Jago Grahak jago

State Consumer Helpline Knowledge Resource
Management Portal (SCHKRMP)

Empowering Consumers

Govt. of India
IIPA logo

Daily News Clipping

 
Shopkeeper, firm penalised for selling old mobile phone
EWS certificates through e-sewa portal started
Relief for tourists as HRTC bus service begins for Rohtang Pass
Jeweller told to pay Rs 20K for selling gold of inferior quality
Bank told to pay Rs 1 lakh maturity bond amount
New GST return system for taxpayers: Here are all the details
Women who was sold inferior aquarium loses fish, wins relief
Chandigarh Housing Board warns cancellation of flats over pending dues
19 hiked auto fare to come in force in 3 days
Want to verify Aadhaar card Here are steps to authenticate on uidai.gov.in
Aadhaar Card: How to find UIDAI centre near you using uidai.gov.in - Check these steps
Insurance firm fined for rejecting claim
Allow basic savings account holders to make at least 4 withdrawals a month: RBI to banks
Motor insurance: Six must-know ways to save yourself from fake policies
Builder charging exorbitant interest from homebuyers on delayed payment is unfair: NCDRC
Government mulling tax on cash withdrawal of Rs. 10 lakh a year
Dos and Don’t-s for Filing ITR in AY 2019-20
How to generate Aadhaar card e-KYC offline
SBI online customer Protect your money check these five points you must follow for safe netbanking
FSSAI proposes ban on junk food advertisements in and around schools
The do’s and don’ts of making a health insurance claim
DNA EXCLUSIVE: Banks to pay penalty if ATMs run out of cash
Insurance firm to pay Rs.1.2 lakh to elderly man
Delhi restaurant, Coca-Cola told to pay Rs.25,000
GST Council may give 1-year extension to anti-profiteering authority
Shops on HRTC land vacated in Una
Maruti Suzuki, car Showroom told to pay Rs. 1 lakh to consumer for faulty horn
Pay Rs 25,000 for failing to refund cancelled ticket: redBus told
Odishas district postal superintendent arrested for not obeying orders of Balangir Consumer Redressal Forum
GST Council may tighten rules to curb tax evasion
Post Office Monthly Income Scheme: Interest Rate And Other Details Here
SBI Online: Account opening benefits, process explained
Beware of online hackers Avoid these 7 acts to keep your money safe online
Not paid Income Tax Or stashed money abroad New guidelines set to hit you
Improper storage not covered under exclusion, NDRC asks insurance company to pay up
Soon, pay parking fee digitally
Forum orders two doctors to pay Rs. 6 lakh to patient
Insurance companies must honour claim at all hospitals: Delhi HC
 

Will cashbacks amd deep discounts to lure customers sustain
The Economic Times, December 11, 2018


As if Diwali was not enough, the seduction starts again in December. Flipkart claims its offers har na ko haan mein badal de. Amazon too will make sure Christmas comes early this year and continues into the next.

Splurge on half-priced electronics or shoes. Kitchen and home appliances will be shipped to you at a 75% discount, with free installation thrown in. You can also ‘claim’ a fancy iPhone or Apple Watch at the special shopping fest or simply ‘grab coupons’ and spend at the ‘carnival’ that in any case, will be offering bargain basement prices.

And in case you missed the fine print, certain credit cards will also give you cashbacks.

In reality though, these bumper selloffs are becoming a round-the-year phenomenon.

Over the course of your average workday, you streamed your chosen music and got credits into your account when you used an e-wallet to pay for those downloads. A gourmet meal ordered over an app came with mouth-watering cashback offers and your movie ticket was bundled with free snack options. All the mobile data you consumed for all of this was also free. You only paid for some premium offerings such as live TV or a Netflix subscription. Actually, pretty much every transaction, including buying your next car from a suburban auto dealership, came at a far lower cost than the rack rates.

Some call it habit creation, others mind mapping. Some dismiss it as a race to the bottom that first burns cash and then businesses all together. Yet, fast fashion, groceries, pharma retail, ride-hailing, financial services and even fine dining have huge discounts, subsidies or teaser payment plans that have changed the rules of engagement forever.

Traffic too is getting exponentially bumped up as is penetration beyond the top 8 metros.

In January-August, fashion etailers recorded a spike of 417% in orders during special sale events that lasted for 26 days in those eight months, says a 2018 report, How India Buys Fashion Online, by ecommerce solutions provider Ace Turtle.

Flipkart alone clocked $1-1.1 billion in gross merchandise value (GMV) in five Big Billion Days, up from $660 million last year. Clearly, deal-drunk consumers — many of whom are stepping on to the consumption ladder for the first time — aren’t complaining about this great discount bazaar.

“It’s great for consumer psychology. That is how they tell themselves they are smart buyers,” feels Abraham Koshy, professor of marketing, IIM-Ahmedabad.

“Seasonal discounts have always been there,” says Sanjiv Bajaj, managing director, Bajaj FinservNSE -0.33 %, a retail-focused non-banking finance company. “It’s just become more obvious because of large scale advertising by major brands, online marketplaces and their fight for growth.”


