{"id":2347,"date":"2014-06-30T10:39:00","date_gmt":"2014-06-30T10:39:00","guid":{"rendered":"https:\/\/www.thirdeyesight.in\/?p=2347"},"modified":"2022-09-07T10:47:21","modified_gmt":"2022-09-07T10:47:21","slug":"doing-more-with-less","status":"publish","type":"post","link":"https:\/\/myechoproject.com\/TES\/doing-more-with-less\/","title":{"rendered":"Doing More With Less"},"content":{"rendered":"\n

Rohit Nautiyal, The Strategist – Business Standard
\n New Delhi, 30 June 2014<\/i><\/p>\n

One \n fine Sunday morning, 29-year-old Nishant Malhotra woke up to non-stop \n message beeps from his smartphone. Irritated, he picked up his \n phone. The first SMS read, "Stop everything and start shopping: \n Get extra 40 per cent off only today; 900-plus products. Code \n WOW 40." While this offer came from Gurgaon-based online \n shopping portal Jabong, the next message he checked had information \n on a similar promotional offer running on fashion portal Myntra. \n There were myriad SMSes from a handful of other shopping portals \n urging him to make the most of his day-off from office. Malhotra, \n an avid online shopper, began his Sunday early but without a whimper \n of protest.<\/i>

\n As the next phase of consolidation kicks in with Flipkart’s acquisition \n of Myntra, e-commerce companies realise that the one metric that \n will help them achieve growth is focusing on revenue per visit \n or RPV, which is a combination of the conversion rate on the website \n and the average order value. Mind you, this is one step ahead \n of the single-minded focus on conversion rate visible at the time \n when the e-commerce industry was still young. The smart ones know \n that while they could probably double their conversion rate by \n cutting all prices in half, this would likely have a negative \n impact on the bottomline by reducing the overall revenue generated. \n Watching revenue per visit ensures that the host site is increasing \n the rate of conversion without compromising revenue.<\/p>\n

Leading e-commerce companies like Flipkart, Myntra, Jabong and \n FabFurnish already claim they are shipping around two to three \n and in some cases up to five products for each order received \n on their website. The whole idea is based on simple math really. \n Experts peg the cost of acquiring a customer by e-commerce companies \n has come down – at Rs 300, down from Rs 1,000 two years back – \n while the cost of servicing an order has gone up with an increase \n in manpower and infrastructure costs. Says Ravi Vora, senior vice-president, \n marketing, Flipkart, "There is enough noise about online \n shopping today and the best part is that each player is not required \n to put efforts separately to draw attention. Today more than 60 \n per cent of shoppers on Flipkart are repeat customers."<\/p>\n

In such a situation what will separate the men from the boys \n will be the way a player clubs his offerings and services the \n last mile to make the whole process more efficient. Praveen Bhadada, \n senior director at Zinnov, believes, "Analytics will decide \n the prospects of growth for e-commerce players." In other \n words, how well a firm knows who its customers are, what they \n want and how to urge them to spend more every time they walk into \n an online store is key. And what will arm online store managers \n with this knowledge is customer data harnessed from the website \n and other sources and crunched and put in a shape that helps in \n customising each offering.<\/p>\n

Discounts are juicier than ever<\/b>
\n <\/p>\n

Coming back to the point on driving volumes by offering discounts, \n many players have a similar discount strategy: lure customers \n into spending a fixed amount of money by dangling the juicy bone \n of high discounts, sometimes up to 50 per cent. Now there are \n two ways of offering discounts. One is the old school general \n sale in which every consumer gets a fixed discount at a certain \n point in a given category. The other, and the more new way, is \n about creating different catalogues for different customers. To \n put it simply, a catalogue sale is an occasional deal available \n on a given assortment for a stipulated time period. For example \n on June 23 both Myntra and Jabong ran a discount deal of 40 per \n cent on a set of products compiled in one catalogue. Says Praveen \n Shah, co-founder and managing director, "When we give incentives \n to shoppers, the chances of repeat purchase go up significantly."<\/p>\n

FabFurnish follows a variant of the ticket-size principle to \n design discounts and drive volumes. The company claims that currently \n the average number of items on a shopping basket is two\/three. \n The baskets are divided as ‘furniture’ and ‘non-furniture’. While \n the average order size of a furniture basket is around Rs 10,000, \n non-furniture basket, which may include bed and bath, decor, lighting, \n kids and baby products etc – stands at Rs 3,500. In the last two \n years, FabFurnish has tweaked its discount strategy completely. \n If earlier it was offering discounts based on the ticket size \n -that is, the higher the ticket the bigger the discount – now \n it has fashioned lucrative offers on smaller ticket prices as \n well.<\/p>\n

Alongside, it has chased this set of buyers relentlessly by improving \n its product recommendations. The principle of recommendation works \n like this: Apart from suggesting brands and offers, the site will \n also prompt other categories of products that a buyer could buy \n along with the original product on the list to avail of an extra \n discount. The results, the site claims, are as expected. About \n 30 per cent of the shoppers clicked on the recommendations and \n conversion rate went up by 20 per cent. Says FabFurnish co-founder \n Vikram Chopra, "If one does not put some constraint on the \n order value, the revenue will go down. Also, it is the best way \n of increasing the number of items per basket."<\/p>\n

