
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Higher inventory stocked for too long severely compromises profit margins. Experts believe that country's FDI policy have forced these companies to portray themselves as marketplaces, initially they were handling everything from warehousing to logistics.
Retailing in general has very less gross margins, even for giants such as Walmart at this scale. It's always a 4.5-6% margin. That way, the marketplace model is profitable even in Amazon's balance sheets. The ShopClues founder thinks when you establish yourself as a hybrid model; you compete against your sellers, which hampers growth.
"Let us consider fashion as a marketplace model which has too many sellers, and let’s say a certain brand is making more money, then there is always the greed to have additional inventory in the interest of higher margins. This results in increased distrust among sellers", Sethi says.
Ever increasing stockpiles in warehouses, heavy discounting strategy and 4.5-6% gross margins in some categories, and with a business that makes zero sense at unit commerce level. You can either have the idea of selling too many brands on a pure marketplace model, or only niche/select brands on an inventory model. You cannot have the best of both the
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who was widely considered Flipkart’s CEO-in-waiting
Often the “top talent who come from the Silicon Valley find it difficult to accustom to the culture in India, where things are usually less structured and more chaotic.
Government regulations: In March, the Indian government inadvertently added to Flipkart’s pain through its new e-commerce policy.
Now, online marketplaces—technology companies that act as facilitators between buyers and sellers—are not permitted to have more than 25% of their sales coming from one vendor. The largest seller on Flipkart is WS Retail, a Flipkart subsidiary. While the company does not disclose WS Retail’s share in sales, analysts told Quartz it would easily be above the new 25% threshold
The government also said that e-commerce marketplaces will not be allowed to influence the selling price of goods and services listed on their platforms. This potentially means companies like Flipkart would be punished for offering heavy discounts—a major driver of e-commerce’s massive growth in India.
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The threat of new entry for the industry is low, as considered by high costs and intense price competition, which make the industry’s profit margins very low. In the United States the market is concentrated, where the 50 top firms, including: Wal-mart, Kroger, Safeway
Due to the fact that Best Buy is non-collusive, they face a kinked demand curve that ultimately determines the firm’s relative market share. The demand curve consists of an elastic and inelastic portion. Oligopolies avoid both portions, where in the elastic portion, competitors keep prices low to steal customers, and the inelastic portion where price war occurs since competitors also lower prices, resulting in no gain in demand.
These conditions are brought about by the enormous pressure Wal-Mart has put on their suppliers. Their sheer size enables them to negotiate whatever they want. Suppliers rarely dare to request a price increase, and they are very conservative when giving price quotes to Wal-Mart. To lose Wal-Mart as a customer can mean the end of business for many suppliers. It’s hard to combat this downfall when Wal-Mart has so much buying power-- countries send government officials to Bentonville, Arkansas to lobby for production in their country.
Exploring the profitability of this industry, domestically retailers are struggling to maintain high profit margins. The solid industry growth expected for the coming years is highly supported by the economic turnaround in 2011, however many small retailers are feeling the pressure of low-cost imports . Reduced imports and the continued shifting of manufacturing operations to low-cost countries, creates a trickle down effect onto the fragmented market of companies, with a mix of small and large participants (see Exhibit 2). Increases in price-setting control of wholesalers, are causing downst...
Primark has a huge customer base for being one of the largest clothing retailer in the UK. Nonetheless, the bargaining power of buyers is relatively high due to the large quantity of competitors in the industry. Buyers are price sensitive and they will probably seek for the lowest price before purchasing an item. There is no switching cost in the market so customers are likely to buy products in other store once they discover a cheaper price.
Wal-Mart’s competitive environment is quite unique. Although Wal-Mart’s primary competition comes from general merchandise retailers, warehouse clubs and supermarket retailers also present competitive pressure. The discount retail industry is substantial in size and is constantly experiencing growth and change. The top competitors compete both nationally and internationally. There is extensive competition on pricing, location, store size, layout and environment, merchandise mix, technology and innovation, and overall image. The market is definitely characterized by economies of scale. Top retailers vertically integrate many functions, such as purchasing, manufacturing, advertising, and shipping. Large scale functions such as these give the top competitors a significant cost advantage over small-scale competition.
