Wednesday, January 29, 2014

Strange Revelations, Essential Strategy for High Traffic, actual pricing of books & How eCommerce companies play with pricing? Is it Ethical Market behaviour?


The basic foundation of high traffic & attraction of buyers to all eCommerce sites; eBay, Amazon, Flipkart, Infibeam, Homeshop18, Snap Deal, Indiaplaza, Indiatimes, Junglee is the way they list & sell books. Amazon, Flipkart, Infibeam are leader in their category because they all started off with books....this is the common uniting factor.

P.S. recent reports indicate, mobile/smartphone search exceeds book search

Publishing industry is well organised, all books/publications have 13 digit ISBN (International Standard Book Reference Number). The books/publications are searched (keywords are) on the basis of
  • Title
  • Author(s)
  • Subject/Topic
  • ISBN 
  • Publisher
  • Many books (hard copies) & eBooks can be also searched on basis of content/description/summary keywords as well 
 Books Costing
  • The regular discounting by Indian publishers, Bulk distributors & subsidiary of foreign publishers is 33% of MRP, Bulk volume players get 37%-40% to the max & 30 days credit
  • The distributor gets 40% + 3 month credit, they maintain bulk warehouse, Office, Infra & a large team
eCommerce Operational Expense to Service Orders
  • Shipping expense is minimum 55/- per book/Kg & can reach upto 110/- per Kg, depending upon weight
  • Packaging & labeling cost is Rs5/- to 10/- per book
  • Payment gateway 1.5% to 3% of invoice value
  • Operational expenses; Staff/Sourcing/Salaries/Vehicle Petrol, Communication-Mobile&internet/Electricity is additional approx minimum 10-15 per order
Revelation: How can eCommerce portals exist when they give free shipping + 30-40% discount.
  • Isn't it strange? 
  • Do they recover money to nullify at least operational expense? 
  • How do they sustain? 
  • How do they earn profit?
To exist & sustain, few of the practices are 
  • Cross subside by selling other items/other revenue streams.
  • Jewelry, home decor, apparels profitability subsides this
  • Plan finances smartly/shrewdly, savvy financially management 
  • Perhaps dress accounts, classify loss as marketing affiliate expense to circumvent FDI rules & get more VC funding
  • Delay payments to distributors
  • Non standard, new brand products also subside this
  • Sell inferior quality other products
  • Lift stocks, maintain inventory in bulk at heavy discounting, this may create artificial scarcity & give minimal discount to buyer, collaborate back-end with distributor/publisher
  • Sell near look alike original, pirated copies (I have seen this being done by only 1 leading portal physically at retail outlet at Airport lounge in India, cannot comment on this being a standard practice)
  • Sell old editions at new edition price (standard practice), often new edition is either not listed till old stocks are cleared. Old editions are usually procured at throwaway prices
  • Foreign companies often launch medical & engineering books at special (highly subsidised) Indian Price, this is never revealed. the listing says US$ price,minus minimal discount & then Indian Price.... because there books are in limited supply
  • Foreign printed books (technical/engineering/medical) sometimes do not carry  any MRP (print price), this loophole is exploited by online retailers to fix their own pricing. I am shocked & surprised to see profiteering on this aspect by many portals.
Need of hour
  • Self regulation to ensure the industry survives & grows with healthy margin
  • Encourage Indian publishers to invest in editorial content & churn out exceptional quality products 
 My personal favourite book shopping sites are;
  • Infibeam for expensive international pre-used & rare/hard to find books, they collaborate with almost all major international distributors and Alibris as well. Infibeam helps me save money & 5-7 days international shipments delivery, despite committing 15 days
  • Snap deal for great discounts
  • Amazon for quick shipping