This has probably been the hottest point of discussion within the start-up ecosystem as well customers since Flipkart announced their plans to move to App only by the end of this year. Many opinions have been shared from both the supporters as well as disapprovers of this move.
Without commenting on those opinions and to look at it from a different perspective, let’s look at a parallel, the FMCG world which was an early-career area of experience for me and also for decades the best practice model for driving end-consumption till Internet disruption started.
- Web/Mobile app/Mobile site are channels much like Large hypermarkets/Supermarket/ General Stores/Chemists etc. for FMCG companies. Customers choose one of these channels to purchase as per their convenience/preference.
- An e-commerce company selling only through app is like, let’s say a Cadbury deciding to sell Cadbury dairy milk only through large hypermarkets/supermarkets and not making it available at any other channels.
- Flipkart’s/Myntra’s argument is that the experience for the customer is much better on the app. Similarly Cadbury can argue that the experience of shopping in hypermarkets is much better for the customer. They can put up grand displays/promoters to promote dairy milk in hypermarkets and nowhere else etc.
- Now there is no right or wrong here – but both Flipkart/Myntra as well as Cadbury need to be aware of the side-effects of this strategy – they will miss out on the sales for the channels where they are not present while they will definitely be able to give an enhanced shopping experience to their customers in the channels they exist.
- However the assumption that the customer will change their channel preference because of a company’s decision borders at ‘brand arrogance’. No brand is completely irreplaceable in the current day and age. Imagine your preferred shop is your neighbourhood kirana store (mom & pop store) and you visit them one day to buy Cadbury dairy milk along with other stuff.You don’t find it there once. Ok you love the chocolate so you go to the closest hypermarket to buy it. Then you go shopping the next time, and again you don’t find it in the kirana store – do you think you are speeding your way to the next hypermarket or switching to Kit-Kat? Well, no prizes for guessing the answer.Similarly FlipKart/Myntra’s assumption that people who prefer web/m-site will all ‘eventually’ move to app is untenable at best. Customers have way too many options to get dictated by one brand.
- FMCG mass brands cannot afford to lose any market share whatsoever and the biggest key to that is mass distribution. Ask any FMCG marketing manager, their worst nightmare and the most common answer would be not being present in an outlet where the competition is available. Truth is in a fragmented market like India, you just can’t afford to miss large channels or your market share would be significantly impacted. Aren’t all E-com brands aspiring to be mass household brands in the future much like Lux and Rin today. If yes, can’t really understand how they can miss out on 2 out 3 channels available as of today.
- The argument of focus: Another argument espoused in the favour of the move was how this will bring in focus for the app channel development. Again to continue the parallel, 10-15 years back FMCG companies were facing the same situation when Modern trade started becoming critical.
They promptly restructured their teams to get specialists for modern trade channel development and separate teams for traditional grocers and chemists as the channel needs and type of customers were vastly different. Shutting some channels was not even an option unless they would have been ok with massive erosion of market shares.
Bottom-line – While what Flipkart/Myntra is doing is making a strategic choice, my main concerns about this strategy are two-fold:
a) Their assumption that because they will work only on app, their app channel development will be better compared to its competition might not hold up. Each of the other companies has enough resources at their disposal to develop multiple channels. I really doubt if channel development has already become a zero-sum game.
b) They run the risk of becoming more premium/niche instead of an all-encompassing absolute mass player.
Again this might be a conscious call, though I doubt it.
What are your thoughts?
[About the author: Ashish Virmani currently heads Marketing at FreeCharge, amongst India’s largest m-commerce platforms. Ashish transitioned from FMCG to consumer internet when he joined Flipkart and led offline and consumer segment marketing as one of the early marketing team member. Before that he was with Dabur and Heinz for over 7 years, working across marketing and sales stints. He holds a MBA from MDI Gurgaon and bachelor’s degree in commerce from Hindu College, Delhi. ]