The Flipkart Fiasco and its Online-Offline Aftermath

On October 06 2014 Flipkart has shaken up the country and its systems with its mega e-commercequake, the #BigBillionDaySale, whose aftershocks are still being felt. A lot has been said and written about this. Here I add mine to the heap, a holistic overview of the entire thing. At 0800 hours on October 06 2014, like a golden army in the sights of conquering their holy land, a million people bravely they surged forward towards the hallowed portal to capture glory and by grabbing whatever they could at some really holy shit prices... BOOM! And the rest is history. The entire thing collapsed in a mess as items costing higher than what they did on days before the sale, Items going out of stock and being removed from carts automatically, those same items later re-appearing with different prices, confirmed and paid-for orders being unilaterally canceled by Flipkart and then the entire portal coming crashing down like a skyscraper in a Micheal Bay movie and so on. I won't bother writing all those endless complaints again, the internet is full of it. What I would bother is trying to look at how this might have happened, supposing that Flipkart did not do all this on purpose, of course. For this, I am afraid I will have to pull out another IRCTC analogy.

So they have recently done some Cosmic magic and IRCTC does not crash during Tatkal hours anymore! As a result, all Tatkal tickets on the Island Express are now sold out at 1005, presenting a totally different problem as I had predicted before: It is only the site speed that has increased while the number of trains, seats and tickets have remained the same. People still don't get tickets today if they aren't quick enough (Read more here). This scenario can be applied analogically to the Flipkart fiasco. Flipkart does not seem to have stocked enough inventory to service all those demands. For example, imagine that there were 1000 units of Samsung Galaxy S4s stocked for sale at Rs.1300. Those could've easily been sold out in 5 minutes, rendering it out of stock for some time and then reappearing at a higher price posted by some other seller. This was probably the base cause that precipitated all the other glitches. If this was indeed the case, Flipkart has incredibly foolish and shortsighted inventory and sales planning processes, or genuinely did not anticipate the avalanche of visitors they would get. Either way it was absurd and sets a case study on how NOT to plan a Sale. It is incredible to believe that after their promotional blitzkrieg over the past few weeks that they wouldn't have anticipated such volumes of sale requests. More on that later.

Shoppingcarts

The essence of the outrage on Flipkart fiasco turned out to take on the typical "Indian Socialist" form. Infuriated that their cart had flipped, "Flipkarters" outraged across the internet calling FK "frauds", "looters", "scamsters" etc and (un)parliamentary words such as MC, BC and their equivalents in other Indian languages. Many angry people even accused Flipkart of "looting Indians to make a profit". They had a problem with Flipkart making money? I fail to understand this logic. How is Flipkart "looting"? They obviously did not try to sell stuff over MRP. Certainly they did not point a gun at anyone's head to force  them to buy stuff, did they? Yes, they did take money from people and then cancel their orders which is pathetic but definitely not "looting" since the money will be returned. People should understand that Flipkart or anyone else is NOT entitled or obliged to sell anyone anything at a discount and they are in business to make money (profits) and not to do charity. They may be dishonest and if they increase prices on their site, it will be available cheaper elsewhere! Unfortunately the old Indian mentality of "everything should be provided at welfare cost" and the sense of entitlement for free stuff hasn't gone away even today.

Deceptive Pricing and What the MRP?

The biggest hue and cry was on the pricing differences before and during the sale, as illustrated in this now famous blog post. It is the oldest retailing sale trick in the books rightfully appropriated by online shopping portals from the offline ones now, where a product's price A before the sale is increased by X and then given a discount Y where Y < X to that the new price B on "Sale" after discount will in reality be more than the original price A! (example: A=2547, X=30%, Y=20% (sale discount), B=2649, you pay 100 bucks more for the 20% discount!). I was really surprised when most people were unaware of this as I always believed it was quite the public knowledge! However, this needs to stop as it amounts to deceptive pricing and in a sense, fraud. Flipkart and all other retailers should be hauled up for these "marked up discounts". Yes, they are are allowed to sell stuff at any price below MRP, but it should be clearly communicated to the consumer on what he is buying, with the MRP displayed at all times! If Sniper's Stop puts a Rs.2499 price tag on a pair of jeans and claims that to be "after 20% discount", how can the consumer be sure that he is actually getting a discount and is not paying more than a non-sale season, or indeed, more than the MRP itself, which is a criminal act? Now check this out:

