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<keyword id="541988" type="COMPANY" weightage="100" keywordseo="SnapDeal">Snapdeal</keyword>, the <keyword id="1705292" type="UNKNOWN" weightage="100" keywordseo="Indian-e-commerce">Indian e-commerce</keyword> giant, has asked the <a href="http://www.businessinsider.in/Snapdeal-doubles-the-number-of-sellers-in-one-year/articleshow/51629270.cms">sellers on its platform</a> to restrict their discounts within 70% of the maximum retail price (MRP) on most products from May 13 onwards. This move has come as it aims to tackle the increasing return of merchandise from buyers. 
 
 
The New Delhi-based firm sent out a communication to its sellers on May 9, in which it said, "We have noticed deeply discounted products often do not meet expectations, leading to increased returns and customer dissatisfaction. To improve customer experience, you would not be able to list a new product or update the price of a listed product with more than 70% discount on MRP." 
 
Also read: <a href="http://www.businessinsider.in/Saurabh-Bansal-Snapdeal/articleshow/52187484.cms">Saurabh Bansal, Snapdeal’s former Merchandising Strategy head, will now head its Category Management</a> 
 
In the recent past, sellers on all leading marketplaces, including <a href="http://www.businessinsider.in/Snapdeal-appoints-former-HUL-employee-as-VP-Marketing/articleshow/52000299.cms">Snapdeal</a>, complaint of an increase in the return of products, mainly because of the "no questions asked" return policy that these e-commerce companies follow. This leads to losses because of<a href="http://www.businessinsider.in/Buy-anything-on-Snapdeal-and-you-may-get-it-within-four-hours/articleshow/51775022.cms"> logistical cost</a>, inventory being stuck in transit for a long time and accounting errors as well. 
 
Also read: <a href="http://www.businessinsider.in/Buy-houses-on-snapdeal-without-any-brokerage-fees/articleshow/51511681.cms">Buy houses on Snapdeal without any brokerage fees</a> 
 
While for some sellers this is a "good move" given that offering huge discounts make customers question the authenticity of the products, there are some who see it as a roadblock in clearing piled up inventory. 
 
<a href="https://media.licdn.com/mpr/mpr/jc/AAEAAQAAAAAAAAB0AAAAJDkyMTY5NWY3LWQwNzItNGJmOC05N2M0LTBiZDJlMTFjNzJkNA.jpg">Image source</a>

No more discounts over 70% on Snapdeal. Read on to know more

<ul><li>Snapdeal added 6 million new buyers on its platform during the pandemic.</li><li>Its recent 5-day sale kicked-off on October 16 and ended on October 20. </li><li>Rajnish Wahi, Senior Vice President, Snapdeal tells us some of the trends the platform saw during its pre-Diwali sale, its plan to go deeper into Bharat and USPs that helped it stand out in the clutter of online sales. </li></ul>Indian consumers have always been value-conscious, who take pride in their haggling skills and with the pandemic, buyers are expecting greater value for their spends. Therefore, e-commerce player Snapdeal’s sale, which took place between October 16 to 20, focused on offering ‘Kum Mein Dum Diwali,’ i.e., value deals for lesser money. According to Snapdeal, less than 5% percent of retail is online and during this on-going <keyword id="36208" type="PERSON" weightage="20" keywordseo="festive-season">festive season</keyword>, the platform’s aim is to bring more users online and give them strong reasons to switch. Snapdeal observed that consumers weren’t willing to buy premium brands this year and wanted to access the online platforms in their regional language. So, as other e-commerce platforms offered premium brands at a discounted price, Snapdeal wanted to make online shopping more inclusive for buyers across India. It focused more on non-metro cities, which is a market with potential 400 million users and shipped orders to rural places like Palasner in Maharashtra, Abdasa in Gujarat, Kalsi in Uttarakhand, Chitkul in Himachal among many others. Ahead of the sale, Snapdeal added 1300 new pin codes to go deeper into Bharat, areas which were previously unserviceable or where users were compelled to travel to nearby towns to collect their orders. It also updated its user interface by adding eight languages including Hindi, Tamil, Kannada, Telugu, Malayalam, Gujarati, Punjabi, and Marathi. As a result, 70% of its orders were received by sellers located beyond the top 5 metropolitan areas of the country and 90% of its orders were placed from non-metro cities. We caught up with Rajnish Wahi, Senior Vice President, Snapdeal to further understand some of trends that the platform saw during its sale. Excerpts: Q. The role of engagement and communication has never been more important, especially in today’s digital-first world. How are you making sure your communication during this year's sale is relevant to consumers? Snapdeal is sharply focused on catering to the value-conscious consumers, who see e-commerce as the connecting link between their aspirations, access and affordability. Our theme for this year’s festive sale - “Kum Mein Dum Diwali '' clearly communicates our core message - your shopping rupee has more value this year. As part of our sale preparations, we had conducted a survey of nearly 1.25 Lakh users and one of the key insights was user unwillingness to pay for brand premiums this year and instead focus on the functional value of their purchases. Based on these inputs, the festive assortment was expanded in a focused manner by on-boarding additional sellers for popular products like kitchen appliances, kitchenware, bed linen, apparel, footwear and fashion accessories like watches, wallets, etc. Shaping our sale offers around the clearly-stated expectations of our customers and conveying the same unambiguously through our festive promotions and digital marketing is the sum and substance of our festive communication. Q. This year is different. People have been observed to be judicious in spending. How has the consumer sentiment improved? While 2020 has been a volatile year, we see that there are many tailwinds that are propelling our business. The pandemic has resulted in redistribution of demand between offline and online channels, with online gaining share due to its inherent advantages of reach, convenience, large assortment and safety of buying from home. It has also accelerated the familiarity and acceptance of e-commerce amongst new buyers. With the pandemic, consumers have become more price conscious and are likely to opt for lesser-priced products, while not compromising on their quality expectations. Given all of this, we have seen two sets of buyers come on Snapdeal - one which is trading up to a better assortment and one that is trading down and opting for better functional value instead of big brands. In fact, we have added 6 million new buyers on our platform in the pandemic. We are witnessing the return of enthusiasm for festivities and it is also apparent that online channels will be a preferred medium for a larger number of buyers this year. But it will also be different this year, as more people will be price conscious and will look to spend on quality products that suit their price sensibilities. In a way, Snapdeal’s “Kum Me Dum” focus is about “offering more choices at price points better than last year”, especially for popular categories like home &amp; fashion, which has been made possible by year-long focus on expanding our value selection. Q. With the on-going festive season, many other platforms will have their Sales days too. How do you then cut the clutter and make sure you win consumers? How will you be different from the other players in the segment? Snapdeal is synonymous with value e-commerce. While others in the industry are now starting to build a value segment, we at Snapdeal have been focused on “only value” for the last three years. While other platforms are making efforts to sell branded items at discounted prices, these are still not affordable for a majority of the buyers in the country. On the other hand, we are focussed on bringing the depth and diversity of India's bazaars &amp; markets to the doorsteps of our users. On Snapdeal, buyers find endless varieties of regional and local brands that not only serve their needs, but also offer immense value at affordable prices. The result of our “Kum Mein Dum” Diwali sale bears testimony to this - more than 80% of Snapdeal’s Diwali shoppers chose to buy regional &amp; local brands on Snapdeal. The strong growth of lesser-known brands relative to national/international brands has been because of two key reasons: increased choice and a substantial price difference. Our value-focused positioning runs consistently through our selection and communication and is one the reasons why 90% of our orders flow from non-metros cities and towns across the country. Q. What are some of the other trends you are expecting to see this festive? Our first sales results are out and are reflective of how close the lives of users revolve around their homes. The sale in the home products category has grown by 30% over last year and has become the largest category on Snapdeal this year, overtaking the fashion category, which has traditionally been the top-performer at Snapdeal. The growth in the home category is propelled by popular products like kitchen appliances, kitchenware, bed &amp; bath,decor,cleaning equipment, lighting and comforters &amp; blankets etc. This growth in the fitness category reflects the extra time that people have on their hands and also underscores heightened awareness about personal health &amp; fitness. This category has grown by 45% over last year led by gym essentials like tummy trimmers, push-up bars, wrist supports, fitness gloves, hand grip strengtheners etc. Users buying sports equipment like badminton racquets &amp; cricket sets and weighing machines are also strong consumer trends. While the fashion category has also grown from previous years in terms of shipped units, the growth is less than other higher-performing categories. In the fashion category, there is an increased spending on kidswear in the festive season. . Among popular picks in Snapdeal’s Diwali sale are men’s &amp; women’s grooming products, nutritional supplements, religious items (prayer books, temples accessories etc). With the deterioration of air quality in North India, the sale of N95 masks, air-purifier filters, anti-pollution skincare items, skin moisturisers, lip balms has also increased. Snapdeal also witnessed an increase in gifting via e-commerce early in this festive season. The range of festivals starting with Karva Chauth and followed by Dhanteras, Diwali, Bhaiya Dooj and Chhath Puja have become important gifting occasions for users in various parts of the country. While in the previous years, shoppers used e-commerce channels to buy and ship to families &amp; friends in other cities, this year many shoppers in metro cities are also sending gifts to people living in the same cities. This year gift cards have also been hugely popular among people to send to their friends and family, with a 3X surge in orders as compared to the festive sale last year. These included gift cards of travel, entertainment, food and retail brands which were upto 30% off. Q. How are you working towards improving the overall consumer experience? E-Commerce in India has grown beyond the first 100 Mn largely urban, English-speaking users. A market of potentially 400 Mn users is now emerging across India’s smaller non-metro cities. This is a very diverse cohort in terms of languages spoken, literacy levels, frequency of online purchases and familiarity with technology. A large part of Snapdeal’s existing user base and new users come from this cohort and all our focus and efforts are on building the right experience that our users want. That means we work tirelessly to give them a wide array of products to choose from, and at just the right prices they are looking to spend. We also make it easy in many other ways for users to buy on Snapdeal. This includes providing interfaces on our app &amp; m-site in eight Indian languages, so that they can browse through products &amp; transact in a language of their choice. We also enable conversation with our customer service agents in multiple Indian languages. Transaction and promotional messages all are available in many Indian languages. Some other ways, in which we support our users to buy is by helping them make well-informed choices through short 10-second product videos which are far more captivating and help buyers to make decisions faster than static pictures of the products concerned, easy 7-days return, no questions asked refunds policy. We are the only platform that provides uninterrupted access to cash-on-delivery option even during the turbulent early days of pandemic lockdowns. Q. Which are your strongest markets currently? How are you planning to strengthen your presence in other markets? We have a strong pan India presence. During the current sale and consistent with Snapdeal’s positioning, more than 90% of Snapdeal’s orders were placed from non-metro cities. Populous cities like Nagpur, Vijayawada, Surat, Bhopal, Chandigarh, Visakhapatnam, Ranchi, Patna, Guwahati and others continued to drive orders on Snapdeal, but smaller cities like Sagar (Madhya Pradesh), Raniganj &amp; Durgapur (West Bengal), Patiala &amp; Gurdaspur (Punjab), Anand, Bharuch, Una, (Gujarat), Miryalaguda (Andhra Pradesh) and Bhimavaram (Telangana) also clock impressive order volumes. With our recent network expansion, Snapdeal has also shipped orders to rural places like Palasner in Maharashtra, Abdasa in Gujarat, Kalsi in Uttarakhand, Chitkul in Himachal amidst many others. Q. What are your current MAUs? More than 70 million users visit Snapdeal every month to browse and buy from our vast catalogue of 220 million plus listings. Q. What kind of target have you set for this year's sale? Do you anticipate people to buy more, considering a lot of people might have pushed buying things for the festive season? What kind of numbers do you aim to reach this year? Less than five percent of retail is online, which is an incredibly small penetration number. In our view, Diwali or not, our job to bring more buying options for our users doesn’t change. Diwali does serve as a milestone to accelerate some of our related initiatives or build virtual infrastructure to connect the dots between demand and supply in our country. This year, ahead of the festive season, we on-boarded additional sellers of popular products like kitchen appliances, kitchenware, bed linen, apparel, footwear and fashion accessories like watches, wallets, etc., as indicated by our users in a survey. In the run-up to Diwali, Snapdeal also on-boarded 5000 manufacturer-sellers who sell products like water purifiers, choppers &amp; blenders, steel &amp; copper utensils, crockery items, bedsheets, quilts, geysers, etc directly from their manufacturing units. This year, we knew more and more people would be buying online and ahead of the sale, and expanded our network to add 1300 new pin codes to go deeper into areas which were previously unserviceable or where users were compelled to travel to nearby towns to collect their orders, reaching out to 50 million additional users. Today, we are India's leading value-focused marketplace with more than 500,000 registered sellers and we cover 27000 + pin code areas across the length and breadth of the country.

