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Indian Startup Scene
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Photo credit: London Scout.
India’s largest ecommerce startup Flipkart said yesterday it now gives shoppers the choice to pay up in monthly instalments without charging them added interests – an effort to more lure shoppers into buying high-ticket products like televisions and home appliances.
“Currently this option is available for certain products and brands in categories like mobiles, TV, and other consumer durables. We intend to expand this service to laptops, cameras, fashion accessories, high-end watches, sports equipment,” a spokesperson told Tech in Asia.
Customers can buy electronic products costing more than US$74 and pay in equal monthly installments over three, six or nine months.
This is the first in a series of finance offerings Flipkart will launch this year.
Ecommerce companies in India are locked in the fiercest of business battles, each trying to generate more customer stickiness than the other. A financing scheme of this sort helps both ways – it lets people splurge without worrying about immediate budget restraints and it lets companies sell pricey items without having to knock down prices altogether.
But the more important message Flipkart is sending isn’t contained in this one scheme – it’s in what the move represents.
“This is the first in a series of consumer finance offerings that Flipkart intends to launch over the course of the year. Together with existing programs like product exchange and assured buy-back, Flipkart is gearing to be the most affordable shopping destination for Indian consumers,” the company said in a statement.
Flipkart’s plan allows for zero upfront payment and zero interests, potentially opening up its merchandise to a whole new set of customers – students who covet pricey iPhones but cannot afford them, or young individuals trying to set up their first homes, for example.
Flipkart cofounders Sachin Bansal and Binny Bansal. Photo credit: LetsIntern.
If the company is able to crack how to balance affordability while doing away with mad discounting, its rivals will have serious cause for worry.
A Flipkart spokesperson did not respond to an email seeking comments on what its future plans could be.
Missing the beat
While Flipkart’s financing schemes sound innovative and comprehensive, there is, however, one problem.
The company has been slipping on many fronts of late, and there is a chance it could be late to the party with this one. Again.
Flipkart has been looking for ways to keep its lead on Amazon in GMV, but depending on who you ask, that lead has been under serious stress for some time.
Gross Merchandise Value, or GMV, refers to the total value of goods sold by an ecommerce company.
Data for the past six months from Alexa show Amazon has had a consistent lead over Flipkart and Snapdeal in terms of website traffic. And while mobile traffic has been growing in importance for all startups, it still isn’t enough to drive growth by itself, as the recent Flipkart-Myntra mishaps have shown.
Graph from Alexa.
Recently, the company went to town with the announcement that it will forego GMV metrics in the future and focus on customer satisfaction instead.
The trouble was, Amazon had already built its reputation doing just that and Snapdeal made a similar announcement days ahead.
To be fair, decisions regarding a company’s future moves are often a fluid process and typically kicked off way before executives talk about it in public.
But even by those parameters, it looks like Snapdeal’s Kunal Bahl started the process earlier, and was hence able to make the policy public long before Flipkart’s Binny Bansal did.
Who will win this race? Photo credit: Wikimedia.
Tall claims made in the past have not made it any easier for Flipkart. Analysts started questioning its big focus on customer satisfaction.
“Many of these players, including Flipkart and Snapdeal, have made extremely reckless claims for GMVs in the past,” Arvind Singhal, chairman of retail consultancy Technopak told Tech in Asia in an earlier interview, referring to statements made by the then head of commerce at Flipkart, Mukesh Bansal, last year.
Mukesh had said that Flipkart was aiming to sell goods worth US$10 billion in 2016 and US$100 billion by 2022. He quit Flipkart in February. Mukesh’s statement came after Snapdeal’s Kunal Bahl told media it was on track to beat Flipkart as industry leader.
By February 2016, Flipkart’s average monthly annualized GMV hovered around US$5 billion, and Snapdeal was around US$2 billion.
Fast and slow
Photo credit: George Lu.
Comparing the newest announcement, Amazon launched its financing scheme in 2014, allowing shoppers with credit cards to pay in tranches for things that cost upwards of US$45. Amazon’s plan, however, is powered by the banks that issue the cards, and works in the traditional way.
“Amazon does not charge any fee for EMIs over and above the purchase value of the items. The banks may charge interest which is normally included in the monthly installment,” a spokesperson told Tech in Asia.
Both Amazon and Flipkart say they only cover select items under the plans.
Snapdeal has long tied up with one of India’s biggest banks to offer a credit card, which can be used in similar ways.
Less than one percent of Indians have access to credit cards.
Flipkart’s big win with the new announcement is that under its scheme, users without a credit card can avail easy financing as well. Anyone with a debit card or a bank account can be eligible, a wise move in a country like India.
“Less than one percent of Indians have access to credit cards, and the traditional banking industry has been slow in addressing the need for small personal loans. This is the first step towards making shopping truly affordable for masses online and brands have shown great enthusiasm to collaborate with us. This has the potential to disrupt online shopping just like we did with cash on delivery a few years ago,” Mayank Jain, Flipkart’s head of digital and consumer financial services said.
For ecommerce companies, boosting sales of high ticket items like TVs, refrigerators and other home appliances is crucial as they try to cut costs and move towards some semblance of profitability.
Whether Flipkart can come in late and still win big depends on what products are available under its scheme, and how seamless the process is for shoppers.
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Photo credit: Wikimedia.
India’s biggest app-based taxi hailer Ola is all set to launch a new post-paid billing service as soon as next week, two people familiar with the matter told Tech in Asia.
The new service, called *Ola Exclusive* as of now, will work on a subscription-based model, allowing users to pay for car rides at the end of a billing cycle. It is part of the company’s broader push toward improving customer experience, one of the sources said.
In India, Ola rivals Uber in the app-based taxi industry. Both companies have tried several different services and customizations to woo Indian consumers, including motorbike taxis, wifi-enabled cabs, and cash payments.
Ola had even gone a step further by introducing grocery and food deliveries, but eventually folded them as Uber kept adding heat with big investments.
Gaining loyal customers is key to winning the taxi race, and many investors have expressed doubts about Ola spreading itself too thin as competition gets intense.
The launch of the new service could be a pivotal move for Ola to gain customer stickiness. It has been falling behind Uber in big ticket launches (or at least announcements, as is the case with bike taxis).
“Ola Exclusive will allow a subscription on a monthly, weekly, or quarterly basis, and will offer services like free wifi, rewards, and an even better supply of cars to customers,” one of the people aware of the matter told Tech in Asia.
In other words, if free wifi and reward points are not tempting enough, Ola is planning to promise that customers who opt for the subscription model will have a higher supply of cars around them than users who do not sign up.
A screen grab of the service page that Tech in Asia saw displays all three of those on offer.
We could not determine subscription pricing and Ola did not respond to an email seeking comment.
Editing by Meghna Rao and Malavika Velayanikal
(And yes, we’re serious about ethics and transparency. More information here.)
I like good apps, tech, books and food, not necessarily in that order. Enabler of good ideas, chaser of good stories. Associate Ed, TIA India. Tips and chats @tweetsfromnivi or firstname.lastname@example.org
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