India's retail industry hit by irrational pricing by online players, new e-com policy to ensure level playing field, says Croma's Ritesh Ghosal

The new e-commerce policy, which was implemented by the government on February 1, has come as a huge relief for India's beleaguered offline retail industry as it puts an end to the investor-funded discount-spree, Ritesh Ghosal, Chief Marketing Officer of Croma, has said.

The discount and pricing strategy of e-commerce players such as Amazon and Flipkart, which are being funded by international players, has hit the profitability of offline retailers in the last few years.

In a conversation with BestMediaInfo.com, Ghosal said that the new rules would provide a level playing field to offline retailers.

“I believe there should be a level playing field for online and offline players. Both have their different virtues and value proposition, shoppers should be able to choose between these as they see fit,” he said.

Ghosal said the industry is suffering from events such as irrational pricing, and distortion of key brands and models by the e-com marketplaces over the festive period that created havoc with the business of the entire retail and home appliance industry. He hoped that with the new regulatory measures, e-com marketplaces will behave more responsibly. “I don’t think they will become irrelevant — it’s just that they will have to compete on the convenience they offer rather than the discounts they fund out of investors’ largesse.”

The new policy was issued by the department of industrial policy and promotion (DIPP) —the nodal agency for formulating FDI policy.

The new regulations ensure that marketplace entities cannot buy more than 25% from a single vendor. It also restricts marketplaces from giving any direct or indirect discounts on products. Entities in which there is equity participation by the marketplace entity cannot sell their products on the platform run by that marketplace. The policy also mandates that e-commerce marketplace entities will not mandate any seller to sell any product exclusively on its platform only.

Talking about the overall growth predictions and future map for India's electronic retail industry, Ghosal said 2018 had witnessed changes and corrections in GST and so the pricing over the course of the year across categories had led to some disruptions in different categories at different times. The effects of GST changes were magnified by the make-in-India initiative, which led to some changes in the supply chain for the categories that the brand deals in and by the weakening of the rupee.

Croma to go on an expansion-spree

The brand that currently operates around 120 stores in 25 major cities is planning to have 1,000 stores across the country in the next few years. The company will add five to six stores before the end of March 2019.

“In the 100-odd catchments the brand is serving presently, it has a share of over 20%. In the current year, store growth has been around 20% while overall growth has been nearly 30% year-to-date (YTD),” Ghosal said. “The plan is to have 1,000 stores in the next few years,” he added.

Ghosal said the brand doesn’t believe in creating campaigns and just opening stores.

Online players are now moving towards creating physical retail spaces while brick and mortar retailers such as Croma are laying greater emphasis on the experiences they create within the stores and also investing in omni-channel capabilities.

For Croma, the stores are the biggest marketing asset. “Our primary investment will continue to be in putting up stores where the façade of the store and the ambience inside can work magic. We built a strong set of digital assets to drive footfall to the store — our website, our social communities, our privileges programme and we will continue to invest in improving engagement and the content on these,” said Ghosal.

Croma has also launched the country’s first loyalty programme that will bring together an entire suite of services such as service, e-waste management and making the next new gadget affordable. It believes that such loyalty programmes are a proven way to increase its customer base. It will market the programme by communicating its benefits to customers with the help of electronic media and its staff.

Apart from the offline stores, the brand is hoping to make its online store the first destination for customers, for which it is undergoing an upgrade in terms of user experience and functionalities. “Today, between 80-90% shoppers start their exploration for a new gadget online — the equivalent of window-shopping in our category is primarily online,” said Ghosal.

“In our category, touch-feel-try is a big part of the choice and we do not intend to walk away from this premise. Our online presence exists to provide additional convenience to our 10mn plus existing customers and not to create new customers. We do not intend to ever outbid e-com marketplaces for eyeballs online,” he added.

The brand has chosen to advertise to ‘shoppers’ rather than consumers since it sees itself as a theatre, where the demand created by the brands gets realised. This has led it to prioritise the times when shoppers get activated — the festive season, or ‘big days’ such as August 15, January 26, etc. — for its big marketing spends. For the rest of the year, it is on a sort of drip irrigation, spending a little amount of money in putting up arms to be visible to prospective shoppers. For the brand, there is a salience campaign that operates across 52 weeks in digital media with spurts in TV and print around the big shopping seasons.

Ghosal predicts that this year should see the business settle down to a more predictable rhythm and hopes consumer confidence, which is at the lowest, too will swing up by Q2 end.

With the digital explosion, Ghosal believes the aggressive pricing of the iOT products such as voice search-enabled speakers from Google and Amazon is driving the penetration and is closer to becoming a reality.

“In 2019, all leading brands in sound and televisions will be bundling one or the other of voice assistants and this will create acceleration in the adoption. Of course, we need the current prices of internet consumption to hold during the period too.”

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