Why Snapdeal targeted non-metro cities and rural India during its pre-Diwali sale

In case you are returning any electronic item such as <a href="http://www.businessinsider.in/searchresult.cms?query=smartphones&amp;sortorder=effectivedate">smartphones</a> and <a href="http://www.businessinsider.in/searchresult.cms?query=computers&amp;sortorder=effectivedate">computers</a> bought from <a href="http://www.businessinsider.in/searchresult.cms?query=snapdeal&amp;sortorder=effectivedate">Snapdeal</a>, be ready to furnish valid documents. <keyword id="541988" type="COMPANY" weightage="20" keywordseo="SnapDeal">Snapdeal</keyword> has tweaked it policy and now buyers returning electronic products will have to show documents from authorised service centres, declaring it defective. 
 
Snapdeal in an email to its sellers told "Electronic items: We require a document from the brand/OEM's service centre confirming that the delivered item was defective. We will carry out a quality check to validate the complaint before processing any request for refund/replacement. Returns/replacements will be accepted for only those items which are found to be faulty/defective.” 
 
This new policy may be a winning point for Snapdeal and sellers but the online marketplace may lose customers and divert them to <a href="http://www.businessinsider.in/searchresult.cms?query=flipkart&amp;sortorder=effectivedate">Flipkart</a> and <a href="http://www.businessinsider.in/searchresult.cms?query=amazon&amp;sortorder=effectivedate">Amazon</a>. 
 
But, sellers are happy with this move by Snapdeal. 
 
"On an average, nearly 10-15 per cent of what they sell online comes back as return or for exchange which increases their delivery costs. This measure will reduce such cases to some extent and might also bring down the fraudulent cases," Harminder Sahni, founder of Wazir Advisors, told ET.

This tweak in policy by Snapdeal is a win for sellers but will hassle online buyers

Aggrieved sellers on <a href="http://www.businessinsider.in/searchresult.cms?query=amazon">Amazon</a>, <a href="http://www.businessinsider.in/searchresult.cms?query=flipkart">Flipkart</a> and <a href="http://www.businessinsider.in/searchresult.cms?query=snapdeal">Snapdeal</a> are raising their voices against a penalty by these <a href="http://www.businessinsider.in/searchresult.cms?query=marketplaces">marketplaces</a> and have even formed an eSeller Suraksha Forum for the same. 
 
Sellers have complained that the marketplaces are penalising them in case of an opened packaging and returned item. 
 Around 1,000 sellers have conveyed that <keyword id="18635" type="CITY" weightage="20" keywordseo="Amazon">Amazon</keyword>, <keyword id="6354742" type="COMPANY" weightage="20" keywordseo="Flipkart">Flipkart</keyword> and <keyword id="541988" type="COMPANY" weightage="20" keywordseo="SnapDeal">Snapdeal</keyword> do not share logistics costs or returning commissions in case a customer opens the package and then doesn't want the item. 
 
Instead, sellers say the marketplaces put the blame on them, saying the product they shipped was fake or faulty products leading to return. 
 
