The actual impact of flash sales of online companies

Companies including Amazon, Flipkart, and Snapdeal have gone on a frenzied build up of inventory

by Subhomoy Bhattacharjee

The lights have rarely been switched off in the row of warehouses in the sleepy towns of Karnal and Hisar in National Capital Region down to Mahipalpur in the outskirts of Delhi in the past few weeks.

These have been some of the landing sites for the mega sales blitzkrieg which has been hurled by the e-commerce companies at metro cities this festival season. Way before the ads have plastered the media over the weekend, companies including Amazon, Flipkart, and Snapdeal have gone on a frenzied build up of inventory. Pages of all major newspapers and other media outlets are plastered with their offers, impossible to miss.

The build up has been aggressive. “We have been working on this for the last two months….and we had over 25,000 sellers registered during this time frame to sell on,” said an Amazon India spokesperson.

But despite all that if one breaks down the actual impact in terms of sales for this season, those are harbingers for the future than of now. Let’s look at some of the macro numbers; an India Ratings report shows the two main movers the index of industrial production to 6.4 per cent for August against the 4.3 per cent median estimate is due to a) the base effect ie the impact of low sales in the corresponding period of last year and b) the build up of inventories for the festival season.

Where do the e-tailers rank within this huge rise? Sunil Sinha, principal economist and author of the report says, ‘As of now e-tailers form 10 per cent of the retail universe. So the larger impact of inventory build up is still coming from the brick and mortar platforms’.

The impact is in terms of signalling they have created. For instance, a Coolpad press note claimed that in span of 72 hours after debut on the Amazon India site from October 9th, ‘the phones witnessed registrations of over half a million’. Those numbers will not necessarily translate into sales. Since they depend on the environment of sales made online which in India means primarily via mobiles.

Globally Facebook is hoping to win over more ad dollars by ‘smoothing the process’ of buying on mobiles. ‘Mobile purchases make up less than 2 percent of all retail sales,’ research firm eMarketer notes. Facebook though hopes to cross that hurdle. “We’re looking to give people an easier way to find products that will be interesting to them on mobile, make shopping easier and help businesses drive sales,” said Emma Rodgers, Facebook’s head of product marketing for commerce.

The tale is at an even more nascent stage in India. A joint industry study by online intelligence service provider Warc conducted with The Mobile Marketing Association has found that even now 75 per cent of Indian marketers are assigning less than 10 per cent of their budgets to mobile-based shopping experience.

But the study notes those percentages are expected to rise by 25 per cent within a year and to over 51 per cent in another five years. Bharti Airtel which began to offer iPhone 6s and iPhone 6s Plus this week will be meanwhile doing so through its brick and mortar retail stores in the first round.

India’s largest telecom service provider has decided to keep open several of those all night to build up the excitement. Yet despite the overall superiority, there is concern among the offline sellers. The umbrella body of the brick and mortar retailers have noted that the current round of ‘five day sale’ on-line is a violation of the foreign direct investment regulations of the government, claims the confederation of all India traders.

‘These companies have solicited response from the general public to their respective sales (which) tantamounts to retail trading’, the traders allege in a note sent to department of industrial policy and promotion. It is a fight that is going to get messy. But meanwhile even as property rates in the National Capital Region have been flat for the past one year; those for warehouses and godowns have held steady thanks to the logistics need from the online sellers.