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August 02, 2012

Small retailers enjoying VC-funded e-tail discounting

Businessworld has an amusing article on how small retailers are having a great time enjoying the (VC-funded) discounts offered by e-tailers.
Heavy discounts, offers on first-time registration, and cash-back vouchers floating on the web are pulling retailers, like Joshi, to shop online with the motive to resell. E-tailers, already marred by negative gross margins, are taking a further hit. Retailers buying online eat into e-tailers' margins and, despite offering huge discounts, these e-sellers do not get the loyal customer they have been looking to cater to.

...Electronics, with its thin margins, is the most adversely affected segment — though the fashion and apparel category, which has better margins, is not far behind. Industry sources believe that most e-tailers that sell a lot of electronics generate about 20-40 per cent of their sales from resellers. However, most electronics players claim it is less than 5 per cent. With companies such as Jabong, 99labels, Freecultr, Timtara, etc., offering discounts ranging from Rs 500 to Rs 4,500 to shoppers, retailers find it convenient to create multiple profiles to avail the discount. They also get the product shipped to their doorstep for free in 3-4 days and then sell them at significantly higher margins.

...Pulkit Sharma, an apparel retailer in Kurukshetra, buys 70 per cent of his goods online. Even after Yebhi diverted him to its wholesale portal, he still logs on to their website to avail promotional offers. "I order from various websites to avail the promotional coupons," says Sharma. He does not shy away from accepting that he has created multiple IDs in his family and friends' names. "Mujhe to apna store chalana hai madam (I have to run my store)," he says.

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