"In case of a customer return (where the customer has opened the package) we have to (still) pay commission to the platforms. In case of courier return (where packaging is intact), we don't have to pay commission," a seller told ET. 
 
The <a href="http://www.businessinsider.in/searchresult.cms?query=return+of+products">returns</a>, sellers say, have shot up and are mostly from Uttar Pradesh, where the sellers have stopped shipping in many areas. 
 
Arvind Singhal, chairman of consultant Technopak Advisors, told ET, “There could be multiple reasons for this. First, with high penetration of smartphones, there are non-serious buyers who order for the sake of fun, like window shopping on ecommerce sites.” 
 
Secondly, he said, in categories such as <a href="http://www.businessinsider.in/searchresult.cms?query=apparel">apparel</a>, footwear, etc, touch and feel could be different from what it looks like on the website. 
On the contrary, Amazon and Flipkart said the returns had declined. 
 
"Our returns process is designed to create a win-win situation for both our customers as well as sellers," a Flipkart spokesperson said, adding “Majority of our sellers have significantly lower return figures compared to the industry. We have an easy return policy for our sellers which ensures prompt returns as well as exchanges." 
 
Likewise, Snapdeal too said that returns had declined. 
 
"The returns on the Snapdeal platform have steadily gone down over the last one year due to introduction of various technology upgrades and tighter monitoring of quality aspects," a Snapdeal spokesperson told ET.

Sellers on Amazon, Flipkart, Snapdeal cry foul over rising return of products; marketplaces have different numbers

The top players in the <a href="http://www.businessinsider.in/searchresult.cms?query=Indian+e-commerce+sector+&amp;sortorder=effectivedate">Indian e-commerce sector </a>have united against some drafts in the <a href="http://www.businessinsider.in/searchresult.cms?query=Goods+and+Services+Tax&amp;sortorder=effectivedate">Goods and Services Tax</a> (GST) legislation such as collection of tax at source. Even while they cited the negative impact on sellers, many online merchants are speaking on the contrary. 
 
According to the tax at source clause, it is mandatory for online marketplaces to deduct 2% per transaction and hand it over as collection towards GST to the government under the Act. 
 
This, however, does not apply to retail sellers offline. 
 
Seller associations like the <a href="http://www.businessinsider.in/searchresult.cms?query=All+India+Online+Vendors+Association&amp;sortorder=effectivedate">All India Online Vendors Association</a> (<keyword id="3339434" type="UNKNOWN" weightage="20" keywordseo="AIOVA">AIOVA</keyword>), which represents 1,800 sellers, feel that <keyword id="6357150" type="CITY" weightage="20" keywordseo="TCS">TCS</keyword> will only hit sellers evading taxes, and also said that the issue of capital blocking on online platforms is already a problem for them. 
 
"The TCS clause will remove the problem of tax evasion among many sellers and the 'unnatural' competition emerging from it. Secondly, since the ecommerce companies are already holding seller money, TCS will not affect our liquidity," a spokesperson of AIOVA, told ET. 
 
The e-Commerce Sellers Association of India, which was earlier known as eSellerSuraksha, says the clause will create a level-playing field among sellers. 
 
"Merchants without proper registration will be forced to move out. This makes a level-playing ground for all online sellers in terms of product pricing. The merchants who evade tax may also quit," the seller body told ET. 
 
On the other hand, sellers do have some concerns over TCS. 
 
"Product returns in apparel ecommerce range between 15-20%. We will be required to claim the TCS from the department directly which is a cumbersome process," Dhiraj Agarwal, cofounder Campus Sutra, an online-first apparel brand, told ET. 
 
E-commerce companies feel that TCS will deter merchants from selling online and will badly hit the digital ecommerce industry holding up working capital. 
 
"Working capital will be hit. Also compliance is an added burden for ecommerce companies. Majority of the products carry a return date of 30 days and given 15-20 million transactions per month and the returns, refunds to sellers have to be done with utmost care," a spokesperson for public policy at <a href="http://www.businessinsider.in/searchresult.cms?query=Amazon+India&amp;sortorder=effectivedate">Amazon India</a>, told ET. 
 
"With TCS, capital will be locked away for periods between 20-50 days depending on the transaction date. The significant impact on the cash flow will force smaller firms to seek additional working capital or ignore the ecommerce marketplace altogether, as it may not offer envisaged convenience and benefits," a spokeswoman for <a href="http://www.businessinsider.in/searchresult.cms?query=Snapdeal&amp;sortorder=effectivedate">Snapdeal</a>, told ET.

Sellers differ from e-commerce giants on GST. Here’s their version

<keyword id="6354743" type="COMPANY" weightage="20" keywordseo="Amazon-India">Amazon India</keyword> added 20,000 new sellers in last six weeks and tripled its seller base this year to whopping 1, 20,000. With these seller base numbers, <keyword id="18635" type="CITY" weightage="100" keywordseo="Amazon">Amazon</keyword> India has raced past <keyword id="6354742" type="COMPANY" weightage="100" keywordseo="Flipkart">Flipkart</keyword>, which has 95,000 sellers on board. 
 
Amazon India’s aggressive and lenient strategy to add sellers on its platform is going to help the online marketplace in the upcoming festive season. 
 To have more sellers, Amazon India started <keyword id="3249499" type="UNKNOWN" weightage="20" keywordseo="Amazon-Tatkal">Amazon Tatkal</keyword> services through which merchants were added in an hour. Not only this, Amazon India also lowered commissions it charges merchants for selling on its marketplace in June, at a time when Flipkart raised its commission and tweaked its policies. 
 
"We have 120,000 sellers on the platform now, of which 20,000 sellers came in the last 5-6 weeks," Gopal Pillai, general manager of seller services at Amazon India, told ET. That's an increase from about 45,000 merchants at the end of 2015. Amazon also has 16,000 sellers who are part of its global programme, with some overlap between Amazon.in and Amazon.com. 
 
Under Amazon Tatkal, the executives travelling travelled across 50 cities in studios-on-wheels that allowed sellers to sign up instantly. 
 
"Amazon Tatkal created huge awareness through word-of-mouth. What helped was that many sellers coming on board through this progamme are getting sales from the very next day," said Pillai. 
 
Amazon India has also launched Seller Cafe programme in 24 cities to onboard more sellers and resolve their issues. 
 
"They let us contact customers directly and let us decide the refund amount in case of returns. The option for self-shipping is also helpful when we need to send orders to remote locations," a spokesman for the All India Online Vendors' Association, a grouping of about 1,000 online sellers, told ET. 
 
For other sellers, however, Flipkart is still the preferred platform. "Almost 70% of our sellers give first priority to selling on Flipkart, mainly because it still sees the highest traffic and it has the most seamless payment integrity," Sanjay Thakur, spokesman for ESellerSuraksha, a group of about 1,700 online sellers, told ET. 
 Flipkart has shifted its policy on improving the quality of its top 100 merchants. <keyword id="541988" type="COMPANY" weightage="20" keywordseo="SnapDeal">Snapdeal</keyword>, third behind Amazon India in terms of sales, has more than 300,000 sellers. 
 
(Image: Thinkstock)

Amazon beats Flipkart in seller base; all eyes on festive season now

Indian <keyword id="436047" type="UNKNOWN" weightage="20" keywordseo="Ecommerce">eCommerce</keyword> industry, which has been growing rapidly so far could soon be hitting a speed bump. The ecommerce industry’s once ‘secret weapon’, the <keyword id="1152455" type="UNKNOWN" weightage="20" keywordseo="Cash-On-Delivery">Cash-on-Delivery</keyword> system, is now soon turning into their worst nightmare. The industry is in trouble as consumers are backing out after promising <a href="http://www.businessinsider.in/searchresult.cms?query=cash-on-delivery+">cash-on-delivery</a> (COD) and returning products purchased, leaving the etailer and its supply partner with mounting losses. 
 
