For eCommerce firms, boosting sales of high-priced products such as TVs, refrigerators and washing machines has been crucial. While everyone has played well at lower price range, the other end of spectrum has been not-so-profitable for online retailers, partly because of the price sensitive economy of the country besides lack of payment options with consumers.
Offering a thrust to its sales of higher-priced products, Indian eCommerce major Flipkart has initiated interest free monthly installments to its customers. The offering will be valid on products such as premium smartphones, televisions, home appliances and other electronics.
Flipkart has tied up with lender Bajaj Finserv Ltd and electronics brands to allow consumers to buy electronics costing over Rs 5000 and pay in equal monthly instalments (EMIs) without paying any interest or down-payment charges.
“According to our surveys, consumers are willing to pay more over time for essential things,” said Surojit Chatterjee, senior vice-president, product, Flipkart. “In the three weeks that we’ve launched the no-cost EMIs, we’ve seen customers have upgraded their purchases because of it. We’re thinking of affordability as an overall problem to solve. We will come at this problem from different angles.”
The launch of the interest-free EMIs comes as Flipkart is trying to turn around its business, rev up sales growth and stem market share losses to Amazon.
Yet, until now, the online sales of these products haven’t picked up in a big way, partly because of a lack of payment options for customers. The other main reason for the limited growth of digital products is the poor reach and quality of the supply-chain network of e-commerce firms.
In late 2013, the Reserve Bank of India banned banks from offering interest-free EMIs to credit card-holders, saying these schemes violated its lending regulations, in a move that affected the sales of higher-priced products at online retailers. This time, Flipkart is offering customers the option of paying through debit cards, credit cards and other digital payment methods.
Once a customer buys a product on Flipkart, Bajaj Finserv will take up the task of collecting the payments. All the three parties—Flipkart, Bajaj and the electronics brand—will share the cost of offering the EMIs.