New ad: why did Flipkart go back to basics?

Sangeetha Chengappa Bengaluru | Updated on January 20, 2018 Published on April 12, 2016

SANCHIT VIR GOGIA Chief Analyst, Greyhound Research

SHOUMYAN BISWAS VP - Marketing, Flipkart

Rising losses, looming competition from Alibaba may be behind the move

E-commerce major Flipkart, with 75 million registered users, has gone back to explaining the basics of online shopping to Indian shoppers with its TV ad campaign, Flipkart matlab bilkul pakka.

The two-film campaign seeks to reassure customers that they can never go wrong while shopping on Flipkart, as the platform sells 100 per cent original merchandise which can be easily exchanged or returned.

While there could be multiple factors that led to the birth of this campaign, three things stand out immediately. First, the tone of the basic message is typically what fresh entrants into the e-commerce space would adopt to create awareness and attract customers.

This is not synergistic with Flipkart’s dominant market share of 45 per cent garnered over its nine years of operations.

A share that is equivalent to the combined market share of Snapdeal, Amazon India and Paytm, according to a February 2016 Morgan Stanley report.

Second, the products that Flipkart has chosen to depict in the films are high-value ones — Banarasi saris and sports shoes, which customers typically like to touch, feel and experience before buying.

Third, the campaign broke in early March, a few days after Flipkart’s valuation of $15.2 billion was marked down by 27 per cent to $11 billion by a Morgan Stanley-managed mutual fund. This had been followed by Chinese e-commerce giant Alibaba announcing its plans to enter the India market in 2016.

Reactive measure

“I see this campaign as a purely reactive measure by Flipkart in response to the Morgan Stanley fiasco and Alibaba’s imminent entry into India,” remarked Sanchit Vir Gogia, Chief Analyst, Greyhound Research.

“Flipkart should have launched this market-building campaign three-four years ago, instead of focusing aggressively on customer acquisitions by doling out huge discounts, thereby incurring huge losses.”

Brand and marketing consultant Harish Bijoor concurred that the campaign is in preparation for Alibaba’s entry into India — Flipkart is trying to distinguish itself as a seller of genuine products vis-à-vis the competition, which may sell Made-in-China products too.

On Flipkart choosing to showcase high-value products, Gogia explained that it could be strategy to mitigate losses.

“They need to become profitable. Showcasing high-value products will get them much higher margins, than low-value, high-volume categories like mobile phones and accessories.”

E-commerce experts peg gross margins on fashion and accessories, including shoes, at 35-55 per cent, while the quick-selling, large-volumes category of smartphones/mobile accessories fetch much lower gross margins of 10-18 per cent. Flipkart suffered losses of about ₹2,000 crore in FY15.

Margins game

Bijoor said Flipkart has already played the width game with 30 million products across 70 categories, and it’s high time it played the margins game.

“The way forward for Flipkart would have been to launch a campaign that inspires consumers to buy high-value, high-margin products such as cars and homes. It is not relevant for them to explain the basics of online shopping at this point in time,” he observed.

Shoumyan Biswas, VP - Marketing, Flipkart, had a different take on the explaining-the-basics campaign.

“While we are seeing great traction with our consumers on the back of pioneering selection, service and pricing, we feel the journey has only just begun. The majority of the country is yet to experience online shopping and, in such a scenario, we as market leaders believe it is our responsibility to develop the market and help on board the next few million,” he said.

Giving reassurance

“With this intent, we initiated extensive activity across multiple cities and different target segments of potential shoppers and found that the two overarching challenges could be distilled to two key points — reassurance about getting original products and the ability to return products with ease.

“That’s why our campaign, Flipkart matlab bilkul pakka.”

Published on April 12, 2016
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