Are marketplaces turning to brands for advertisements, due to the funding crunch?

Online marketplaces are resorting to all and any measures to help bail them out of their quandary (the double quandary of thinning funds and fatter losses). It seems as though Flipkart and Snapdeal have requested leading brands that sell on their sites to advertise for them. The online marketplaces are looking at getting the same treatment that brick and mortar stores get.

However, some brands are unconvinced about it, as they don’t want to antagonise the physical stores. The marketing head of a leading brand spoke on condition of anonymity,

“The marketplaces are demanding that top brands invest on campaigns of deals and products of the brand due to a funds crunch and asking to be treated on par with offline retail. However, we are yet to decide since we don’t want to make any move which antagonises offline channels, which account for 97% of our sales.”

Amazon does not have this problem, as the company is getting funds from the US headquarters.

‘Give us a hand, will you please?’ say marketplaces

Online marketplaces have spent a fortune in the last year on advertising alone. This has contributed significantly to their losses. This, coupled with no profits or even break even in sight, has prompted investors to grow wary of keeping up the cash flow. Devaluations have become the norm for marketplaces. Recently, Morgan Stanley brought down Flipkart’s valuation by almost 27%. Likewise, Rocket Internet devalued GFG (to which Jabong belongs) by close to 68%.

This leaves the companies with a lot less for luxuries like advertising. This is where the pleas for help to brands have entered the picture. Marketplaces are looking at electronics brands, consumer goods, and mobile brands to help out with advertising, as these are the top selling categories.

Desperate times have indeed called for desperate measures. Some feel that this might work. Eric Braganza, president of Haier India, says,

“Brands and ecommerce firms will work closely since the issue of crazy prices does not exist anymore.”

This might well be the big break ecommerce companies are looking for.