E-commerce marketplaces in India have seen tremendous growth in the past three years. This has been fueled by 50,000 to 1 Lakh sellers that have been on-boarded by these e-tail giants. But, if you imagine life for any of these seller companies, the first word that will come to mind is COMPETITION. In high-traffic categories like mobiles (say iPhone), there are 30+ sellers selling one product. It is not uncommon to 1 rupee price-wars. In other categories like women's fashion, the customers have excessive choice. A quick search on "women's tops" will result in 80,000+ results.
In this world of ever increasing competition, how does a seller succeed.
Unfortunately, like most complex problems, it is more of an art than science. Here are some strategies that we have learnt while working with sellers large and small.
Be Paranoid about Account Reputation
Every marketplace seller from Day 1 needs to be paranoid about account reputation. If you drop the ball on this one, it can potentially cause you months of slow sales, which can sap the life out of your business.
Account reputation depends on many parameters
a. How fast you ship your products
b. How few orders you cancel because of stock not being available
c. How few customers return your orders
d. How responsive you are to customer complaints and questions
e. Overall customer feedback on your products - positive or negative
From experience, we can tell you that low account reputation (seller score) is a downward spiral that takes very long to come out of. With low reputation, you get low sales, which in turn makes it slower for you to garner positive feedbacks to help you recover. We have seen sellers take 6 months on 50% low sales due to mistakes done during 1 week of deal season. Treat this with seriousness.
Loss Leader Products
From your catalog, select 10% or less of your most popular, mass market products to be your loss leader. These products aren't supposed to make you money, they are supposed to be your savior. Price them aggressively such that you drive big volumes on loss leader products. They help you stay up in the eyes of the marketplace managers, recover from account reputation mishaps and get your brand into homes of hundreds and thousands of customers.
Study the Competition in your Sub-category
I always tell my clients that marketplace are not the channels where you can build demand for your product. They are vehicles which can drive good volumes if the demand is already generated with the customer base. We get many customers who think their product is the best and hence should be priced high. We very regularly get say a men's apparel brand that wants to price their casual shirts are Rs. 1999 because of it's quality. Unfortunately, when a customer does a search for casual shirts, he gets many options in the 699 to 999 range. In a product grid of virtually thousands of products on an ecommerce site, it is very tough to make the quality of your product stand out unless you are very well known brand like Woodlands. In a store, the customer can feel your product, he can try it and see the fit. On ecommerce, you are just product #35 in a grid with a 100 more.
We've helped many of our clients refine their pricing strategies based on marketplace competition. We've consistently seen that playing within the hitting range of competition works better in increasing sales manifold. One of our women's sleepwear clients dropped prices form 1000-1500 range to 750-999 range and saw a 400% jump in sales immediately. A client developed a laptop bag in bright colors (targeted at women) with a specific price range in mind, which sold like hot cakes.
Talk to your marketplace account managers to understand the sweet spot in your sub-category. And of course do a search on your sub category on every marketplace every day.
Ecommerce Loves Discounts
As customers, we've chuckled about crazy discounts on ecommerce sites. 80% off? Yeah right! I believe you...
One would think that customers have figured that these deep discounts are just inflated MRPs. But, we can tell you from experience that showing a constant discount on your products by inflating the MRP a bit works. If you are a manufacturer or a brand owner, you have the play with MRP and you should try it.
Now, we don't recommend putting your entire catalog on a crazy discount.
But some discount all the time, with a capability crank it up for a special event will certainly help. We suggest our clients to keep their latest products on a 10-20% discount. Have some running anytime at 20-30% discount which you can crank up to even 50% off during a Valentine day, X day or Y day sale. All this is done by planning the MRP a bit higher right from the beginning.
There are many more strategies that can be applied, but these are the few we've seen working across many clients.
About the Author: Gurpreet Singh is the co-founder and CEO of Browntape.com, India's leading multi-channel player. Browntape helps sellers sell better on all Indian marketplaces by providing them technology to scale and services that help them setup a strong business in ecommerce.