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TMCNet:  SMALL COMPANIES WITH BIG ADVERTISING BUDGET

[January 08, 2014]

SMALL COMPANIES WITH BIG ADVERTISING BUDGET

(Pakistan & Gulf Economist Via Acquire Media NewsEdge) The dotcom boom seems to be back, at least for television advertising. And it is not just the big names spending money on the most popular mass medium, even small online retailers are spending big marketing dollars on expensive television advertising.


Fabfurnish, an online furniture retailer, which is less than two years old, will kick-start its first television campaign in January. Backed by German e-commerce incubatorcum-investor Rocket Internet, the company has put in half-a-million euros into this campaign. However, the company did not disclose the size of the fund it has raised. "Online home decor market is in a nascent stage. We need to create awareness about the category as well as build a brand for ourselves," Vaibhav Aggarwal, CEO and cofounder, Fabfurnish.com said.

The campaign is planned for four weeks in January and will be supported by a simultaneous digital initiative. TV advertising forms a significant part of media mix for Lenskart.com. The online portal, which sells eyewear, is backed by venture capitalists. "We spend approximately. 10 crore annually on mass media advertising, which is mainly done for brand building and gaining trust of the consumers. TV allows us to educate and create the much-needed awareness for the brand, resulting in traffic and building trust," Peyush Bansal, CEO and founder of Lenskart.com, said.

While the prospects for e-commerce companies cannot be doubted, does advertising on television lead to increased sales? Most e-commerce company's claim traffic to their portal increases and so does awareness and trust, but most of them do not have numbers to back their claims. GreenDust, an online portal selling branded factory seconds products (electronics) that are repaired and refurbished and come with a warranty, spends heavily on advertising in the mass media, including radio and TV. Its founder and CEO, Hitendra Chaturvedi, said, "TV advertising has helped us reach mass audience and in building trust for the brand. This, in turn, has improved the brand recall and we witnessed 100% increase in number of prospective customer queries in the month we released our first advertisement itself." He added, "TV ads have helped to break the clutter and to reach across all target audience, which has been achieved by targeting different channels covering all the genres and different languages." According to estimates of Madison media, the advertising spend of online portals have gone up in the last two years. The ad spends of online portals in the April to July quarter was 1.2% against 0.8% in the same quarter of 2011. The Indian e-commerce market is seeing a surge in growth. According to a 2012 CRISIL report, Indian online retail industry will grow from. 32 billion in 2012 to 100 billion in 2015, a CAGR of 45%-48%.

To add to the growth prospects of the industry, infrastructure such as internet connectivity is expected to grow exponentially in the country. Apart from laptops and desktops, mobile phones and tablets are becoming major growth drivers. The I-Cube 2013 report released by the Internet and Mobile Association of India (IAMAI) and IMRB International said India has 200-million internet users as of October; the number will grow 40% year on year by December. The number of internet users in India is expected to rise 18.53% in the coming months to 243 million by June 2014. In spite of the huge potential, critics seem sceptical about the effectiveness of mass media advertising for e-commerce players, especially the beginners.

They say there is hardly any data to establish the link between high traffic and increased sales conversion. "There has been a spurt in traditional advertisements by e-commerce sites and this is primarily because mass media such as television tends to bring more credibility. But the question is whether TV advertising brings in the expected return on investment (RoI)," said Gaurav Gupta, senior director, Deloitte in India. He, however, says massmedia advertising might be done more for brand building and spreading awareness or for establishing credibility to get private equity rather than for increasing sales.

Seema Gupta, faculty - marketing, IIM Bangalore, advises small ecommerce ventures to look towards marketing activities such as activation in malls or initiatives on the digital media, which can be done over a prolonged duration and, hence, prove to be more sustainable, rather than opt for expensive mass media advertising. "Below-the-line advertising can prove to be more sustainable as they can be done for a longer duration. It will also help in reaching out to the right target audience as compared to mass media advertising, which can burn money very quickly," Gupta said.

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