Fund crunch forces online marketplace to slash ad spend

Editor | Sep 10, 2020

It looks like the ad-happy ecommerce companies are going slow on their ad spends. A study conducted by AdEx India (part of TAM Media Research) has shown that leading ecommerce companies have reduced their advertising budgets. Interestingly, last year, most ecommerce companies spent heavily on ads. The over spending on ads was found to be the leading cause for the huge losses.

Older and wiser

Leading ecommerce companies are getting smarter with the passing years. AdEx’s study has shown that the share of ecommerce companies spend on TV ads fell to 2.49%, and spending on print ads dropped from 1.29% to 1.25%.

The ranks have also dropped. Last year, Flipkart was the second largest advertiser in terms of volume, Snapdeal was the third, and Jabong was eighth. However, this year, Flipkart stands third, Snapdeal stands tenth, and Jabong does not appear in the list. Flipkart’s Myntra, however, stands at fourth position.

Flipkart is facing a tough time with a lack of funds from investors and the recent tiffs with its sellers.

“Media strategies are framed in line with the company’s business goals and the target audience. What we focus on is the access and relevance of ads and communication to our consumers and the media mix is formulated accordingly,” says a Flipkart representative.

Jabong also insists that there has been no reduction in ad expenditure. CEO Sanjeev Mohanty said,

“We continue investing behind both offline as well as digital channels. We are just coming off of a large 360-degree brand campaign in June. Our approach clearly is to drive sustainable scale.”

No problem at the Amazon camp

Amazon seems to be enjoying free flow of cash. The company has been investing in its Indian arm over the years. CEO Jeff Bezos recently promised PM Narendra Modi an added investment of $ 3 billion in its India operations. This is a top up to the $ 2 billion that the company has put earlier. Clearly, a good chunk of that money has gone into advertisement. Amazon has 18% share on TV ad spends and 21% in print ads.

Have ecommerce companies miscalculated their moves? Doubt seems to be seeping in. Flipkart recently rehired its ex-CFO hoping to recover its fading sheen. Currently there seems to be only bad news around. Perhaps this is just the law of economics playing out – first a peak then a drop, and a peak and a drop. Ecommerce companies should be able to pick up from the current trough with the right moves.

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Editor team is specialized in introducing the marketplace content targeting the Indian online sellers. They plan and coordinate to bring the appealing content for the small businesses on how to partner with the e-commerce sites like Amazon and Flipkart and strategies for improving their online business. 

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