As far as the COD model goes, the consumer always has the option of returning the product if not satisfied, which means the etailer doesn’t receive money for the said product, and also has to bear the shipping costs of the product ‘to and fro’ that adds salt to injury! Also, flexible return policies provided by various <a href="http://www.businessinsider.in/searchresult.cms?query=eCommerce+">eCommerce </a>sites open ways for consumers to avail as much as they can and return the product for any odd reason. 
 
According to the financial advisory firm Motilal Oswal, the number of mobile wallet users is estimated to jump five-fold from the current 3 crore to 15 crore by 2019, however, COD still accounts for 60% of all ecommerce orders. 
 
Gurudatt Nadiger who started selling household essentials this February has now realized that he has lost more than he had gained. Nadiger says, “Consumers today are not willing to wait longer than two days and might buy the product elsewhere and reject the delivery." 
 
As per a business management platform for eCommerce sellers, Sellerworx, 70% of all returns are made up of customers who do not accept deliveries, of which a majority are cash-on-delivery arrangements. In this case, merchants are still charged with the commission. 
 
As eCommerce biggies are aiming to enlist more and more merchants on their online market, the digital payment method is also gaining pace at firms like <a href="http://www.businessinsider.in/searchresult.cms?query=Snapdeal">Snapdeal</a>. 
 A <keyword id="541988" type="COMPANY" weightage="20" keywordseo="SnapDeal">Snapdeal</keyword> spokesperson has said, "As more customers opt for prepaid payment options, we have seen significant efficiencies being built into our digital commerce ecosystem." 
 
<a href="http://www.businessinsider.in/searchresult.cms?query=Flipkart">Flipkart</a>, India’s leading eCommerce firm which popularized the cash-on-delivery model now remains agnostic about which payment method customers choose. <keyword id="6354742" type="COMPANY" weightage="20" keywordseo="Flipkart">Flipkart</keyword>, reportedly, is expecting to get some 1,00,000 sellers on its platform sell merchandise worth $10-12 billion by the end of this year. 
 
Mobile wallet Paytm, which launched its ecommerce platform in February, has seen its cash-on-delivery orders drop from 10% in the beginning to 5% now, said founder and CEO Vijay Shekhar Sharma. "We have the least returns because consumers pay in advance, and merchants prefer that," he said, adding that this may be a trend. 
 Analysts believe that apart from the loss due to returned goods, in COD, the credit cycle also gets hampered. "In a cash transaction, merchants receive money only after a product is delivered, for the extra few days, the vendor needs more working capital. There is a cost to it," said Gaurav Gupta, senior director at <keyword id="6358918" type="PERSON" weightage="20" keywordseo="Deloitte">Deloitte</keyword> India. 
 
In the global eCommerce market, particularly in China, Russia and a number of Southeast Asian Countries, COD is gaining popularity. However, in China — one of the largest markets for ecommerce — the proportion of cash payments has dropped from 70% in 2009 to 30% last year, giving way to mobile payments, according to business intelligence firm Asia Briefing. 
 
Experts believe a similar trend will follow in India as well. "India is still a cash economy to a large extent, so it will not phase out immediately," said Vishal Gaur, associate dean of Cornell's Johnson School of Management. 
 
"But single workers or working couples are generally comfortable using credit cards or mobile payment options. So it's really a question of the target market." 
 
Image: thinkstock

eTailers in trouble as COD gaining pace in Indian markets

Niche online retailers or e-tailers are taking on giants like <keyword id="18635" type="CITY" weightage="60" keywordseo="Amazon">Amazon</keyword>, <keyword id="6354742" type="COMPANY" weightage="60" keywordseo="Flipkart">Flipkart</keyword>, <keyword id="541988" type="COMPANY" weightage="60" keywordseo="SnapDeal">Snapdeal</keyword> through their ‘try and buy’ schemes. As per industry experts, e-tailers—like <keyword id="1518229" type="PERSON" weightage="80" keywordseo="Lenskart">Lenskart</keyword>, BlueStone, <keyword id="686987" type="COMPANY" weightage="80" keywordseo="CaratLane">Caratlane</keyword>, etc—who give customers a lucrative option of trying at home before buying, are hurting country’s largest online market places as the scheme has been able to push through higher value purchases, earn customer loyalty and satisfaction. 
 On an average, 10-12% of products sold online are returned by customers for varied reasons and as per industry estimates every return costs an additional Rs 70 for <keyword id="436047" type="UNKNOWN" weightage="60" keywordseo="Ecommerce">eCommerce</keyword> firms, excluding shipping costs. However, though home trials also cost the same ranging to Rs 70-100 per visit, but they have their eyes trained on potential long-term benefits. 
 
As per Economic Times, this gives them an advantage over eCommerce giants such as Flipkart and Amazon in the specific category they operate, because offering home trials would complicate the inventory-light business models of these electronic marketplaces. 
 
Lenskart, an eye-wear online retailer, has been offering home trials in 42 cities for the past five months. Under the scheme, customers have to choose five frames which the delivery people bring it to their homes. 
 
As per data provided by the financial daily, this practice has translated to over 8% of the company's 150,000 monthly shipments. 
 
"Home trials work for specialised categories where people want to be sure they make a right decision," co-founder and chief executive of Lenskart Peyush Bansal told ET, adding "We have seen that about 60-70% of the user send up placing an order. The conversion rates are higher and results in half of regular return rates of 7% for items ordered online." 
 
The scheme is doing wonders for Ratan Tata founded BlueStone as the company claims the returns have plummeted to zero. The company offers online buyers to try replicas of jewellery pieces at their homes before buying them. 
 
"Since it's a high-value category with the average price of an item sold on our site around Rs 20,000 per piece, a 'home try on' more than covers the cost of bringing the samples to a customer's doorstep," CEO Gaurav Singh Kushwaha told ET. He added that this has boost their transactions. 
 Meanwhile, Bengaluru-based online furniture retailer <keyword id="6368309" type="COMPANY" weightage="60" keywordseo="Urban-Ladder">Urban Ladder</keyword> recently allowed customers to choose colours and fabrics for sofas, charging Rs 299 for the service. Tiger Global-backed Caratlane sends jewellery consultants for home trials on request. 
 However, lingerie e-tailer Zivame stopped the ‘<keyword id="2837317" type="UNKNOWN" weightage="80" keywordseo="try-at-home">try at home</keyword>’ scheme after a three-month period and replaced it with ‘fit assessment’ and call centre, without charging the consumer. 
 
Assistant professor of marketing at the Indian Institute of Management, Bengaluru, Seema Gupta informed that try and buy policies would work for companies that deal in high-value and high-margin products to lock in the customer. “The cost of exchange can be recovered from the high margins in these products. Inventory players have better quality control and hence try and buy is likely to be more successful in them than a marketplace,” she added. 
 
Globally, in a bid to bridge the experiential shopping gap, ‘try and buy’ schemes have long been deployed since eCommerce began. New York-based online eyeglasses retailer Warby Parker, estimated to be valued at $1 billion, lets people choose five eye-frames to be shipped over for a five-day home trial, all free of cost. While in India, industry experts forecast a speedy phase-out of retail stores in several categories like electronics and books, where the touch and feel is not that important. 
 
"Over time, outlets will only be needed to test the look and feel. For products where touch and feel is less important today such as smartphones, tablets and other electronics, the opportunity to phase out large offline locations quickly will be even greater,” said Aamir Jariwala, member at industry body Ecommerce Coalition of India and founder of Karma Recycling, an online seller of refurbished electronic products. 
 
