Lord’s Shoes takes an ‘if you can’t beat them, join them’ approach to e-commerce in India
March 25, 2015 01:24 PM
It can be an uphill battle for smaller online retailers in India to compete with the major online shopping malls such as Flipkart.com and Snapdeal.com, two of India’s largest e-commerce marketplaces. These players have attracted significant funds for marketing, have been selling online several years and are consolidating the India e-commerce market by buying up competitors or complementary businesses. Flipkart.com, for example, sold more than $1 billion worth of goods online in 2014 and has attracted $2.5 billion in funding. Snapdeal.com, meanwhile, is using the money it has raised to expand by acquisition. In February it bought Indian high-end fashion e-commerce site Exclusively.com in a move to strengthen its fashion business and meet its goal of $2 billion in fashion-related sales this year.
Seeing money flow and customers flock to the big marketplaces, Mumbai-based retailer Lord’s Shoes took an “if you can’t beat them, join them” approach, opting to sell online on marketplaces that already attract Indian shoppers rather than add employees to Lord’s 120-member staff to manage and market a stand-alone e-retail site.
“Many of our competitors who tried launching their own sites were running them at a loss,” says Sophia Premjee, managing director of the family-owned high-end footwear retailer. “With the costs of running and marketing a site, it is very difficult to operate at a profit.”
While India boasts a population of 1.25 billion, Gartner Inc. estimates only 2.2%, or 28 million Indian consumers, shop online. Forrester Research Inc. estimates the number of online shoppers could leap to as many as 128 million by 2016 or roughly 10% of the population. For now, however, the pie is small.
“India may one day have substantially more web shoppers, but today that base is very small, and some companies like Flipkart have been catering to those customers for eight or nine years,” says Vishal Tripathi, Gartner principal research analyst for India.
Lord’s Shoes, which began selling on several marketplaces in India in April 2014 after more than four decades of selling shoes in stores, says online sales account for 8% of total sales. Lord’s has eight Mumbai stores. Online sales are growing about 15% on average each month, Premjee says, adding that she thinks online sales could catch up with sales in physical stores.
While Lord’s sells on several marketplaces, Premjee says Rocket Internet AG-backed marketplace Jabong, Snapdeal and Flipkart-owned Myntra account for 70% to 75% of Lord’s online sales, mainly because these sites focus on fashion. Rocket Internet invests in and mentors online startups across the globe. She pays a commission of 30% to 40% of each sale to the marketplaces. Fees are steep but she deems them worth it as the marketplaces collect payment, offer the popular cash on delivery option and deliver the packages.
Marketplaces offer the best way to reach online shoppers in India, Premjee says. “Absolutely marketplaces are most popular for online shopping in India because you get everything under one roof,” she says. “There is also the familiarity factor as these sites are marketed well, such as on TV.”
Online shoppers in India skew young and affluent, and many reside in small towns where there isn’t a wide selection of fashionable brands in stores. Despite many being well-off, however, web shoppers in India are intensely bargain hungry, Premjee says. The need to cut prices to compete online is one of the biggest challenges to Lord’s web business.
What best attracts buyers to Lord’s are big discounting promotions the marketplaces run. For example, Amazon, she says, has a six-week end-of-season sale. Other sales and promotions center around the Hindu festival of Diwali, and the Great Online Shopping Festival, India’s version of Cyber Monday.
To participate, Premjee says Lord’s usually is required to offer a minimum percentage off, such as 20% or 30%, and the marketplace often will kick in another 10% or 20% discount. Lord’s says such promotions generate a 300% to 400% boost in orders compared with an average shopping day.
“The online customer is spoilt for choice as every portal is offering massive discounts to gain customers,” she says. “There are frequent promotions online offering as much as 70% off. This is marring sales in bricks-and-mortar stores.” She says stores are complaining of more inquiries and fewer sales as customers drop in to physically check out goods and then buy them online for a lower price.
Rocket Internet, is No. 53 in the Internet Retailer Asia 500. Flipkart is No. 15, Snapdeal is No. 47 and Amazon is No. 4.
To read more about the growing and complex Indian e-commerce market, check out the April edition of Internet Retailer magazine.