The real reason why Myntra moved to an app-only strategy test

Flipkart and Myntra see mobile phones as a disruptive force in retail

N S Ramnath

Just when we thought everyone was bored to death discussing Myntra's app-only strategy (the online fashion retailer closed its doors on web users, making its wares available only through its mobile app since May 15), a new round of debate kicked off recently. The trigger was a piece written by Alok Kejriwal in Economic Times, which suggested that one of the real reasons Myntra shut down its website was to reduce sales in order to limit its losses. Sachin Bansal, CEO of Flipkart, which bought Myntra for about $300 million last year, was obviously not pleased, and made his displeasure known through a tweet.

That one decision around one sales channel of one e-commerce firm should give rise to so much discussion--often by people who have never even bought anything from Myntra--says something about the broadening reach of online retail. And thus most discussions around how it will impact users. Will users be better served with just an app, or an app and a website? The answer seems blindingly obvious. Having a choice is always better. So, why did Myntra do what it did?

The first six slides looks at some of the popular arguments and their weaknesses, and the following ones presents a few more reasons to consider. Do you think they explain its strategy better. Let us know why, or why not.

The Argument: Customers are moving to the mobile phone. Smartphone sales are zooming. Myntra says 90 percent of its traffic and 70 percent of sales already happen via the mobile. Customers buying through a mobile also tend to stay longer, come back more often and are better engaged. By all counts, the mobile seems to be increasingly the preferred way to buy things online. 

The Counterargument:

Yet, that doesn’t explain why it had to close its web channel. People still use computers. What we are headed to is probably not a mobile only world, but a multi-screen world  

The Argument: Shortly before Myntra announced its app-only move, Flipkart signed up for Airtel Zero. The tie-up would have let its customers use its app, without having to pay Airtel for the data. Flipkart, after days of vigorously defending its move, opted out when it saw the public mood turn against the so-called violations of net neutrality. Yet, the episode led to the theory that Flipkart was trying to use a combination of app and Airtel Zero (and perhaps similar tie-ups with other telcos eventually) to score a point over its competitors: users will spend more time on its app, without worrying about data costs, and time means money. Also remember, Amazon is expected to earn $1 billion in ad revenues this year. 

The Counterargument: The theory has some validity given that users tend to be worried about data charges. Yet, it couldn’t have been the main reason, since Flipkart anyway opted out of Airtel Zero. Besides, it still doesn’t explain why website and app shouldn’t co-exist. ?

The Argument: It's easy to compare prices on the web. On the app, customers tend not to. It's not that they can't, but it is less convenient to compare prices. Behavioural economics suggests that small triggers can significantly change customer decisions. It’s reasonable to assume that a significant number of customers, while using the app, will likely not compare prices, and buy at a cost Myntra dictates. This will take some pricing pressure away. 

The Counterargument: It's unlikely to work in the long term. The app makes comparing price less convenient, but doesn’t hide the price information forever. Taking liberty with prices could backfire. (Amazon once tried charging higher for Mac users on the assumption that they could pay more, and it turned out to be a PR disaster).

The Argument: Since a mobile device follows users everywhere, it's good to encourage us of the app to capture the impulse buys. For example, you see someone wearing a great dress at a party, and place an order then and there. 

The Counterargument: That explains why it's good to have an app. But, it doesn’t explain why there should be only app. Impulse purchases happen on the web too. Why force a customer to switch screen, and waste an opportunity?

The Argument: This is the official line by Myntra--that it can use the app to provide a superior, personalized experience to its customers. The mobile phone has already become one of the most intimate devices for people and--setting the privacy and security issues aside for the moment--is capable of providing highly contextual and relevant information/service. Myntra aims to do that. ?

The Counterargument: While it’s true that the web cannot match the mobile experience, it’s not as if users expect both to be exactly the same. Google Maps on the mobile phone has more features than its web app, and yet, both have a place. Again, this doesn’t explain why app alone is superior to web and app.?

The Argument: Since fashion retailers (and presumably Myntra too) lose on each sale, restricting the access to just mobile will reduce sales and, therefore, losses. This was one of the three points made by Kejriwal in his ET piece. This line of argument appeals straightaway to those who are very pessimistic about e-commerce, and those who believe that it’s a bubble sustained only by VC funding. 

The Counterargument: This argument assumes a sharp fall in users, not just immediately but also in the future. Which might not be true. Besides, if the goal is to reduce the number of users and loss, there is an easier way to do it. Increase price.

The last argument might not be entirely right, but it shifts the focus from users’ perspective to business needs. From the users’ perspective, the choice is essentially between these two: whether to have just an app, or app and a website. 

However, from Flipkart’s perspective the question changes significantly. What is the net benefit for Flipkart (and not merely Myntra) of having only an app, versus having an app and a website over the long term? 

