Discounting corrupts market

Setting benchmark in online retailing
Discounting corrupts market

FabMart sells electronics, bed & bath and other category products to HNIs through its distinctive offerings.  In an exclusive conversation, Alphonse Reddy, Founder and CEO of FabMart highlighted his corporate strategy to stay ahead among peers.

 Lately, a lot of funding is coming in e-commerce do you think it’s a good sign for industry in long run?

The industry is an investment intensive industry given the underlying economics. Hence, it is a good sign for the industry. Investments into the industry will grow by 10 xs in the coming years especially into more mature companies in the sector.

This is definitely required given that the Indian e-commerce industry is at a nascent stage compared to what it is in China.

Are you looking to raise money through equities? What are your growth plans?

Given the nature of our business model, we are able to grow the business through Internal accruals. Having said that, a good investor can add value beyond capital for sure. Our vision is to become the largest product discovery platform and market place for curated premium products. We are aware that this won’t happen overnight and we will be cautiously aggressive with our usage of funds and customer acquisition strategies.

Your business model is seller based (market place) or inventory based? If it is seller based what is your current strength?

We are India’s only market place focused on selling premium products. Our strength is not based on the number of sellers but more on our ability to choose the right seller. We cater to an HNI customer and hence we choose those sellers whose products and service quality tops. We have tied up with more than a 100 vendors selling close to 2000 products and we are just starting.

Deep discounting in e-commerce especially on electronic goods is troubling many retailers as well as e-tailers, what is your take on it?

Yes, it is a concern as discounting products is never helpful and it is just a temporary solution to increase sales. First and foremost, it’s a bad business practice as it corrupts the market. The other important point is that deep discounting hurts customers’ perception of the brand a lot especially if it’s a premium brand. However, the current state of price wars in certain categories is a result of how the brands have managed their channels. Some brands like Nike, have managed this pretty well but some others seem to have not done it that well.

At FabMart, we ensure that the customer gets value for money. It does not mean that we discount the products nor does it mean we sell at MRP. We work together with brands to make sure that we price things really attractively but we primarily focus on providing better customer experience through high quality video and web content and features such as “ask-an-expert”.

Highlight your retail categories with average ticket size?

Our average ticket size is about Rs 40K. It is one of the highest in the industry not only in India but even globally. Our ticket size is about 20x more than the average ticket price of mass-market player in e-commerce. We primarily deal in home furnishing products, electronic items and fitness equipments.

 Furniture is usually a high ticket item, what type of response you are getting from this category?

That’s right; furniture is a high ticket item and especially premium furniture. We make sure that the furniture on Fabmart is exclusive and has inherent value in the product. We have had better than expected response especially in the furniture category from HNI customers who are looking for exclusivity.

Who do you consider your competition? What are your strategies to stay ahead? 

High street stores are our current biggest competition as there are no direct competitors online. Our strategy is simple even though implementation may be difficult: we want to provide the best buying experience.

Alphonse Reddy