Winner Takes All

Some businesses in the aggregate economy — financial services, ecommerce or travel — thrive on scale and make money only after. “There is no fun and no point in building small scale profitable businesses in the technology space. We know that in the long term, costs and power to reduce prices on the supply side will be so much that we can pass on those discounts in the future,” Flipkart cofounder Sachin Bansal told ET recently.

For them, short-term discount is a kind of marketing cost to drive volumes. How short that short term should be will depend on market size. Drawing parallels with WhatsApp, Bansal argues that it doesn’t make money and has started monetising after reaching a billion users. “That’s how you build large businesses.” Food tech or ecommerce are still to reach that inflection point.

The sources of capital chasing these cash machines are also doing so to support market leadership and domination, which they believe will eventually turn into a bonanza.

Paytm, for example, is serving about 20,000-plus pincodes and gives discounts to first-time users. “They are an important factor for a company to expand scope,” feels Amit Sinha, chief operating officer, Paytm Mall. “Most people shopping online for repeat items want discounts. This isn’t always the case for lifestyle and fashion products. Less than 50% of our products are discounted.”

Discounts do win brownie points but it’s temporary. First-time users are arguably not loyal. Travel site ixigo spends less than 1% of funds on ads and repeat loyalty is high. With over half the population not connected and only about 100 million transacting users, it’ll be at least another 4-5 years until it’s a 100% customers market.

“If discounts create irreversible customer behaviour, it’s alright. But if they don’t, maybe it’s not (necessary),” Sriharsha Majety, cofounder, Swiggy, admitted in an earlier chat with ET. “There should be value for consumers. How we do it, discounts or otherwise, (it doesn’t matter).”

Singe, Burn and Char

It actually does. Remember what happened to Snapdeal when it tried to edge past Flipkart with unplanned freebies? It simply sank. The Future of Discounts Neeraj Roy, managing director, Hungama, which has various streaming services, has a unique take on unit economics of online businesses.

He says that by 2023, there will be 500 million Indian consumers who should be willing to pay about Rs 100 a month for entertainment. This could come in the form of micro-transactions, potentially adding up to Rs 60,000 crore a year. “This is equal to the size of the entire broadcast industry as it stands today

“If one ecommerce company gives a discount, the other follows suit. That is a race to the bottom. Companies put up an average product experience,” says Sandeep Murthy, partner, LightBox VC, early investor in InMobi and InfoEdge.

Peers Airtel and Vodafone Idea retaliated in kind. They slashed prices and started bundling value added services such as time-bound subscriptions to Amazon Prime and Netflix. “The customer thinks freebies and discounts are great. They are, but only in short run, as service quality, investments and innovation will all suffer,” warns Balesh Sharma, chief executive, Vodafone Idea.

Specialised sub sectors have always been relatively easier to manage and scale up. There are enough examples — be it furniture, fashion, eyewear, mattresses or early morning delivery platforms. “Segments are opening up where growth is not crazy and they have arguably better aggregate capital deployed because they can be built more efficiently.

Some would still insist today’s burn is for posterity. “You are burning $3-4 billion today but creating infrastructure, logistics and changing consumption habits forever.

Nobody questions Mukesh Ambani on why he spending over $25 billion on Jio. They are creating a backbone they can milk for the next 2-3 decades,” argues a founder whose company has just recently joined the rarified unicorn club. “Ambani’s refining business is his cash cow. For SoftBank, it’s their stake in Alibaba or Vision Fund’s petro dollars. But for the moment, every consumer is benefiting. Then who are we to play God?”

Translate this page

Help No. States Consumer Helplines

  • ANDAMAN & NICOBAR
    03192-246323
  • ANDHRA PRADESH
    1800-425-0082, 1800-425-2977
  • ARUNACHAL PRADESH
    1800-345-3601
  • ASSAM:
    1800-345-3611
  • BIHAR
    1800-345-6188
  • CHHATTISGARH
    1800-233-3663
  • DELHI
    011-23379266
  • GUJARAT
    1800-233-0222,
    079-27489945 / 46
  • HARYANA
    1800-180-2087
  • HIMACHAL PRADESH
    1800-180-8026
  • JHARKHAND
    1800-3456-598
  • KARNATAKA
    1800-425-9339,
    1967
  • KERALA
    1800-425-1550
  • MADHYA PRADESH
    1800-233-0046
  • MAHARASHTRA
    1800-22-2262
  • MANIPUR
    1800-345-3821,
    0385-2443924
  • MIZORAM
    1800-345-3891
  • NAGALAND
    1800-345-3701
  • ODISHA
    1800-345-6724,
    1800-345-6760,
    0674-2351990,
    0674-2350209
  • PUDUCHERRY
    1800-425-1082,
    1800-425-1083,
    1800-425-1084,
    1800-425-1085
  • RAJASTHAN
    1800-180-6030
  • SIKKIM
    1800-345-3209
  • TAMIL NADU
    044-28592828
  • TELANGANA
    1800-425-00333
  • TRIPURA
    1800-345-3665
  • UTTAR PRADESH
    1800-1800-300
  • UTTARAKHAND
    1800-180-4188
  • FSSAI
    1800-11-2100
  • WEST BENGAL
    1800-345-2808