E-commerce companies ready Rs 2,000 crore ad budget for this Diwali

MUMBAI | NEW DELHI: With Diwali approaching, e-commerce companies are getting ready for a big round of fireworks.
Cash-rich biggies such as Flipkart, Amazon and Snapdeal, as well as smaller startups, are expected to together burn Rs 2,000 crore in the four months around Diwali as they try to wean away more consumers from traditional stores to online marketplaces during the all-important festival season.
Shah Rukh Khan and Aamir Khan will join a bevy of celebrities promoting e-commerce companies in the multimedia blitz that, media planners say, will shift significantly towards print and digital this Diwali from television. Last year, e-commerce companies had spent as much as Rs 1,300 crore on marketing and promotion during the September-December period, these people said.
While last year top companies such as Flipkart, Amazon, Snapdeal and Quikr were the big spenders and most visible brands during Diwali, this year even small startups are going to be active, said a media planner. "Therefore, there will be a huge shift of e-commerce advertising money from television to digital and print," he said. Until last year, e-commerce companies spent 60% of their marketing budget for the festival season on television marketing, media buyers said. This year, just about 35% is expected to go to television.
Market expansion
Ashish Jhalani, founder at eTailing India & Indian School of eBusiness (ISeB), said his company tracked around 700 e-commerce companies of some scale and size in 2014. This year, the number has grown to more than 1,700, including small and big players, he said, which points to market expansion. A growing number of startups are also advertising to showcase their offerings and leave an impact on consumers. According to top media buying firms, the heavily funded online startups are the ones splurging without watching returns on investment.
"Unlike the general market sentiment of slump, advertising in media is seeing a significant up-swing. Almost all advertising (inventory) has been blocked in the October-December quarter," said Navin Khemka, managing partner (north and east region) at Group M owned media buying firm Maxus, which represents Hero MotoCorp and Paytm.
"A lot has to do with emerging categories in the online space. Online advertisers are neutralizing losses of traditional advertisers and leading to huge spurt in demand." Lakshmi Narasimhan, chief growth officer at GroupM-South Asia, said during the festive period companies spend Rs 14,000-15,000 crore on advertising. "Retail sector (e-commerce plus brick-and-mortar) will be about 8-9%. The split is more or less equal between e-commerce and retailers," Narasimhan said. "Our estimates are that retail will grow around 15-16%, primarily led by e-commerce players. While margins are under tremendous pressure, given the importance of festive period, one expects an increase in spends by both established retailers and several new retailers."
Suppliers sounded out
The buzz for Diwali among e-commerce companies can already be sensed from suppliers and allied sectors. A large corrugated boxes manufacturer that supplies packaging material for both Flipkart and Amazon said the companies have doubled the order compared with last Diwali.
One of India's largest e-commerce companies has doubled the commissions for coupon companies and cash-back sites from 8% in August to 16% for shopping through mobile app, said Aman Jain, founder of cash-back site Go-Paisa. "It is very likely they (ecommerce companies) will come with a bang and they will come with no holds barred for sure," said the top executive of one of the largest brick-and-mortar retailers.
Omni-channel strategies of the likes of Future Group and Shoppers Stop are not going be in place during Diwali this year, so it will be really online versus offline." Market watchers said growth had slowed for e-commerce companies during the April-June quarter and now they have more reason to become aggressive to recoup the lost sales. Vipin Nair, joint director and co-founder at sports marketing firm Baseline, sees sporting events acting as a catalyst.
"In Q4 (fourth quarter), while online, retail and FMCG (fast-moving consumer goods) naturally allocate higher advertising spends, high-decibel sports events like the India-South Africa series and ISL (Indian Super League) have escalated spends," he said. "Brands, which are even otherwise in spending mode, have pre-allocated even higher spends in the quarter."
Physical retailers' approach
Since offline retailers with their limited resources cannot compete with the heavy discounting strategies of e-commerce companies, physical retailers will rather focus on their offerings this year. For example, Big Bazaar will increase its offerings in premium products in home, kitchen and dining segments. "We are introducing a lot of higher-price items, also in niche classes. For example, cutlery for gifting purpose and other home and kitchen category products in the range of Rs 10,000-15,000," said a senior executive, asking not to be named.
Department stores such as Shoppers Stop and Lifestyle would focus on fresh merchandises and step up private label offerings. Akshay Mehrotra, chief marketing officer at Big Bazaar, said the company is "well prepared" for the Diwali season but declined to elaborate. Meanwhile, e-commerce companies are telling suppliers, vendors and logistics companies to ramp up.
Gurgaon-based logistics company GoJavas, which counts Snapdeal, Jabong and Lenskart among clients, is enhancing its automation. By September, an automatic sorting system that can process up to 1.5 lakh packages daily will be in place. "We expect volumes to touch two to three times of normal pre-festive season," said Chief Operating Officer Vijay Ghadge.
Srini Murthy, senior vice president for marketing at Snapdeal, said this year his company will focus on customer experience. "We will try to make sure we give the best offers but the new news for the consumer will be great delivery experience and many more brands versus last year," he said.