The key to answering this question is to first stop seeing the mobile phone and web as merely two different channels, but as two different businesses. Today, it might be tempting to think of mobile as just another channel. And some years ago, Borders or Barnes and Noble probably thought about the retail stores and website just the same way. But, in fact, e-commerce turned out to be a whole new segment altogether.

What if mobile is not just another channel to make your sale, but something that will completely disrupt the market? If that is the case, you wouldn’t burden the people who are working on the mobile phone app with managing the website too. You will not let anything take their focus away from the mobile phone. Flipkart did just that. Its biggest cost was not losing a few customers, but missing out an entire line of business.

To get a sense of disruptions possible in e-commerce, consider three examples. They are not from the future. They are real. 

We know Uber as an embattled cab hailing service. In the US, it’s disrupting food delivery. In April, it launched UberEats in New York and Chicago, promising to deliver food in 10 minutes. Yes, you read it right. Ten minutes. About the time a restaurant takes to serve food at the table to its walk-in customers. How does Uber manage? The way it managed to send cabs by connecting the Uber app in your mobile phone to the app in the nearest Uber cab. In this case, Uber drivers go around with prepared food in temperature controlled packages, just the same way they go around looking for customers. When a hungry user orders the item, the nearest UberEats driver gets alerted and reaches your place in minutes.  It’s a whole new way of looking at food delivery. And the holy grail of e-commerce is, of course, delivery. 

Takeaway: Mobile is not just another channel, it’s a whole new business.?

In Germany, Amazon has tied up with Audi and DHL to deliver your packages to your car trunk. It works like this. The amazon delivery person has an app in his smartphone that gives him/her the exact location of your car, he arrives, opens your trunk using a temporary access code, delivers the package, and a message is sent to you confirming delivery. ?

One of the promises of drones is that they will deliver not just to your home, but any place you happen to be, or any place your mobile device happens to be.  

Takeaway: The mobile is not merely a channel, it could well be the delivery address.

In all likelihood, the first virtual reality (VR) experience for most of us will be through our phone, and a folded cardboard. Last year, Google introduced its Cardboard at its I/O conference. Simple to make and easy to use, it turns your android phone into a VR device. This year, it improved its Cardboard to include more screen sizes and iPhones too, and also made it easier for people to take VR videos and post it on Google.

Takeaway: The mobile phone could open up new ways to let customers experience a product.

Last year, IBM bought Fluid, an e-commerce technology company that integrated Watson, the tech giant’s artificially intelligent computer system that famously won in the quiz show Jeopardy, answering questions posed in natural language. Using Watson, Fluid created a virtual shopping assistant for e-commerce firms. Unlike the present breed of recommendations, based on browsing or shopping history, this virtual assistant will understand user needs and provide advice, much like an expert salesperson would. 

What's even more interesting about virtual shopping assistants is an IBM research prediction that in five years, local stores will beat online by offering an immersive, mixed real and virtual experience that's far superior to buying online. And a key for this to happen is a mobile phone and an intelligent personal assistant in it.

Takeaway: The mobile phone is not just a delivery channel, it can be your advisor, irrespective of where you shop, and even when you shop offline.

For Flipkart, the biggest cost of making Myntra go mobile-only is to lose users who want more choice. This problem can be fixed to some extent by moving some of these users to Flipkart’s own website. Or, in the worst case if there is an exodus that threatens the very existence of Myntra, it can restart the website pretty fast. Even today, it’s not as if there is a consensus even within Myntra about its mobile-only strategy. Myntra went ahead in part because it knew starting a web channel, even from ground up, is no big deal these days.

As an organisation, Flipkart faces a bigger threat--not from Amazon or Snapdeal--but from a small, nifty startup, using a new technology, first nibbling some of its business away, and eventually having it for dinner. That technology could well be on the mobile phone, given how important it is becoming to most users. Myntra wants to beat them--the new kids on the block hatching a mobile plan in university dorms.  

The biggest cost of doing both web and mobile would be to get distracted, lose focus on mobile, be less obsessed about exploring mobile’s limitless possibilities. The biggest cost is opportunity cost. And like all high-growth and insecure companies, it’s really worried about the opportunity costs.

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About the author

N S Ramnath
N S Ramnath

Journalist, Author

NS Ramnath has been writing about business from 2002, first for The Economic Times, and then for Forbes India. He took a break from journalism in 2014 as a Tow Knight Entrepreneurial Journalism Fellow at City University of New York to study business models in media, one of the many industries being disrupted by technology. Now, he devours information on exponential technology, and its impact on individuals, businesses and society. His stories in Founding Fuel revolve around this theme. He is also associated with HowIndiaLives.com, a public data start up. He has degrees in economics and finance from Sri Sathya Sai Institute of Higher Learning.

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