To drive volumes and cross-category impulse purchase, Myntra \n has been running what it calls ‘basket promotions’ for a year \n now. Says the company’s COO Ganesh Subramanian, "Picture \n a scenario in which a consumer has come on the website to buy \n two products. After making the selection her order value comes \n to Rs X. By adding one more product of lesser value, she will \n be able to claim a Y per cent discount on her order. In most of \n the cases we have observed the consumer ends up buying the third \n item." What he means is that in doing so the consumer usually \n experiments with a new category. Myntra claims the number of items \n per order has gone up by a count of three products in the last \n one year. Catalogues created for women have driven volumes for \n the company. Similarly Jabong has seen a big jump in sales by \n cross-selling accessories.<\/p>\n

Getting the logistics right<\/b>
\n <\/p>\n

As leading e-commerce companies exit the phase of customer acquisition \n to take on the challenge of customer retention, logistics will \n be crucial. Says Shah of Jabong, "When per-order value goes \n up along with the number of items, it is viable for us to pass \n on the savings to the customers." This is achieved by driving \n efficiencies in logistics.<\/p>\n

Let us try and understand the math. The cost of delivering two \n items of the same size to the shopper’s doorstep will not be radically \n different from what it takes to deliver one unit. In this scenario, \n if the ticket size on a given order goes up by, say, Rs 1,000, \n an e-commerce company can log savings of up to 20 per cent on \n its delivery cost, say experts. How? Take just one element: call \n centre charges. When an e-commerce company outsources call management, \n it has to pay a certain amount. If the number of calls remain \n the same but the order value associated with a call goes up, it \n means same workload – and therefore the same fee – for the call \n centre but higher realisation for the e-shop.<\/p>\n

While most online shopping companies that started off with an \n inventory-led business model have cut down heavily on stocking \n inventory and moved towards the managed marketplace model, order \n aggregation is forcing them to re-evaluate their strategies. Take \n this example. Suppose a customer in Chandigarh has demanded two \n products from a website that works on the managed marketplace \n model. If it has to source these two items from two different \n merchants located in, say, Surat and Delhi, it is unlikely that \n both the items will reach the customer on the same date. Add the \n shipping cost the e-commerce company incurs. Where does it leave \n loyalty and efficiency?<\/p>\n

Subramanian of Myntra – the portal which hopes to be profitable \n by 2015 – says, the website tries to forecast as best as possible \n but yes, it doesn’t get it right 100 per cent of the times. "There \n is a gap between demand and forecast," he adds. "But \n our split order percentage is in low double digits."<\/p>\n

But there’s a catch. Delivering more items per order will demand \n more investments from logistics partners. Says Sanjiv Kathuria, \n co-founder and CEO at e-retail delivery fulfilment company Dotzot, \n a DTDC company, "If the weight per shipment is 1 kg or more, \n we will have to look for a transport solution other than bikes." \n To leverage the network of DTDC and accomplish timely deliveries, \n Dotzot is planning to bring some of the best global practices \n in logistics to India. ‘Click and collect’ is one. As part of \n this, online shoppers will be able to pick up and return their \n orders at multiple booths set up by various players. <\/p>\n

Aggregating orders is one answer. But the task is easier and \n faster for companies that stock a major portion of the inventory. \n With a number of promotions lined up during any given week Jabong \n has managed to increase the number of items per order by 25 per \n cent from last year. To service its biggest market of Delhi NCR \n faster, the company has opened four packaging centres in the NCR \n itself. In this way it is able to deliver within 20-24 hours of \n receiving an order.<\/p>\n

In all this shopping portals are following in the footsteps \n of their brick and mortar predecessors. Devangshu Dutta, chief \n executive officer of specialist consulting firm Third Eyesight, \n sums up the trend succinctly: "E-commerce companies in India \n have to focus on the principle of low price needing to be supported \n by low cost. Global players like Amazon and Walmart have grown \n by offering lowest prices and keeping their operational costs \n low. Promotions drive repeat purchase that eventually make up \n for lost margins and this is no different for e-commerce companies."<\/b><\/p>\n

(Published in Business \n Standard <\/a>.)<\/i> <\/p>\n","protected":false},"excerpt":{"rendered":"

Rohit Nautiyal, The Strategist – Business Standard New Delhi, 30 June 2014 One fine Sunday morning, 29-year-old Nishant Malhotra woke up to non-stop message beeps from his smartphone. Irritated, he picked up his phone. The first SMS read, "Stop everything and start shopping: Get extra 40 per cent off only today; 900-plus products. Code WOW […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-2347","post","type-post","status-publish","format-standard","hentry","category-press-quotes"],"yoast_head":"\nDoing More With Less - Third Eyesight<\/title>\n<meta name=\"robots\" content=\"index,follow\" \/>\n<link rel=\"canonical\" href=\"https:\/\/myechoproject.com\/TES\/doing-more-with-less\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Doing More With Less - Third Eyesight\" \/>\n<meta property=\"og:description\" content=\"Rohit Nautiyal, The Strategist – Business Standard New Delhi, 30 June 2014 One fine Sunday morning, 29-year-old Nishant Malhotra woke up to non-stop message beeps from his smartphone. 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