Why Flipkart’s app-only strategy might backfire in the long run

Indian E-commerce players are leaving no stone unturned to quickly expand their market share and establish dominance in an online retail marketplace that holds a multi-billion dollar opportunity. According to PWC estimates, the ecommerce market is expected to grow from $17bn in 2014 to more than $100bn in five year’s time. Flipkart, which continues to be the most dominant player in the space, has been trying different strategies to solidify its position, as it senses threat signs from foreign rival Amazon as well as some other emerging players in the market. In its latest move, the online retailer has announced its plans to shut it mobile and desktop site and shift operations entirely to its mobile app in a few months. With this the company is moving in the same direction as its fashion retail unit Myntra, which closed website operations and went app-only some time back.

It might look like a clever move considering the expanding smart phone penetration in the country. According to a Strategy Analytics’ report, India is all set to take over US as the second largest smartphone market in the next two years. Hence the opportunity of capturing the new set of smartphone users in the country will clearly be huge. And the app-only strategy underlines a broader move by ecommerce companies to get prepared for the change.

With increasing margin pressures, online retailers want to streamline their technology spending and focus on a single platform. Also, mobile apps enable integration and promises of seamless user experience. “Mobile apps allow the e-commerce players to integrate them with contacts, calendar, and camera and enhance user experience. This gives them seamless access to customers’ private data (contacts, location) which is great for targeted promotions and advertisements,” says, Rajeev Suman, Senior Analyst, Pierre Audoin Consultants (PAC), a global market research and strategic consulting firm for the software and IT services industry.

What about the customers?

The opinions are divided on this as experts predict that the move might affect Flipkart’s popularity. It currently has nearly 4.5 crore registered customers and about 75% of its traffic comes from its mobile app. The remaining customers are still using website for transactions. By going all app the retailer runs a risk of losing out on its legacy customers who may not be willing to give up on the richer desktop experience.

Although smartphone users are increasing at a rapid pace, yet not all users are equally inclined to use mobile apps for making retail transactions. There could also be issues relating to storage and performance in the lower end smartphones that may discourage customers from using the mobile app.

“For the apps, customers’ will be dependent mostly on Google or Apple marketplaces (they together control 96% of the app marketplace). If any of these decide to bring change in their current market place policies, which effects the customers’ negatively, the e-commerce players will have to pay the price as customers would be at a loss of alternate mode of accessing their shops,” adds, Suman.

Is app-only the way to go?

In the online retail space customers are spoilt for choices. It doesn’t take time to switch to an alternate site in case they don’t find the right user experience. So there will always be some price to pay in going for an app-only strategy and not having a website presence.

There are always sections of customers’ who would prefer to have ease of access of products through a PC. Additionally, mobile payment is still not taken as the most secure mode of payment in India. I would suggest to keep all the three platforms alive for better customer retention.

---- Rajeev Suman, Senior Analyst, Pierre Audoin Consultants (PAC), a global market research and strategic consulting firm for the software and IT services industry.

Experts indicate that though it might yield some benefits over the short run in terms of sales and profitability, in the long run such a strategy could backfire. The key is to give customers the flexibility to choose how they want to interact and from where. “I would suggest to keep all the three platforms alive for better customer retention. And just as in the beginning, having an app was considered to be a differentiator, now having a retail website will act as a differentiator in future as Indian e-commerce companies go app-only,” advices Suman.