FlipkartAmazon
Snapdeal

While Amazon and Snapdeal explicitly display the original MRP of the product (Rs.41500), Flipkart has just displayed "Rs.46630" and does not even mention what it is and claims that is giving "38% off". Even Samsung's own web page for the Galaxy S4 does not display the MRP, only the "best price". This is the "deception" that I was talking about. How do we, the consumer, even know what the original MRP the manufacturer assigned for the product even was? It should me made compulsory that the MRP of the product is displayed everywhere the product is listed and if possible, the price fluctuations of the product over time to prevent consumers from being taken for a ride, as we have seen in the #BigBillionDaySale thamasha. Another stellar example of this is this: Now this is tantamount to cheating!

Flipkart's Terms and Conditions mentions this:

No, this is not an excuse. So my stating this hasn't Flipkart openly admitted that whatever they have posted on their website is incomplete, false and misleading? Now, isn't willfully deceiving customers a criminal act in itself?

The Psychology Behind the Outrage

Most people who were ranting about Flipkart's transgressions were intrinsically furious that they were denied the fabulous discounts promised to them, as most of those people just ended up not being able to buy stuff, they didn't lose money or anything. It was the promise, the word of honor Flipkart had given that they unilaterally broke that incited them. Well, however unethical this might seem, there is unfortunately no illegality behind this, especially since nothing is given in writing. Ever since India started trading in the ancient times right from the days of the Silk Route, trade has been carried out under the word of honor, viewed as unbreakable and unthinkable to break A word given in trade was like a tangible instrument like a cheque, as good as money itself. Many communities conduct business like this even today. Legal fundas, which are only a recent introduction to our culture don't really matter, it is the word that still is the final word. And when this word is broken outrage results! It is this cultural hangover that I believe incited all this outrage. And of course, Indians cannot resist the promise of a good deal!

The Aftermath: The Online-Offline War

Despite all the bad press and outrage, Flipkart laughed all the way the bank. Goods worth Rs.600 Crores (USD 100 million) Gross Merchandise Value were sold in just 10 hours, with 60 items including one TV being sold every second! The site received a BILLION (100 crore) hits from 1.5 million (15 lakh) shoppers buying 2 million (20 lakh) items from over 1000 Indian cities and towns! (source) Even if we take actual sales revenue to be a liberal 40% of GMV after discounts, Flipkart still would've made Rs.420 Crore (USD 68.5 million) in cash in 10 hours. God only knows how much they made in 24 hours! These numbers are no joke. For instance Rs.420 Crore was the Worldwide gross for the SRK-starrer Chennai Express! Now, such huge amounts of money is sure to beget trouble.

The second part of the Flipkart drama unfolded when traders and brands led by international consumer product behemoths Sony, Samsung and LG came out openly against e-retailing in India, saying "predatory pricing" by e-tailers is seriously affecting revenues for their "traditional" brick-and-mortar" showrooms which cannot afford to sell products at the exorbitant discounts that e-commerce sites can. They also accuse e-tailers of brand dilution and distorting market reality among other things and even have approached the government against online retailing businesses. Even India's original "discount king" Kishore Biyani of the Future Group which owns Big Bazaar and Brand Factory ranted against e-retailing in India saying that Flipkart wants "to destroy competition" and "just because they have foreign funding, they can't kill local trade like that." This is rich, coming from a guy whose super and hypermarkets have surely affected the businesses of many corner stores. On January 26 2006 Big Bazaar ran a "Sabse Sasta Din" campaign offering goods on sale at discounts unheard of before, resulting in such enormous crowds besieging Big Bazaar stores resulting in chaos, near-riots and injuries that the Police had to be called to restore order. Flipkart, in essence, pulled an online version of the same campaign.