(Image: Reuters)

Know how the ‘try and buy’ tactic by smaller e-tailers is hurting Amazon, Flipkart and Snapdeal

Do you have ‘it’ in you to take the leap of faith and become an <keyword id="6359301" type="POSITION" weightage="100" keywordseo="Entrepreneur">entrepreneur</keyword>? Of late, the <keyword id="6404679" type="UNKNOWN" weightage="100" keywordseo="start-up">start-up</keyword> mania has caught up in India and <keyword id="107737" type="ORGANIZATION" weightage="100" keywordseo="Entrepreneurship">entrepreneurship</keyword> is passionately glamorised all over the country. Home-grown role models can be found aplenty – right from <keyword id="225032" type="PERSON" weightage="60" keywordseo="Sachin-Bansal">Sachin Bansal</keyword> and <keyword id="6364080" type="PERSON" weightage="60" keywordseo="Binny-Bansal">Binny Bansal</keyword> of Flipkart fame who are taking home million-dollar paycheques to Phanindra Sama, the former redBus CEO who recently made a $100-million-plus exit from his venture. 
 But one can’t ignore the flipside either – the numerous consolidations and shutdowns that had taken place. Only 10% of the approximately 800 start-ups that enter the <keyword id="47445" type="UNKNOWN" weightage="100" keywordseo="Indian-market">Indian market</keyword> each year survive to make it to the next level, experts say. The <keyword id="6357455" type="EVENT" weightage="100" keywordseo="Funding">funding</keyword> stream has thinned as well. In a typical scenario, only about 27% start-ups in incubators make it to <keyword id="6364511" type="UNKNOWN" weightage="100" keywordseo="angel-funding">angel funding</keyword> and out of that set, only about 20% reach Series A stage, according to Alok Mittal of <keyword id="218905" type="COMPANY" weightage="80" keywordseo="Canaan-Partners">Canaan Partners</keyword>. 
 But in case you have got <keyword id="1946693" type="UNKNOWN" weightage="100" keywordseo="Business-ownership">business ownership</keyword> on the brain and would not back out at any cost, here are five crucial points to ponder. Take a look and find out if you, your idea and your business fit the bill. 
 
Have you got a ‘zero’ idea or ‘hero’ idea? Have you got hold of a concept that will take the world by storm? You might be obsessed with your ‘disruptive’ idea but can it survive some of the acid tests that the market has in store for you? That’s a difficult thing to evaluate, especially when you are passionate and firmly believe in your idea. But do it right now and better still, get an expert’s view (an industry guy or an investor could be the ideal person to approach). Don’t flinch if a rejection letter is thrown your way. Just remember you can work around the initial idea and hit the jackpot in a bit. After all, even <keyword id="6354427" type="CITY" weightage="100" keywordseo="Apple">Apple</keyword> was selling blue boxes (phone phreakers used them to make free calls) and PC kits before its revolutionary i-devices came to life. So stay focused, try hard and avoid launching copycat companies. It requires more brainstorming, more <keyword id="1946700" type="UNKNOWN" weightage="100" keywordseo="Innovative-thinking">innovative thinking</keyword> and loads of insight to establish quality entrepreneurship. 
 
Can you entice your <keyword id="6359672" type="UNKNOWN" weightage="100" keywordseo="customers">customers</keyword>? Do you have a market for your product/service and will it grow in time? An idea may sound great on paper but it must have real-life utility if you want to develop a sustainable business. In most cases, you will have to prove the potential in your idea through hard work and the investment of your own capital. So do a thorough <keyword id="878850" type="UNKNOWN" weightage="100" keywordseo="market-research">market research</keyword> with focus on <keyword id="900658" type="UNKNOWN" weightage="100" keywordseo="traction">traction</keyword> and <keyword id="1558852" type="UNKNOWN" weightage="100" keywordseo="paying-customers">paying customers</keyword> who will get your business going. The money must be there where the mouth is – so have a viable <keyword id="173266" type="ORGANIZATION" weightage="100" keywordseo="Business-Plan">business plan</keyword> in place, along with a <keyword id="584695" type="UNKNOWN" weightage="100" keywordseo="prototype">prototype</keyword> and an effective team. Otherwise, even the most wonderful ideas won’t work out. 
 
What about a great team? 
Ideas sound great when they are abstract, but it is an entrepreneur’s painful necessity to find the right kind of people who can build upon those without spending a fortune and market the same in a memorable way. This may seem deceptively simple and some first-timers actually feel that hiring is an exciting chunk of the whole deal. Unfortunately, there are too many loopholes. For one, you need some outstanding people who are experts in their own space, can think out of the box and share your long-term vision. But it requires a large amount of money to get them on board. 
 
On the other hand, industry veterans are a bit wary about joining start-ups – not just because they pay less but because they go back on promises as soon as they strike gold. “Within a few months, they become the worst sort of dictators and getting a free hand is next to impossible,” reflects a former CTO of a start-up who was compelled to return to his old job after a ‘miserable’ start-up outing. Again, mid-level managers bitterly complain about the lack of transparency and sudden pink slip spurts that keep them on their toes all the time. 
 
“The bad thing is funds are not always the issue,” says Arunav Massey, an HR executive. “Their policies are not that people-friendly and ego comes in the way. That’s why even co-founders part ways after some time,” he adds. So take note. Putting together a great team is crucial for your business. But it also matters how you build the team and how you play the game. 
 
Can you <keyword id="766636" type="UNKNOWN" weightage="100" keywordseo="Bootstrap">bootstrap</keyword>? Going by the current trend, that’s the way ahead for start-ups. On an average, start-ups in India received 52 angel and 155 Series A <keyword id="6362476" type="ORGANIZATION" weightage="100" keywordseo="investments">investments</keyword> over the past three years, according to Venture Intelligence, a research <keyword id="6359391" type="ENTERTAINMENT" weightage="100" keywordseo="SERVICE">service</keyword> focusing on <keyword id="34499" type="POSITION" weightage="60" keywordseo="private-equity">private equity</keyword> and mergers &amp; acquisitions. Let’s also get back to Mittal’s analysis, presented at the TiE India Internet Day event earlier this year. Based on an informal survey involving more than half-a-dozen stakeholders in <keyword id="1946708" type="UNKNOWN" weightage="100" keywordseo="Early-stage-funding-ecosystem">early-stage funding ecosystem</keyword>, it has been found that about 38% of the start-ups have to survive through self-funding, at least for a year. Of course, you can try out government funding, collateral-free and interest-free loans and the latest craze – crowd funding. But overall, you must be prepared to put in some seed money of your own if you want to start up in today’s volatile economy. 
 
Do you have the courage to fail? Mental toughness is the key to success in any field but here you need a double dose. Don’t worry – you have home-grown role models like <keyword id="6436290" type="COMPANY" weightage="80" keywordseo="just-dial">Just Dial</keyword> and <keyword id="541988" type="COMPANY" weightage="80" keywordseo="SnapDeal">Snapdeal</keyword> who failed and pivoted over and over before striking the pot of gold. However, the path ahead will not be easy. As for the born optimist, here is another disconcerting finding from the legendary land of start-ups – the <keyword id="6354458" type="COUNTRY" weightage="100" keywordseo="US">US</keyword>. According to a new study by the <keyword id="361096" type="ORGANIZATION" weightage="60" keywordseo="Kauffman-Foundation">Kauffman Foundation</keyword>, only 52.8% Americans are aware of <keyword id="6357934" type="PERSON" weightage="80" keywordseo="Steve-Jobs">Steve Jobs</keyword> while 96% know who <keyword id="21024" type="PERSON" weightage="60" keywordseo="Marilyn-Monroe">Marilyn Monroe</keyword> is. If that does not deter you (knowing fully well that very few of us will ever reach his height), go, take your leap of faith, backed by well-chalked-out business plans and future-proof growth strategies.

