More for less: e-retailers add customers while cutting costs

Ashish Vyas, a Mumbai-based media professional, bought a pair of denims recently from fashion e-retailer Myntra.com. He got a hefty discount of 75 per cent overall, after availing himself of a coupon to file his tax returns on Taxsmile.com, a site certified by the Income-Tax department.

This is just one example of how online companies are pulling in customers who do not normally shop online. What’s more, they’re now doing it at a lower cost, through tie-ups with other entities.

Firms such as Jabong, Koovs, Fashionara, Fashionandyou and Onemi have tied up with Taxsmile.com, HDFC Bank, ICICI Bank and Vodafone.

These tie-ups work on a sort of barter system, where the ecommerce firms pay the companies a small commission on every successful transaction.

“It (a tie-up) helps companies bring down costs by 30-40 per cent,” says Ahmed Naqvi, founder of online digital marketing firm Gozoop.com.

According to experts, acquisition costs vary across businesses. For example, a mobile recharge site might gain a customer for as little as ₹50. This is because consumers need to recharge their SIM and data cards regularly.

A fashion site, on the other hand, may spend ₹1,000-1,500 per customer as these products are costlier.

Thus far, e-commerce firms’ efforts to acquire customers have involved spends on Google and social media ads, email, as well as advertisements on TV, radio and print platforms.

The challenge now is to optimise the use of different digital channels better.

“Companies spend heavily on getting more traffic. They will turn profitable once these costs shrink, since the marketing spend remains the biggest use of capital,” says Ashish Jhalani, Founder of E-tailing India, a consultancy.

While the ₹19,000 crore e-retailing industry is pegged to touch ₹30,000 crore by 2016, the consumer base is not expanding at the same pace.

According to industry data, India has over 200 million Internet users, of whom 89 million visit online shopping sites. However, the number of people actually shopping is just 15 million.

Says Rohan Bhargava, founder of cash-back site Cashkaro.com: “We have driven new and repeat customers to leading sites for as little as ₹200 versus historical costs of over ₹1,000. Banks, looking to encourage card usage, get compelling offers from retailers, which they distribute and promote widely for free.”

Prabhkiran Singh, Co-founder and Director of merchandise e-retailer Bewakoof Brands, says the biggest challenge for small e-commerce companies today lies in reaching out to the right audience. “If the strategy is not executed properly, you end up wasting a lot of money on advertising.”