Indian ecommerce giant Flipkart launched its Product Listing Ads service for sellers in 2015 after acquiring mobile advertising firm Adiquity. Within a year, the marketplace touched $1 million monthly revenue from paid ads.
The strategy to make the advertising business as one of its major sources of revenue worked for the etailer. But did it work for sellers? Has Flipkart been able to deliver what they promised sellers while launching the ad arm?
As of now, Flipkart’s seller base is 93,000. While speaking to Indian Online Seller (IOS), the online marketplace’s spokesperson shared that around 50% sellers on its platform avail the PLA services. Ergo the company’s claim is that over 46,000 vendors use PLA to increase visibility.
When asked why a seller should sign up for this service, the spokesperson said,
“Targeted at sellers, we launched Product Listing Ads, which allows them to promote their products to the right set from the millions of customer that log on to Flipkart on a daily basis.”
Some of the other reasons the company representative listed out are easy to use campaign creation module and real time tracking of campaign metrics that results into increased sales opportunities and expansion of business while staying ahead of competition.
Last year IOS published a report on the benefits of sponsored ads on online marketplaces.
“The initial investment in products ads is economical as compared to other sponsored promotions.”
And it’s true. Many sellers who were willing to pay for ads benefitted a great deal from this service and doubled & tripled their business.
In the last two years Flipkart has improved its advertising options by moving from basic sponsored ads to launching Brand Story Ads, Native Advertising and PLA for mobile app platform. The big spread of ad tools with different pricing options has given sellers and brands the freedom to choose an ad plan depending on their budget and desired results.
“During Big Billion days we received orders every 2 minutes! A direct result of Product Listing Ads,” gushed a seller on Flipkart’s website.
Kush Agarwal, an online seller and member of AIOVA seller forum shared his Flipkart PLA data with IOS that shows clear decline in ‘ad views’ and ‘actions’ (purchases) from 2015 to 2016.
Take a look at Agarwal’s Flipkart ad campaign outcomes (starting from 2015):
While the views and actions have gone down, the ad costs have gone up.
“PLA is damn expensive. It is not improving visibility. It only gives sales when PLA is done. The cost of PLA is 9-12% of sales. If you consider 15% returns, this goes to 11-14%. Sellers don’t have this much margin,” says Agarwal.
There are three types of sellers on Flipkart currently:
A is losing business to B.
C is losing business to both A and B.
B is in the most coveted position as these sellers get the major chunk of sales.
This is where Flipkart’s PLA fails. Because ads or no ads, sellers can’t seem to find a way to compete with sellers sitting comfortably in Block B. How can they?
Surya Shankar wrote on IOS’ forum,
“No ads will work for not-in-demand products. For good products it works well. You need to keep in mind that advertisement is not directly proportional to sales. It definitely boosts your visibility.”
Shankar raised a valid point. If everyone is selling the same product, ads won’t win in front of price. But if the product is different or only few vendors sell it then PLA can help to differentiate. And it is difficult to measure the ad effectiveness across all industries, not just ecommerce.
So IOS asked Agarwal if some sellers have unreal expectations and don’t understand how ads work because it doesn’t guarantee sales.
“Please understand, these are not your normal ads. These are product display ads. If this was an organic marketplace without WS Retail, we wouldn’t mind. Nor are we saying we want guaranteed sales. Expectations are only to do profitable sale. And we don’t have 10-15% margin to spend on each additional sale, better we take up a hoarding somewhere. If this ad showed something about my brand, or a video, we would still consider.”
Fair explanation, right?
He also questioned if Flipkart’s WS Retail and other preferred sellers have to spend on ads? And if not, then why are they featured prominently on the portal?
“In conventional ad, the media doesn’t get sales commission and other things. Once sales are generated through the ad Flipkart gets ad revenue, sale commission, ekart courier, FA charges. Flipkart forces us to use ad by reducing our product ranks. Secondly, show us proof that WS retail, retailnet and vector ecommerce are doing ads. Aren’t they sellers? Or they have preferential treatment,” asks Agarwal.
No, we aren’t talking about the ad revenue earned by both the ecommerce players. We are talking about seller satisfaction.
IOS asked Agarwal,
“Ads in general are tricky when it comes to ROI. Do you think it’s the product that matters (number of sellers selling it) or PLA doesn’t work for any one?”
“Ask all these sellers, they are happy with Amazon PLA. In Amazon, rankings are transparent. PLA options are dynamic. ROI is less. And once initial boost is done via PLA, and ranking increases, we stop PLA. Also, in Amazon we target keywords, categories etc. That’s not possible in Flipkart,” he replies.
Sellers are at a disadvantage because the Bansals-led company aspires to be both – the largest & most preferred online marketplace and the largest digital ads platform.
To become customers’ favourite, the etailer is gradually shifting to inventory platform by setting up seller units and working with selected sellers like SuperComNet (some vendors claim in the garb of Flipkart Assured). Result: Sellers don’t earn revenue in spite of spending lakhs on ads.
To become the largest digital ads platform, Flipkart is doing everything – right from tying up with big brands to manipulating sellers’ product listing visibility. Result: Sellers are forced to spend on ads to get stray bits of sales.
These two aspirations are why Flipkart’s PLA isn’t a particular favourite of most of the sellers IOS spoke to.
Agarwal’s one last piece of advice is “Flipkart should decide, if they are Ad Company, then just take ad revenue from us, if we don’t like we won’t come on your platform. If it is a marketplace for goods, then take commission. Don’t play two roles.”
Million dollar question is will Flipkart choose one, if it’s raking in money from both sides?
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.