Facing the prospect of funds drying up, leading online marketplaces Flipkart and Snapdeal have asked their top brands to run advertising and marketing campaigns for them to promote deals and products, demanding the same treatment as large brick-and-mortar chains.
While some brands are wary about a backlash from offline retailers, others are amenable to the idea, viewing it as support for an additional sales channel.
The strategy will enable ecommerce companies to comply with rules that bar them from predatory pricing, which implies they cannot promote them either, four industry executives said.
“Brands are at liberty to discount products and hence any such deals and marketing campaigns done by them will not violate the rules,” said the head of a leading domestic consumer electronics maker. He said a squeeze on marketing budgets had accelerated such efforts. Until recently, ecommerce companies ran all advertising campaigns to drive sales, except those for exclusively online products, which were mostly joint spending. With investors tightening their belts and scrutinising marketing spends, ecommerce firms have been compelled to approach the big sellers, the officials said.
The online marketplaces have pitched mainly consumer electronics, mobile phone and apparel brands for such campaigns.
These are the top-selling categories online and are estimated to account for 85-90% of their business. However, some large brands are sceptical, fearing a backlash from offline retailers, which are still the largest contributors to their sales.
“The marketplaces are demanding that top brands invest on campaigns of deals and products of the brand due to a funds crunch and asking to be treated on par with offline retail. However, we are yet to decide since we don’t want to make any move which antagonises offline channels, which account for 97% of our sales,” said the marketing head of a top white-goods maker.
The ecommerce companies, which were one of the top media spenders in India, in the same league as telecom and auto companies for the past two years, have cut down on campaigns since last Diwali, with most of their advertising focussing on promoting the platform rather than deals and brands. This step was taken after investors pulled the plug on ecommerce companies burning money, executives said.
While Flipkart declined to comment, an email sent to Snapdeal did not elicit any response till Tuesday press time. Amazon India hasn’t sought such marketing support from brands on its platform. The management announced additional investment in India during its quarterly earnings call last week. The US ecommerce giant has already invested Rs 15,000 crore in its India operations and the company expects the country to eventually become its second-largest market, after the US.
Some vendors, which are focusing on online for additional sales and had launched exclusive models or portfolios for this channel, are evaluating such marketing campaigns.
Chinese white-goods maker Haier said since ecommerce companies have moved away from predatory pricing and are maintaining prices set by brands, manufacturers will start looking at it as an additional sales channel and provide support for it. “Brands and ecommerce firms will work closely since the issue of crazy prices does not exist anymore,” said Haier India president Eric Braganza.
The head of a leading domestic mobile phone maker said since ecommerce accounts for almost one-third of smartphone sales in India, the company is ready to invest on marketing for the platforms to ensure healthy returns. Alexander Mogilny JerseyShare This