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Fashion is an outlet people use to express themselves. People anxiously wait to see what the next trends are as seasons pass by. We buy anything that doesn’t break a bank, people buy a $10 shirt just because it’s cheap and they might not even wear it, but it’s all right, since it wasn’t expensive. As harmless and normal as that scenario sounds, the fashion industry has created the harmful concept that is “fast fashion”, in which stores sell an abundance of extremely cheap trendy clothing and “where deliveries are small and often, with stock delivered twice a week, for instant-access fashion.” (Cochrane)
Mishra, Sita, and Mathew, Priya. "Analyzing Perceived Risks and Website attributes in E-Retailing: A Study from India." Journal of Internet Banking & Commerce 18.2 (2013). Print
Amazon has more warehouses than any other online retail sites. They also have them spread out all over the world in more countries than any other online retailor. This gives them a competitive advantage because they are able to get the product to the customer quicker and most of the time overnight even. This is certainly a sustainable competitive advantage for Amazon because it is not a resource that will go away or that fluctuates on price or availability.
Few other companies can compete with Amazon’s ability to use ecommerce to cut costs of manufacturing, selling, holding, and making its products as affordable as possible. This is an attribute that has become increasingly important to American’s as they try to recover the massive loss in average income that accrued during the recession of 2008 and 2009. In a scholarly article written by two University of Chicago economic students, Ethan Lieber and Chad Syverson, in 2011, “Online vs. Offline Competition” there is a comparison made by the competition for book sales with the traditional retail store Barnes & Noble and Amazon’s online book sales. In the article the two writers focus on Amazon’s ability to undercut Barnes & Noble’s costs due to their ability to hold less inventory, buy in bulk if needed, and have a lower employment cost per book sold. This was contributing to Amazon’s lead in book sales, becoming the “World’s Largest Bookseller” and current control of the book sales market. Another huge advantage that Amazon online sales has over retail stores is the absence in income tax due to having buyers adopt these costs while still keeping the price of the product lower. “Only when the online seller “has nexus” in the consumer’s state is the sales tax automatically added to the transaction price by the firm. (16, Lieber, Syverson)” This shows
The Flipkart was founded in 2007 by Sachin Bansal and Binny Bansal, both alumni of the Indian Institute of Technology Delhi. They had been working for Amazon.com previously. The business was formally incorporated as a company in October 2008 as Flipkart Online Services Pvt. Ltd. During its initial years, Flipkart focused only on books, and soon as it expanded, it started offering other products like electronic goods, Air Conditioners, Air coolers, stationery supplies and life style products and e-books. The first product sold by them was the book, Leaving Microsoft to Change the World, bought by VVK.Chandra from Andhra Pradesh. Flipkart now employs more than 4,500 people.Flipkart's offering of products on Cash on Delivery is considered to be one of the main reasons behind its success. Flipkart also allows other payment methods- Credit or Debit card transactions, net banking, e-gift voucher and Card Swipe on Delivery. The company has employee base of over 4500 and Global Alexa ranking of 142 (10 in India) which is Best Ranking in Ecommerce product line category industry and regarded as the Amazon of India since 2007 Till 2013 Flipkart raised 541 million us dollar from market Naspers, Accel partner, Morgan Stanley and Tiger global is majority contributor . The online megastore integrated campaign consist of four sub campaign use same theme to convey the messages but different target audience and different group of peoples. All the campaign conceptualized by the same team that is Happy creative agency founded in 2007 by Kartik Iyer to the objective of provide the communication and design service to the client also to do great work have fun and be happy with belief of an idea can change everything. First campaign was “No kidding n...
The gross profit during the year 2015 was actually a $10 billion increase from their fiscal year 2014 (University of San Francisco, 2015). Over the past six years, Walmart continues to generate these types of numbers, representing increases in growth, time and time again. The company’s income was generated by more than 4,500 stores in the United States alone which is supported by a supply chain that moved from number 14 to number 13 on research and analyst company Gartner’s annual ranking (University of San Francisco, 2015). Many business professionals have analyzed and interpreted Walmart’s supply chain management approaches, making it apparent which elements of their strategy have proven effective. These major supply chain components that have shaped Walmart’s success over recent years are their buyer bargaining power (one of Porter’s Five Forces), focus on the overall customer experience, and investments in emerging technologies along with the implementation of these technologies in their business
Wal-Mart is the biggest retail company in the world, and to say it will be like that forever is an illusion. The competition is very intense and if Wal-Mart does not take action, it could lead market share loss. Online retail and shopping is the perfect opportunity that Wal-Mart can take on, it is a risk Wal-Mart has to take.
Wholesalers acts as a lesion between manufacturers of commodities and other industries that are interesting in selling the same products. Along this distribution chain wholesalers usually purchase goods in large quantities and in turn sells them to retailers who ultimately supplies goods and services to consumers. Due to the available space at wholesale locations they are able to store products for distribution to retailers which reduces retailers storage costs. Wholesalers are able to store goods in large quantities which allow retailers to purchase in small quantities. Due to this option retailers are able to only purchase what is needed at that given point (Kotler & Keller, 2012). Additionally, because wholesalers are able to purchase goods