5
Points To Remember When Starting Your Own Business

<ul><li>As we enter a brand new year, we want to crystal gaze into what the year holds for us. </li><li>In today’s feature, e-commerce players tell us what lies ahead in 2021. </li></ul>With the second-largest internet user base, India has emerged as one of the most prominent markets globally. Being stuck at home because of the pandemic further triggered the desire to make life and work easier at home, which resulted in a significant increase in <keyword id="10547863" type="UNKNOWN" weightage="20" keywordseo="shopper-spends">shopper spends</keyword>. People who would otherwise go out to buy groceries and medicines at the pharmacy, turned to e-commerce platforms to get essentials delivered at their doorsteps. 2020 accelerated the e-commerce industry by a decade, revolutionising the way brands operate, run, and grow their businesses, as well as how consumers choose to shop and pay. As per Nielsen India’s E-commerce Consumer Panel (E-Analytics Solution), there was a double digit increase in average spend of <keyword id="237977" type="PERSON" weightage="20" keywordseo="online-shoppers">online shoppers</keyword> for electronics and accessories (39%), mobile and accessories (12%), and fashion, including apparel, footwear, and accessories (10%) after the pandemic. Appliances (e.g.TV, WM, refrigerators, etc.) also saw notable shopper spending increase at 9%. This growth trajectory of e-commerce platforms in India testifies how customers are increasingly recognising the importance of comfort shopping within closed doors, and after seeing their businesses take a plunge in the first three months of the lockdown, more and more sellers are also coming online. According to IBEF, ‘The Indian E-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second-largest e-commerce market in the world by 2034. Indian e-commerce sector is poised to reach US$99 billion by 2024 from US$30 billion in 2019, expanding at a 27% CAGR, with grocery and fashion/apparel likely to be the key drivers of incremental growth.’ The second half of the year, which is the festive season in India, brought cheer for many brands and further pushed the adoption rate of e-commerce. Players like Amazon, Flipkart, Myntra, and Snapdeal together sold goods worth $3.1 billion in the first 4.5 days of the festival season sale. Consumers are still hesitant to return to in-store shopping completely and audiences from Tier II and Tier III are also preferring to shop online. Snapdeal saw 70% of its orders come in from Tier II and Tier III during Diwali. The pandemic and lockdown period has brought many learnings for all businesses, and e-commerce has undoubtedly been one of the sectors with the biggest takeaways. As we enter a new year, we reached out to e-commerce platforms to understand what role it would play in 2021. Here is what they said: Anchit Nayar, CEO, <keyword id="7726437" type="PERSON" weightage="20" keywordseo="Nykaa-Retail">Nykaa Retail</keyword>: In the initial months of the lockdown, businesses witnessed a clear shift in consumer behaviour- with scores of historically offline shoppers coming online due to convenience and safety. As the country reopens further in 2021 we see the customer seamlessly moving with ease between online and offline channels underscoring the importance of omnichannel retailers catering to customer preference. Another key trend for 2021 will be a focus on bringing more personalization and curation to customers shopping online through greater tech and marketing integration. Lastly - we believe social commerce is going to have a big impact this year. At Nykaa we have integrated our content into our shopping app thereby allowing customers to watch and shop at once. Sandeep Komaravelly, Director of International Growth at Shopify: Shopify’s first annual report* <a href="https://www.shopify.com/future-of-commerce/2021">Future of Commerce 2021</a> report brought together global merchant and consumer data to predict how the commerce landscape will shift in the coming year. It highlighted five key trends that will be prevalent next year. <ol><li>Young consumers will change the business landscape as ecommerce charges ahead.</li><li>Physical retail as we know it will transform, giving local businesses new advantages.</li><li>Consumers want to shop independent. Businesses will adapt to make that easier.</li><li>More consumers will vote with their wallets.</li><li>Modern financial solutions will disrupt business and consumer banking, financing, and lending.</li></ol>Although we have seen the greatest shift online among young consumers, the other key segments including middle aged and older consumers are also seeing significant numbers starting to go online for their shopping needs. We expect such habits to persist in 2021 as Indian consumers increasingly prefer to support independent brands and local businesses. Kashyap Vadapalli, Chief Marketing Officer &amp; Business Head, Pepperfry: In a post-pandemic world, the one guarantee is massive shifts in the outlook of humanity across a wide spectrum of things. As people, as societies and as businesses, there has been a sea change in what one values or considers in their decision making and actions. The illusion of continued uninterrupted safety, growth, progress have all been shattered. In such a scenario fundamental values have become paramount. Organizations and marketing teams that focus on foundational propositions will thrive and in my opinion the trend that we will see in the next few quarters will be about these fundamental matters. People have become more purposeful in their actions and consumption than ever before and marketers who can tap into this theme of purpose will be able to attract consumers to their offerings. While digital and social have enabled interactions over the last 5-10 years, the next stage of this trend is where simple interactions, evolve to become deep connections. Going beyond the transactional exchanges and building relationships is the second key trend that will drive the growth of businesses in future. Samarth Agrawal, CEO, Cofounder, MaxWholesale: The key e-commerce trend for 2021 will be D2C retail, as e-commerce is growing at a fast pace, new-age brands will capitalize this opportunity to grow direct-to-consumer reach to a $15-$20 million revenue run-rate online for their brand. For the medium and large brands, the operative word is going to be “omni-channel retail” as they will try to champion B2C and B2B e-commerce for growth. B2B e-commerce in India today is where B2C e-commerce was in 2015. Amazon Spokesperson: “The unprecedented situation of the pandemic has brought about a rapid adoption and acceptance of e commerce as an essential service. One thing we’ve learned this year is that how important a role Amazon and ecommerce can play with enabling policies – for our customers as much as for small businesses &amp; economy. Throughout the year, we remain focused on enabling small businesses to benefit from widest reach made possible by e-commerce as they adapted to the unprecedented situation. For customers, we continued to put together and safely deliver the best of products from our widest selection by top brands across categories to address their ever evolving needs. As the lines between online &amp; offline continue to blur, 2021 will see businesses seamlessly implementing an omni channel approach and leverage our investment in technology and infrastructure to help empower their growth.” Snapdeal Spokesperson: The lockdown saw shoppers order everything online, from groceries to stationery, from maths tutorials to yoga sessions. Covid-19 related disruption has brought fundamental and long term changes in the way people shop. Millions of new e-commerce users, including in smaller cities &amp; towns, are now comfortable buying online. The growing cohort of online buyers is also leading to deepening of the supply available online. Online has grown beyond just well-known brands to embrace a wide range of regional and seller brands, which offer a compelling value proposition of good quality at great prices. The range of products that users now browse for and buy online has grown significantly this year. It’s not only phones, gadgets, food and fashion that they buy online, but also everyday stuff like a new mop, cooking utensils, bed covers and much more. Till a year ago, customers usually preferred to buy such products offline after a good look and feel. Users are now turning to online channels more proactively to discover choices beyond the physical markets in the neighbourhood. Having experienced the vast selection that is available online, the basket for online users will become more diverse and will reflect their consumption in a more representative way.