With such statements these traders and industrialists risk sounding like Luddites wanting to go back to the time when the government decided pricing and selling of all products and services and we all know how that ended. It would be ridiculous to even think of putting unwanted controls on the e-commerce industry to "help" traditional brick-and-mortar retailing. The government has no business in regulating prices and business practices but only oversee and take action in case companies indulge in anti-consumer behavior or in serious anti-marketplace activities (like mentioned above). If these "trade bodies" want to regulate pricing and selling, everything consumer-friendly including cheap air tickets will have to go. Let the market decide the pricing because the market, brands and retailers exist for the consumer and not for high-handed traders and tycoons to exhibit and propagate their whims, fancies and controls. If the consumer can get a product at a more competitive rate, he MUST get it! The real reason for opposition against FDI in retail, e-governance and e-commerce is all the same: the loss of control and power by a few empowered elite. It is high time the grip of traders and middlemen in the Indian retail space goes away for good. What the government should do is frame concrete and definite business practices for this sector that keeps out the Luddites and enables an easy-to-do-business environment where customer rights are paramount.

Customer is King. Or Are They?

After the #BigBillionDaySale debacle, many angry consumers could be seen swearing solemn oaths never, ever to shop on Flipkart even if they were offered Lamborghinis at Re.1. Yes, Flipkart had broken many hearts on that day and have even magnanimously apologized for all their screw ups, but unfortunately have succeeded little in cooling passions. There also have many eulogies been written for the company, saying it is "finished" and so on. However, not so. They have made a lot of money and a lot of satisfied customers as well, which goes unnoticed because it is the pissed off guy who shouts more and gets attention rather than the happy one. And the sad state of customer support and satisfaction levels are a direct outcome of our demographic stats. For every customer who quits the service there are hundreds, maybe thousands of others to readily replace him. Every single product or service has a mass market here, thanks to our population. So in most cases sellers once established have only to sit back and take the money as customers stream in an endless line. I am sorry, but that is all we are. Customers are just revenue streams. It is fine being brand loyal but keep your eyes open.

Some time ago Amazon India committed a blunder of their own by pricing a box set of all Asterix & Obelix comic books for just Rs.999. I was among the ones lucky enough to grab the offer. However, they later corrected the mistake by still delivered my order. I was overjoyed and Amazon in turn won a customer for life. Imagine the goodwill Flipkart could've generated if in addition to admitting their mistake they also delivered all those orders they canceled after payment being made? Yes, it would've costed a bomb but size of damage control is directly proportional to size of the screwup. However, people should remember that almost all consumer-facing companies always work for their own benefit. If not, they wouldn't have those absurd Terms and Conditions!

Conspiracy Theories

No debate on any incident is complete without some juicy conspiracy theories. So here I add those too to the heap:

They did all this on purpose. They knew all this would happen.

Interesting Interest: Money debited from shoppers whose orders were canceled by Flipkart will get it back only after 10 days. So

Brand Recall Marketshare: A million people chanting "Flipkart" "Flipkart" the entire day.

The Best One: Snapdeal and Amazon also did mind-blowing sales on October 06 thanks to Flipkart. So maybe there is more than what meets the eye behind all this?? #Collaboration

Tailender: It is said that the real cause for the Monday Fiasco of the Flipkart Debacle was their choice of hour to sound their opening gong. 0800 hours is an inauspicious and ominous time point that does not invoke fond memories for the average Indian e-commerce user. For many years it was at 0800 hours that IRCTC the Great would open up sales of Indian Railway's last-minute Tatkal tickets to aspiring travelers who after an hour of soul-sucking desperation would be reduced  to (ticketless) weeping wrecks thanks to IRCTC's notorious servers locking up at the slightest hint of pressure. Sounds legit.

#PROTIP: You usually do not get any advantage by buying stuff during "Sale" periods.

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