The famous online shopping retailers like Myntra, Flipkart, Jabong, Shopclues etc. are now facing the bitter realities of the business world. These online fashion retailers might have earned a huge chunk of loyal customers by offering heavy discounts on their products on various festivals and occasions, but at the same time they can’t ignore the huge losses encountered.
Speaking of Myntra particularly, the e-commerce website offers heavy discounts on various Myntra online shopping festivals. A company can’t keep a margin of 60% off on all of its products as this surely will cause heavy losses. As per the business experts each and every company takes a calculated risk to boost up its business. The Chairman at Management Consulting firm Technopak “Arvind Singhal” explains that, if a company keeps 10% of the products on the discount of 80%, the rest of the merchandise is discounted for less. But here, it seems that the e-commerce company has set its foot in the extreme risk zone by providing heavy discounts on almost everything.
So, what could be the reality behind these whacking deals and discounts?
The answer to this question lies in the fact that these e-commerce company have the prime focus of increasing their user bases. The great buzz around these heavy discounts proves to be an expensive but a definite and effective marketing strategy. However, in the e-commerce industry the traffic moves away more quickly than it arrives. In case of offline/physical shopping stores, it takes time and effort to move from one store to another. However, in case of online shopping, it is no cumbersome task, it is a matter of just few clicks. Myntra has however restored this discount applicability to the app users only. This is done to draw the attention of the customers toward the mobile app which is considered to be stickier and much helpful to build a better brand experience for the users.
The website reimburses/ funds the sellers for the discounts they offer on the product and this not being done without a reason. It is an expensive risk and there is no doubt in it, but like they say, you got to spend money to make money!
In the year 2014-15, not only Myntra but also the other big online retailers have reported huge losses due to these heavy festive discounts. The e-commerce companies lost crores of rupees in the financial year 2014-15 due to which the discount levels had to be reduced heavily. Speaking of 50% and above, it is like an imaginary number nowadays that can be found rarely in some stock clearance sales. The most hot-selling items like women’s apparel & footwear have been affected the worst, with the discount range dropping from above 50 per cent to 30-35 per cent. The next best selling items- smartphones are also down by 10% as the discount range has decreases to just 20 to 25per cent.
Due to these reduced discount levels, the e commerce website is expected to improve, however there is still a long way to go to become profitable. To successfully become profitable once again, the e-commerce website needs to bring down the discounts further and make profitability their prime focus.