E-commerce: Trends to watch out for in 2021

Ten years ago, my mother severed her years-long allegiance with her local shopkeepers and started buying products online. It felt like a historical moment. All her friends and their friends gradually followed suit too. The material force driving this transformation in India's consumer landscape - that kicked off with <keyword id="6354742" type="COMPANY" weightage="20" keywordseo="Flipkart">Flipkart</keyword> in 2007 deciding to sell books - was <keyword id="112217" type="PERSON" weightage="20" keywordseo="Discounts">discounts</keyword>. Since then, this trail mix of coupons, deals and sales has generated its own feeding frenzy and has become a crucial component on every online retailer's entry strategy in India. Apart from being the major driver of sales, discounts have made annual bumper selloffs a staple Indian tradition. Flipkart’s Big Billion Days and <keyword id="18635" type="CITY" weightage="20" keywordseo="Amazon">Amazon</keyword>’s Great Indian Festival are important for customers, big businesses and small businesses. Millions of products are sold. After Flipkart’s festive sales last year, the gross merchandise value for the industry reached Rs. 9000 crore - approximately $1.3 billion. While a <a href="https://www.bcg.com/en-in/publications/2017/marketing-sales-globalization-new-indian-changing-consumer.aspx">BCG report released last year</a> proclaimed that the price-conscious Indian consumer now prefers convenience over discounts when buying products online, <keyword id="35621" type="PERSON" weightage="20" keywordseo="e-commerce">e-commerce</keyword> firms are still competing in a proverbial race to the bottom. Everyone wants to offer the lowest prices. And what's more, the government has now legitimised this discounting model. The <keyword id="6354751" type="UNKNOWN" weightage="20" keywordseo="income-tax">Income Tax</keyword> Appellate Tribunal, on April 25th, allowed Flipkart to continue recording discounts on its products as marketing and advertising expenses, thereby allowing the e-commerce firm to claim tax deductions on them. Flipkart was appealing a ruling from the Income Tax Department, which said it owed ₹1.1 billion in unpaid taxes for the year ended March 2016. The move will allow India’s e-commerce firms to a sigh of relief while encouraging their loss-leading impulses. On the other hand, it will also ensure that price-conscious consumers keep getting the benefits of heavy discounts on online shopping. The economics of discounts However, there is more to discount policies than meets the eye. The IT Dept, last year, had sought to make e-commerce firms classify these as a “capital expenditure”, which is taxed over a period of 4 to 10 years, as opposed to “revenue expenditure”, which refers to daily expenses that are deductible in the period they are incurred. When Flipkart offers customers discounts, the company absorbs these costs. Its sellers are usually paid in full or charged lower commissions, even though customers don’t pay full amounts for products. Under the IT Department’s proposed classification, Flipkart would not have been allowed to deduct the full value of these costs from its bottom line, which in turn would have increased its tax liability. The IT Dept’s rationale was that since discounts allowed companies to build their brands and retain customers for the long haul, they should be classified as a capital asset - essentially, an asset that provides returns over an extended period of time. However, brand value is largely an intangible cost and hence, it is a subject of confusion. Why it pays to report a loss Flipkart said that it needed to offer discounts on its products in order to achieve greater sales and increase its market share, making these discounts tax-deductible marketing expenses. Under the Income Tax Act, the government does not have the authority to levy taxes on such expenses, which fall under "revenue expenditure". This is precisely why e-commerce firms like Flipkart and Amazon India are reporting losses in the first place - to avoid taxes. These firms offer discounts to consumers in order achieve high sales, and write off these discounts as marketing expenses - leading to a net loss - so that they aren’t liable to pay tax on them. For the year ended March 2017, Flipkart’s net loss reportedly widened by<a href="https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/flipkart-revenues-rise-29-losses-swell-68-in-fy17/articleshow/62761811.cms"> 68% to ₹87.71 billion</a> while sales rose 29% to nearly ₹200 billion. Despite reporting losses, the sales machine keeps on chugging because these firms draw up on the sizeable investments of backers like Softbank Corp, or in Amazon’s case - cash reserves, in order to finance these discounts. If discounts were to be classified as capital expenditure, e-commerce firms would have no reason to offer them and without the discounts, customer demand would plummet,. Under the scanner E-commerce firms have been under the IT Dept’s scanner for a while for availing tax deductions on discounts while reporting high sales. In order to set a precedent for the rest of the industry, India’s income tax authorities had asked Flipkart and Amazon to reclassify their discounts as capital expenses in August 2017. The following December, the IT Dept ordered Flipkart to pay up ₹1.1 billion. Flipkart<a href="https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/income-tax-panel-refuses-to-stay-rs-110-crore-tax-demand-on-flipkart/articleshow/62876893.cms"> unsuccessfully appealed the decision</a> in February 2018, explaining that it couldn’t pay taxes on “fictional” assets, before lodging a renewed appeal with the Income Tax Appellate Tribunal. Flipkart, Amazon and their competitors in the online retail space aren’t only causing headaches for income tax authorities. Physical retailers like the Future Group, Shoppers Stop and members of the Indian Cellular Association (ICA) are finding it hard to navigate India’s retail industry as more and more consumers scour deals online. Earlier this month, the Retailers Association of India (RAI), an industry body that includes Future Group and Reliance Retail, wrote a letter to the Suresh Prabhu, the Union Minister for Commerce and Industry, alleging that online retailer were violating India’s FDI rules by<a href="https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/retailers-seek-action-against-flipkart-amazon-for-violating-fdi-rules/articleshow/63674973.cms"> by lowering prices of products on their websites and illegally funding “abnormal discounts.</a>” Under India’s foreign investment regulations, retailers can only be foreign-owned if they function as marketplaces to connect vendors and buyers, without actually influencing prices. A similar letter was sent by the ICA explaining that e-commerce firms were driving down prices for mobile handsets with direct and indirect discounts, resulting in the closure of mobile retail outlets. The commerce and industry responded by<a href="https://economictimes.indiatimes.com/industry/services/retail/rbi-ed-need-to-look-into-charges-against-e-tailers/articleshow/63839420.cms"> passing the buck on to</a> the Reserve Bank of India and the Enforcement Directorate. A decision is awaited. How long can the party continue? India’s e-commerce industry is relatively young, and growing fast (it is expected to touch<a href="https://www.ibef.org/industry/ecommerce.aspx"> US$188bn by 2025</a>) as more and more consumers get access to the internet and change their buying habits. As a result, e-commerce firms are not focussing on profitability for now. Their overarching purpose is to increase their market share by driving up sales and the number of active monthly customers. However, as opposed to selling everything for cheap, they’re focusing their discounting approach on popular segments like<a href="http://indianexpress.com/article/business/companies/e-commerce-sales-the-economics-of-discounts-amazon-flipkart-snapdeal-big-indian-sale-4651737/"> electronics and clothing</a>. Much like the telecoms industry, where Jio has sparked a price war wherein everyone is trying to undercut each other to hold onto the market, once a number of competitors are forced to leave after burning too much cash, the victor will be in a position to raise prices for everyone. Snapdeal has already become a casualty of the discount war. Now, with Walmart set to<a href="https://www.livemint.com/Industry/YuoY0Iim6xhlBdE7gdz7yL/FlipkartWalmart-deal-on-track-butAmazon-remains-a-contend.html"> purchase a majority stake in Flipkart</a> to take on Amazon, India’s consumers could benefit from lower prices for at least the medium term. Both these entities have a lot of money to spare and are comfortable playing the long game. However, in the event that the Walmart deal doesn’t go through and Amazon ends up joining forces with Flipkart, then the combined company will have<a href="https://www.bloombergquint.com/business/2018/04/08/flipkart-amazon-combine-may-face-close-scrutiny-for-competition-aspects"> a monopoly</a> over the online retail segment- spelling doom for price-conscious consumers. The Indian government is currently in the process of formulating<a href="https://www.livemint.com/Industry/EuTJ9j7Dn4VT5CyrpaZL2J/Framework-for-national-ecommerce-policy-to-be-finalized-soo.html"> a policy framework for the e-commerce sector</a>. It’s goals, however, are conflicting. On one hand, it will try to level the playing field between e-commerce firms and brick-and-mortar retailers and also increase the tax liabilities for online retailers. On the other, it does not want to disincentivise companies from entering the e-commerce space and reduce the industry’s overall competitiveness. It will be a tricky balancing act.

