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    Top online vendors including Cart2India, RedLily mull jumping ship

    Synopsis

    Adil Saleem, managing director of Cart2India, a Bengaluru-based online seller of electronics and accessories, said the company’s business on Amazon India dropped by 80% in 2017 while increasing on other platforms such as Paytm Mall.

    Online vendorThinkStock Photos
    Several top sellers are redrawing their strategies, which could include pulling out from the online marketplaces.
    BENGALURU: Amazon India and Flipkart’s apparent focus on a few select merchants is forcing several other top sellers to redraw their strategies, which could include pulling out from the online marketplaces.

    Merchants such as Cloudtail and Appario on Amazon India, and WS Retail, Omnitech and Supercomnet on Flipkart, work closely with these platforms and cover a large chunk of their sales, especially in categories such as smartphones and electronics, according to industry members.

    This, said other large sellers such as Cart2India, RedLily and Deal Kya Hai, resulted in sharp sales declines for them last year, forcing them to consider alternatives such as moving to other marketplaces or transforming into enterprisefocused businesses. Several of these entities have been among the top 100 sellers on the marketplaces.

    Adil Saleem, managing director of Cart2India, a Bengaluru-based online seller of electronics and accessories, said the company’s business on Amazon India dropped by 80% in 2017 while increasing on other platforms such as Paytm Mall.

    “We had to shift focus from mobile phones to laptops after Amazon supported-sellers captured the mobile space. We foresee a similar move by (Amazon India) category by category to capture the top-selling brands,” he said. “We have raised this concern with Amazon and have asked them to create a level playing field for sellers for their own benefit.”

    ecommerce


    Amazon India dismissed these claims, stating that it did not discriminate between sellers.

    New Seller Entities to Comply with Rules
    “Amazon is absolutely committed to remaining compliant to local laws at all times. Amazon has an equal relationship with all the sellers on our marketplace,” Amazon India said in a statement.

    A spokesperson for Flipkart said, “All sellers on Flipkart get the same opportunities and we constantly educate and empower them on ways to ensure great customer service in order to generate increased sales.”

    While Cloudtail and WS Retail controlled a majority of sales on Amazon India and Flipkart, respectively, at a point, the marketplaces restructured their vendor strategies after the government in 2016 decided that sales from a single merchant could not exceed 25% of the total gross merchandise volume, or gross sales, of a marketplace.

    Amazon India and Flipkart created new seller entities or identified those that would buy mainly through their wholesale platforms to cover most of the sales on their online marketplaces, although this has dragged sales for Cloudtail and WS Retail.

    “The marketplaces had to create these seller entities to follow the guidelines. Their focus is to take their sales through these entities to 60% of the total sales,” said Satish Meena, senior forecast analyst at Forrester Research.

    For these marketplaces, focusing on select merchants helps them keep more control on quality and pricing.

    Overall, Amazon India’s seller base has grown to 285,000 vendors and Flipkart has more than 100,000 sellers.

    Some experts say the addition of more sellers on these marketplaces may also be creating more competition.

    “More businesses are using the multichannel strategy to target consumers. While this affords consumers varied choices, it does create severe competition for existing product sellers, who also compete with the private labels (in-house brands) of these online platforms,” said Aashish Kasad, tax leader for consumer products and retail sector, EY, India region.

    Changing Strategies
    Gurgaon-based DBM Marketing, which sells consumer electronics online under the seller name Deal Kya Hai, has decided to focus on catering to other businesses after sales dropped last year.

    “The last year has been tough,” said Amit Daga, managing director at Gurgaon-based DBM Marketing. “Our sales on Amazon India dropped 80% in 2017 due to factors such as Amazon’s focus on its own retail as well as the impact of demonetisation.”

    Daga plans to launch his own brands in consumer electronics to sell to companies such as Cloudtail.

    Cloudtail is a joint venture between Amazon Asia and Infosys founder NR Narayana Murthy’s personal investment vehicle Catamaran. WS Retail was set up by Flipkart cofounders Sachin Bansal and Binny Bansal in 2010. The founders sold their stake in WS Retail in September 2012 after facing heat from regulators on circumventing rules that restricted foreign-backed ecommerce companies from selling directly to consumers.

    Hyderabad-based RedLily, which operates on Amazon India and Flipkart, saw its topline across the marketplaces drop by 70% last year and is now focused on selling mostly through its own website. “Earlier, month-onmonth growth used to be 20-25%, but growth has plateaued over the last six months,” said founder Sashi Somavarapu.

    Bengaluru-based apparel seller Rohit Singal, who used to sell 250 pieces a day on Amazon, now sells only 15-20 pieces. He is now focused on exporting through Amazon’s global selling program, where his sales has increased from $40,000 in fiscal year 2016-17 to $200,000 so far in 2017-18.

    “Majority of the sellers, big and small, have been reducing their exposure on the marketplaces since the end of 2015. In most cases, individual exposure has gone down from a high of 90% revenue contribution to 15%,” said a spokesperson for the All India Online Vendors Association, which represents about 3,500 online sellers.

    “These sellers are either moving to their own websites, offline, (business-to-business models), or leaving the business altogether and going back to their old professions,” the spokesperson said.

    (With inputs from Varsha Bansal)
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