The Indian marketing context has seen an explosive growth of retailing online in recent times.
Other than consumer durable and apparel, FMCG brands are also gearing up to enter online retail.
Britannia even launched Good Day Chunkies exclusively online, at first. Myntra, Flipkart, eBay and Snapdeal are already major brands with a significant following. Some brands of Motorola and Xiaomi mobile phones launched exclusively online were major hits.
Online retail in India, according to media reports, will cross about $16 billion by 2018. One of the distinguishing aspects of this growth is that it has been fuelled by unprecedented discounts across categories and brands.
The size of these discounts and their perennial nature (unlike the seasonal discounts that the Indian context is used to) has created a context that will force branded offerings to not just revisit their strategies but also question the rationale for the existence of the brands that have endured for several decades.
This situation throws up three questions:
Can brands sustain what they stand for? (Unless they belong to the luxury category, such as heritage brands Ferrari, Mont Blanc or BMW in which case the brand associations are created by their legacy.)
If an unknown brand of microwave ovens offers a good product, it has the potential to replace an established brand through digital word of mouth.
While established brands may lose their brand associations, unknown brands may enter the consideration set of consumers.
Development of private label brands by the online portals themselves.
Satisficing behaviour of consumers (the term ‘satisficing’ was first used by political scientist and economist Herbert Simon, Nobel prize winner.)
Challenges Companies that offer a product line (a string of offerings at different price points) may have a price-fighter brand exclusively for online and strengthen the emotional or symbolic lineage of higher priced brands. Apparel, mobile cameras and watches are examples of categories that may take this route. Furthermore, functional aspects of brands at a higher price point may assume a direction that discounted brands may never be able to match. Sony’s pocket camera and smart watch are examples that indicate the trend. Sony’s smart watch has several features that other brands do not offer. Innovations like sensor-based apparel that can read the mood of the wearer and change colours may be launched.
Cross-selling among the brands of a company may become widespread with business analytics and data mining. Millions of consumers may be associated with the offerings of a company such as Unilever or Procter & Gamble. There may be clusters of families that use the various offerings of the same company. The challenge for brand managers is to utilise the data on consumption and develop micro-segments that can be effectively targeted with offerings and promotions. For instance, a consumer who cooks using organic ingredients may be different from one who likes to experiment with her cooking. Both consumers may use different sets of ingredients. The personal connection between the brand and consumer connection would be heightened (like Allen Solly’s customisation of colours to reflect one’s individuality). Consumer relevance will be built into the brand and it would require a continuing relationship enabled by the company/brand. Nike+ in association with iTunes had several features to enable a user to monitor his performance and connect with others.
Private labels, unknown brands Consumers having access to digital media will be able to connect with their friends and contacts and obtain information on unknown offerings and their performances. This will be an opportunity for online portals to develop their own brands. An example is Myntra’s launching private labels in apparel. Shoppers Stop will shortly be introducing its own brand Haute Curry online too. This writer was looking for a mobile phone for the elderly that would have bold letters on the keypad. Brands such as iBall, Philips and Samsung were the ones that showed up on Google search. iBall was good but pricey for the “conversation only” requirement (basic need required for the purpose). The other two brands were unavailable in retail search. An unfamiliar brand called Swingdel, priced around ₹1,000, was ordered from Flipkart. The entire search and purchase of the unknown brand took about 10 minutes (online). The brand’s rating and reviews online also influenced the choice. The brand’s performance was much more than what was expected from an unknown brand at the given price point.
The satisficing phenomenon In an emerging market like India, there are millions of consumers who would fit this with their needs knowing fully well that other better options exist in the market.
Though there would be a few personality traits that motivate a consumer towards satisfying behaviour, there is likely to be a huge segment of consumers who would “satisfice” due to reasons of affordability.
Little known brands that are priced lower than branded offerings and the ones that do not have the luxury of launching an advertising blitzkrieg will have tremendous opportunity to break into the consideration set of consumers through online retailing. Shopclues is a website that lists several manufacturers who may have the potential to develop their offerings into powerful brands, adding to the intense competition faced by established brands.
Online retailing of the discounting kind will pose emerging challenges to brand managers while benefiting consumers in the emerging market.
(S Ramesh Kumar is Professor of Marketing, IIM-B)