India, your e-commerce discounts are safe

While the jury is still out on the good, bad and the ugly sides of demonetisation, we can all agree that digital economy has had its biggest push ever in the country after this disruptive policy was launched a year back. Let’s see how this has impacted some key sectors. <keyword id="44870" type="PERSON" weightage="20" keywordseo="luxury-retail">LUXURY RETAIL</keyword>: The Rise of HENRY High Earning Not Rich Yet aka HENRY is a new economic category that has emerged in post-demonetised India. They comprise people who are typically very aspirational, well-read and who also want to find something that will suit their personality, not necessarily for a boast value. They fall in the age bracket of 25-35 and earn in the range of 15 lac+ per annum, and they have opened an entirely new channel for luxury retailers after digitisation and online retail sales saw an upswing in the aftermath of demonetisation. While the traditionally rich, despite being steady spenders, stick mostly to tried and tested brands, these new bunch tend to take risks and try things out which offers a whole new range of possibilities for luxury retailers. Swagat Sarangi, co-founder of premium invite-only app Smytten, says, “The luxury market in India caters to two kinds of customers – the traditionally rich and the nouveau rich, or old money and new money. And HENRY belongs to the latter category. “The old economy has affinity towards certain brands while the new gen is all about ‘let me first figure out what works for me’. They will want to find what fragrance really works on their body composition rather than simply opting for a Nina Ricci or Chanel No. 5, which have a huge following. There is a massive change in the way shoppers are 'buying' luxury products. For us, 90% of the core audience is HENRY, in the age group 25-35, mostly female in the income bracket of Rs 15 lac annually or more. They have a fair share of disposable income at hand.” Online shopping has been gaining traction in India, even before demonetization, with desi players like Flipkart and Snapdeal fighting it out with the global giant Amazon. But what demonetization did for online outlets was to open the floodgates of offers from digital payment channels who partnered with service providers to ensure that shoppers keep shopping. And brand positioning and marketing focus became increasingly tilted to HENRY because of their tech savvy nature and affinity to the online experience, which has democratized the luxury market. "Luxury brands have realised that they can reinforce their brand positioning, especially after demonetisation, by welcoming this new stream of young players, who come with a fair share of disposable income, good social media presence and the power to help push their business through referrals," says the top executive of a major company that sells international luxury products in India (on the condition of anonymity). Swagat says, “Young crowd with a decent amount of disposable income has access to information, they know what they want and are now figuring out new avenues to fulfill their aspirations.” Luxury retailers are also seeing a paradigm shift in sales demographics with Tier II and III cities catching up with Tier I cities in terms of high end luxury sales. With the lack of luxury shopping spaces in small cities, online shopping makes more sense to the HENRY category in these places, despite apprehensions about fraud on the Internet. “The trust issue is still there because of the marketplace model most of the e-commerce industry operates on. As the luxury retail is limited to the metros, Tier II and III cities rely on the convenience of online shopping for premium and luxury products, which then, by default, plays a huge role in the growth of the luxury markets in smaller towns and cities,” says Swagat. “In early 2016, almost 90% of our purchases came from Tier I, which is typically top metros. Now, almost 35% of our sales comes from Tier II towns like Nagpur, Aurangabad, Jalandhar, Ludhiana and the north-east, which is coming up as a very big market, especially in premium beauty &amp; makeup sector. In the south, Coimbatore, Mangalore and Mysore have caught up quite significantly,” he adds. Online retailers have also seen a trend of Tier II sometimes exceeding Tier I in average basket value. Swagat says, “Our hypothesis is that tier II doesn’t have a showroom to drop by and buy a BVLGARI rose gold fragrance for example. So, they think of buying it online even if it is on a very high price range because for them it might make sense as they might be buying one luxury perfume in a year." Things weren’t that rosy for the retailers when demonetization hit the country. It took more than a month for business to stabilise. “Demonetisation was introduced on November 8, 2016, and that was a terrible month for us. Even though much of our shipment was not in cash on delivery mode, we still got hit by the whole sentiment of money not being available in the system. It was really bad until mid December and then we started seeing holiday shopping with Christmas, New Year etc, and with end of the season sale, the business started kicking in again.” But websites had to continue with incentives to keep shoppers interested until things began to pick up. “In the luxury segment, not many brands want to offer deep discounts to keep the brand positioning intact and we do not introduce discounts without the permission of the brands. Still we did have to offer around 10% added incentive to the consumers than regular times. But things got back on track and in February, there was a spike with Valentine’s Day, and since then business has been good. And with wedding season going on now (November onwards), we are seeing a spike in business which was completely muted in the same period last year due to demonetisation. If you look at the Indian luxury market, reports show it has been growing by 25% YOY and it is already an $18bn industry. But again, in India, luxury space is very narrowly defined. It is primarily about luxury cars, spirits, wine and jewelry but if you go down, there is a huge market that is opening in the premium space. Swagat adds, “Premium segment has seen a massive growth as compared to luxury space, driven by the aspirational HENRY class. Our estimate is, there are about 10mn households earning more than Rs10 lac income annually and who would have a decent amount of disposable income to splurge on these things and these numbers will go up to 20mn households by 2020. A combination of physical luxury stores, social media presence and collaborations in the digital space (without compromising on the exclusivity component) will drive the luxury sector to the cusp of market dominance. Property and <keyword id="6354553" type="COMPANY" weightage="20" keywordseo="real-estate">Real Estate</keyword>: Reality of Realty The sector that saw a deep impact post demonetization was real estate. A sector that mostly operated on hard cash, was jolted to its core with the currency crunch and push for digitization. But companies who played by the book found the impact to be a mild seismic activity than an earth-shattering quake. Nibhrant Shah, CEO &amp; Founder of Isprava, a luxury realtor, says, “We don’t think digitization has had much of an impact on the luxury real estate segment post demonetization. It indeed was a sentimental hit for the first couple of months but, that was all it was. We believe, demonetization would have only hit the fly by night operators who were not ethical in their approach. Trusted players kept following the same process and the HNIs (high net worth individuals) and UHNIs (ultra high net worth individuals) of the world were still able to afford the luxury they wanted.” Real estate was among the worst hit sectors after demonetization. Raj Khosla, Founder and Managing Director of financial services marketplace mymoneymantra says despite the short-term ‘bearish’ hit, the effect of demonetization on real estate will be positive in the long run. “Real estate got back on track after a few months but only partially, as in actual users were acquiring but the investor is still missing. Price buoyancy is determined primarily by investors. So, the effect will be positive in the long run.” Reports on market analysis pointed out that 7% of real estate customers shifted from buying to renting. This trend seems to have emerged as there were talks about an overhaul in property laws. As a positive effect the sector has seen a certain level of consolidation and a rise in purchases by upmarket clients who made the best of the situation at hand. “For a brief two months period right after demonetization, we did experience a sentiment hit in the market, but having said that this was only short lived for Isprava, mostly because of our transparent purchase process and seamless experience. So, when the world thought that the luxury industry, especially the real estate sector would perish, we on the contrary, saw an upward trend, increasing sales in the holiday home market. “We believe this has happened because the industry has become more consumer centric and only the large players have survived. The process and the new set of laws that now define the real estate industry, have separated the wheat from the chaff. The result is what I like to call Real Estate 2.0” The real estate sector is now developing every day. Builders have gone beyond the old-school brick and motor perception and companies are now looking to disrupt the way real estate functions. By bringing technological developments in client relationships, client servicing, operational and building processes, the typical fly by night operators will leave the arena and only trusted players will survive. Shah adds, “Over the years we have also seen a psychological shift in the mind set of people when it comes to the luxury segment in India. Families are now more open to buying and investing in various luxury products and services. The future of the real sector looks bright due to this developmental shift in India.” Investment and <keyword id="25450" type="ORGANIZATION" weightage="20" keywordseo="savings">Savings</keyword>: More Money to be Made While it is difficult to estimate how demonetisation has affected the savings habit of people, it can be said that after demonetisation, people have started to invest a lot more. The simple reason for this is that they had more surplus money in their bank accounts and easy access to investment options like fixed deposits and mutual funds. Money that earlier used to be held in cash found its way into bank accounts. The financial industry also created awareness about investment options and how that extra money lying idle in the bank could be used to earn higher returns. “Enquiries about SIPs (Systematic Investment Plan) vastly enhanced post demonetization. Also, there was a splendid acceleration in insurance policies, especially those products which combine investment and risk cover”, says Khosla. “The mutual fund industry has reported record breaking inflows over the last year and a part of this is because of demonetisation. The stock market bull run has also aided and drawn people towards investing in mutual funds. It is safe to assume that people getting into this habit of investing would also have led to them saving a lot more than they did before. How much an individual or family saves would depend on their income and expenses, but increased <keyword id="6362476" type="ORGANIZATION" weightage="20" keywordseo="investments">investments</keyword> post demonetisation point towards a higher rate of saving as well,” adds Archit Gupta, Founder and CEO, ClearTax. The general outcome from a cursory view into these segments show that economic activity keeps taking new shape amid changing circumstances. The true impact of demonetization will be revealed in the years to come. But with strong fundamentals on our side, the Indian economy is still a juggernaut.

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