Guest Article: Ankit Singh: How Online Shopping is Redefining Marketing Rules

'Forty thousand Xiaomi RedMi 1S smartphones go out of stock within 4.4 seconds of its exclusive launch on Flipkart.'

Today, Motorola is No.4 in the Indian smartphones segment, displacing giant Nokia. Still, the success of Xiaomi is unprecedented because its strategy challenged almost every set norm of the marketing rulebook. Till now, online shopping in India has been more or less limited to adapting principles of traditional marketing in accordance with the digital channel. It is no wonder that online retailers like Flipkart, OLX and Quikr are marching shoulder to shoulder with the other top ad spenders in the traditional media.

In India, online shopping is treated like discount shopping plus convenience. In fact, it's a common sight to find shoppers first visiting the physical retail shops to have a touch and feel of the product and then buying it online at a discounted price. So even for online sales, there are set rules of launching a product - first spread awareness through advertising, then generate interest by giving a single-minded strong proposition, then make the product desirous by giving a virtual touch-and-feel experience of the product and finally sealing the deal by offering a discounted price and freebies.

The launch of Xioami in India has short-circuited the whole model by cutting down all the intermediate steps and directly making sales. Firstly, despite being an unheard name in India, Xiaomi didn't spend a single paisa on advertising. Secondly, the brand was only present exclusively on Flipkart so there was no chance of getting a 'touch-and-feel' of the brand and, finally, there was no discount or freebie offered with the brand.

Despite all these factors Xiaomi made such an impressive case study of success that most of the marketing gurus' jaws dropped to the floor. For the people who are still not aware, Xiaomi is a Chinese smartphone brand that is popularly known as the 'Apple of China'. It is a regional brand present only in select Asian countries. Xiaomi recently displaced Samsung to become the No.1 smartphone brand in China and also features in the top 5 smartphone brands in the world.

Xiaomi launched its first smartphone Mi3 in the Indian market two months back in an exclusive tie-up with Flipkart, which ended up selling almost 100,000 handsets through six flash sales, which lasted just for 2.5 seconds each on an average. Redmi 1S is an entry-level smartphone which has sold more than 500,000 units till now.

Electronics is one of the biggest categories to be sold online. Thus any trend observed in the electronics category has larger implications on the overall online shopping behaviour. We can draw at least five direct lessons from the Xiaomi wave.

Brands are launched only once

In the current interconnected world, brand values are shared and transferred instantly across the globe even if the brand is launched in just one corner of the world.

The concept of local launch is getting limited to only inventory management in that particular region. That's why despite people lauding the Xiaomi India team for a successful launch, I believe that it was a poor show because the brand failed to manage its stocks and inventory properly. The brand was already sold in the mind of the consumers even before it was available in India.

The demand was there. The only big task for the brand team in India was to manage the supply side. But the demand-to-supply ratio remained as high as 10:1, which means that 9 out of 10 potential customers were left un-served and frustrated. Though a few marketers speculate that creating a shortage is Xiaomi's strategy, I believe that it's not the right strategy.

In the digital age, every potential customer left unhappy has a negative multiplier effect on the overall conversations about the brand. The stark example is the launch of the iPhone 5S and iPhone 5C from the stable of Apple. Apple expected iPhone 5S to do well in the developed wealthy nations and the cheaper iPhone 5C in developing nations.

The whole strategy fell flat in the new digital era. iPhone 5C not only failed to impress the consumers in the US, but their negative word of mouth also led to a cold response to the iPhone 5C launch across the globe even in the poor and the developing nations.

Brands need to prove their worth time and again

Gone are the days when the benefits of one brand-building effort could be reaped for years. Today, the brand has to prove its worth with every new product launch or with every technological innovation.

For well-established brands, there used to be an initial window of time for the new product launch in which its loyal customers used to try the new product enthusiastically. This window of time has reduced substantially because only a few consumers test the new products and the other people wait for their testimonials before buying into the product. Even this small group of early adopters has high reach due to real time information dissemination through the internet.

The internet has clearly shifted the information power balance in favour of consumers, who sometimes know more than the company itself. The internet not only enables feedback from the common consumers but also from the amateur developers and software engineers who simplify the technical performance parameters for the layman. Thus, in case a brand falters on some new technology innovation, it registers a sharp decline instantly rather than a gradual shift in consumers' preference.

Nokia is the most prominent example of the same. The brand that ruled the Indian mobile phone market for decades with more than 60 per cent share till 2006 dropped to No.4 within a span of less than 5 years. A similar sudden demise of the brand was seen in the case of Blackberry.

The 'touch-and-feel' factor is not compulsory any more

While the touch-and-feel factor is missing completely in online shopping of electronic goods, people no longer depend on the same even for categories like fashion and apparel. For electronics, the purchase decision is made by comparing product features and user feedback.

When it comes to design aesthetics, people trust their visual judgment based on the available product images. Even for the other categories like fashion and lifestyle, the incidence of product returns on portals like Myntra is in the range of 7-9 per cent, which means that the consumers are making the right decision in most of the cases without the 'touch and feel' factor working in their favour.

Moreover, with the Indians waking up to consumerism, they are no longer buying products thinking that the products have to stay with them for their lifetime. They are comfortable buying two dresses at 50 per cent discount from online portals rather than going for that one special dress at full price from the physical showrooms, which offer an opportunity for trial.

It's not about discount - it's about the best product in that price range

With ubiquitous discounts and promotions on the online retail portals, now even a common consumer knows that online stores offer products at a rate cheaper than the brick and mortar stores.

Thus, the next level of conversation has to be around the value delivered by the product in a particular price range. If we look closely, we find that all the successful exclusive products launched online - Moto G, Moto E, Xiaomi Mi3 & Redmi 1S offered the most advanced features in their price range. The other phone Moto X from the same brand failed to impress because there were better products offered by the other brands in that price range. Thus despite Moto X offering an exchange discount and Moto G not offering any discounts, the latter performed better because it offered better value.

It's all about having the right conversations around your brand

Xiaomi's sales model has also raised questions against the need and effectiveness of advertising in the traditional way - both mass media and digital media.

Today traditional advertising has not only become more of a blind spot but is also generating scepticism towards the brand in some cases. Recently, a car brand had done a print ad where they stuck a physical key in the paper and asked readers to come with it and take a test drive. Most people remembered the key but didn't remember the brand.

Moreover, people think that the advertising spends will finally be charged to them. The new model of online flash sales requires new ways of advertising - sometimes advertising which is actually not advertising.

Though Xiaomi did not spend even a single penny on advertising, it invested heavily in forming strong bonds with the consumers through social media. Xiaomi has enabled formation of highly active user communities on Facebook and Twitter. Xiaomi responds to each and every comment from the members on the social media. They have also formed a community of users and software developers who continuously help them release new updates.

Thus, before the marketers ask what advertising will be relevant for the brand, they need to ask whether the brand needs any traditional advertising. In short, e-commerce is constantly challenging the well-established rules of the traditional marketing and the radical launches of brands like Xiaomi definitely mark the beginning of the next phase of evolution of e-commerce in India.

(The author is planning director, Grey Group)