Image credit – All owners of “Khalnayak”
I don’t think of Marie Antoinette often. She is neither my VC, nor my contact in Google, nor a rich Marwari relative. If you don’t know her, let me remind you that she was the Queen of France during the reign of her husband Louis XVI (1791) and became very infamous. When the courtiers of her palace told her that the French public was starving and did not have bread to eat, she simply said, “Then let them eat cake”. She lived in denial and was punished by the guillotine a year later. Gulp.
I did remember Marie recently when I read a high decibel proclamation of a well-known, heavily funded, stratospherically valued e-commerce fashion brand that announced they were going to be available only via their app and that were shutting down their web & mobile sites immediately!
This was Marie Antoinette saying, “Hey you! Don’t have bread? Then eat cake. And please download my app to order that cake, will you?”
When the dress doesn’t fit, lose weight!
Haven’t you been in a situation where you tried out a garment that felt tight on you and your regular size wasn’t available? What did you do? Grumpily walked out of the store? Did it occur to you to rush to the nearest gym, camp there for eleven days, lose a few kilos and then rush back and buy that tight garment? No? Then, you are stupid!
Most fashion e-commerce businesses in India lose 50% on each sale they make (public data). This includes dead stock, returns, costs of delivery, etc. Why do they lose money? The usual reasons of building audiences, loyalty and of course having so much VC money that you could propose Mukesh Ambani to buy out Antilia.
So, what happens when all of a sudden you need to become profitable? None of the businesses I know can instantly increase margins by 50% (or cut costs by 60 %) to achieve this? So what do you do?
You starve yourself out.
The largest digital properties in India (Facebook, Google) and e-commerce businesses have acknowledged that they receive 50% traffic from the web and 50% traffic via mobile (mobile web and app). comScore (the baap of digital measurement) just released a report that web traffic is growing in the same pace as the earlier quarters; while mobile traffic is growing faster.
India has 900 million mobile phones of which only 70 million are smartphones (to use apps). But the non-smartphones users heavily use the Internet!
India has just got started on digital adoption and our habits are unique. Most fashion sites have reported that their deliveries are made to offices where girls try out clothes in the washrooms before paying! Who doesn’t use company desktops, laptops and WiFi for personal use?
So, imagine if you have 100 people who visit you and buy goods of Rs. 100 from your site, daily. That’s a sales of Rs. 10,000 and a loss of Rs. 5000 every day. Now you say, “I am only available via my app (not even mobile web)”. Overnight, your visitors drop to 40 (instead of 100), you sell Rs. 4000 of goods and your losses are down to Rs. 2000!
Voila, you have saved yourself Rs. 3000 of losses daily and not lost face because you proclaim that you are so avant-garde that you are available only via your app!
Takeaway : Going “Only App” is a premeditated strategy of Fashion e-com stores to reduce sales volume and thereby control losses.
The difference between Fashion Street and Zara
If you have lived in Mumbai, you must have been to Fashion Street. It was this snaky road opposite the Bombay Gym that sold surplus tees, shorts, etc. So many traders shacked up selling the same stuff. It was indiscernible who had better goods. You had to walk up and down, keep haggling till your patience ran out and then make your purchase. Zara stores on the other hand, are quite the opposite! You buy what’s inside and you don’t haggle.
Fashion Street is my real life analogy of the Indian e-commerce market today. Everyone is the same and sells almost everything. All they do is compete on price and who blinks first. Consumers always win.
The strategy of this fashion company to suddenly go ‘all app’ is exiting Fashion Street and becoming an exclusive ‘private’ store. Think of it – inside an app, you are directed and controlled the way the app owner wants. On a public street market, you are the king.
Takeaway: Becoming ‘app only’ is good to save losses, but the sudden shift to control consumer behaviour is a risky decision. Consumers may feel stifled (we are trained to google options and price comparisons) and may never come back.
Have you tried Google Jeans?
If you haven’t read, Google is rolling out a ‘Buy Button’ that will feature next to the ads when you search for things you want to buy! Now, the (politically correct) reason Google says it’s doing this, is to make buying frictionless. Consumers will pay using a Google account and have their goods delivered to them.
If you are fourteen years and older, you know that Google dominates everything on the web. Google is the web. By adding the ‘Buy Button’, Google will further tighten its grip on the advertisers that pay massive ransoms to appear via specific keyword searches on its sites and extract much more money than it did before.
Google is going to own the pants of the e-commerce fashion companies even before they have worn them!
By going ‘all app’, the fashion store in question is valiantly trying to defend the new onslaught that Google is proposing. Unfortunately, this company has not realized that Android (the most popular mobile phone operating system in India) is also owned by Google. What they do there next is anyone’s guess!
Take away: Do businesses that make money. Then no one can call you naked.
Please do comment and share your thoughts and POV?
This Article was also featured in the Economic Times Sunday – 31.5.2015
Sachin Bansal’s Reaction :
Comment in the Economic Times on 29-6-2015 🙂
Update: ET – 24.8.2015 :))))
This just nails it (Trak.in) – dated 10.11.2015
Dec 1, 2015:
First they call you retarded, and then realise they were talking about themselves :))
And exactly 7 months later (16th Feb) in the Mint
4th May 2016 – Times of India
First Published on: May 31, 2015