flipkart-myntra-acquisition

Yesterday, at a press event in Bangalore, Myntra announced that on 15th of May, it will shut down its website, and switch to an application only option. At the event, Mukesh Bansal, CEO of Myntra and Head of Commerce at Flipkart, and Sachin Bansal, Co-Founder & CEO, Flipkart, spoke extensively about the importance of mobile for India, saying that 95% of traffic and 70% of their transactions are coming via mobile.

Sachin Bansal’s said, “When cars came for the first time, the questions were being asked that horses are so much better. I’m seeing similar arguments, because consumers are using mobile.” However, it’s one thing to go mobile, and quite another to shut off all web, including the mobile web.

MediaNama’s take:

1. It’s about lowering the customer acquisition cost: Web based channels of promotion largely end up being about customer acquisition for each transaction. Unless users sign up and log in (not something users actually like doing), there’s really no means of reaching out to them, and driving repeat usage. Email marketing (much of which is just spam) is about driving impulse purchases, and again, involves a cost.

What will change with an app only approach? Much of the communication will involve driving app installs, which can potentially lead to many transactions, and hence potentially reduce the cost per transaction. With the user always signed in, it can allow Myntra to personalize promotions because they will have access to a users location, and more importantly, their phone book: what your friends like or just bought, what people near you or in your company have liked etc. Personalization can help improve the customer life-time value (LTV). Access to the phone book also helps lowering cost of customer acquisition by asking people to recommend the app to friends in exchange for coupons/discounts, and create wishlists and collections with friends, shop with friends, and receive alerts.

Why is this important? While doing $400 million in Gross Merchandise Value, Myntra is yet to turn profitable in a category that is typically a high margin category. Mukesh Bansal expects Myntra to turn profitable in a couple of years, for which they’ll have to encourage repeat purchases and at lower customer acquisition cost. But is the reason? Sachin Bansal agreed that outside of the app, shopping on Myntra was more of an event, where a user went to the website to shop, and the idea is to now convert it into a regular experience.

Mukesh Bansal declined to comment the impact on the impact on margins for going app only, saying it’s too early to conclude how the margins will settle. Overall, they do see this as an important step towards profitability.

2. It’s perhaps too early: While the smartphone penetration in India is increasing rapidly, as is the mobile Internet penetration, majority of the devices are still low end and with limited space. It’s a significant risk for Myntra to take because the number of apps that people keep on their mobile is limited, given that the space available for handsets, and the way the cache tends to fill up, is also limited. There is a significant propensity to uninstall.

Sachin Bansal agrees that it is very early, saying, in response to our question that “We’re talking about running cars, and those roads aren’t there, petrol pumps haven’t been established. That’s happening in parallel. Look at the smart phone situation, we’re talking about very powerful devices. And really, 4G internet which is faster than transferring from USB. That’s the future.” But the data points towards what users want: “If you look at it, consumers are asking us to do this. 90% of time spent on the Internet is on mobile. 90% of time spent on Myntra is on mobile. That’s where the consumers are basically shifting.”

He adds that the mobile web experience isn’t as good, and that’s driven the decision to switch from the mobile web to mobile app. “Desktop versus mobile is a very different decision from mobile vs mobile app. That’s a decision that we took in March, when we decided to off the web on the mobile. The experience on the mobile web was really bad. The engagement rates, the bounce rates, the user repeat rates, the user satisfaction feedback was bad. The mobile browsers are much less powerful than the app. The challenge for us is to deliver an almost local/native experience on the mobile.”

Deep linking (allowing search to link directly to apps) is still an issue, but it is getting better. A Flipkart executive said that “deep linking to the mobile app is getting better and better, but there have been cases where it hasn’t worked.” Earlier in the conversation, something that should worry Google was said: “Google as a search channel doesn’t work on mobile. App marketing has its own channels. ”

How Flipkart is thinking about this is indicated by something that Mukesh Bansal said, in response to a question about competition: “Short term marketshare is something we don’t factor into our decisions. You really can’t be competition driven. It’s about how deeply we understand consumers.”

Flipkart is next

For Flipkart, it’s about 75-80% of traffic is mobile, and Sachin Bansal indicated that a switch for Flipkart to the mobile app could also eventually take place, but they’re not sure of when that might happen. “It will happen over time,” he said. “We don’t have a timeline. Consumers are voting for it.” and “It has more to do with our internal readiness. Myntra has only one product line. Flipkart has multiple product lines.”