The Half Yearly Report on the State of E-commerce

The annals of human history are filled with stories and accounts of numerous success stories, where the symbolic hero has to go through several failures before he can finally taste success. This inexplicable and unfathomable paradox has somehow managed to hold true through every such account and every such story. At some point, one has to face the trials on the path to glory. A phoenix must first burn in order to be reborn.

The current state of the e commerce industry in India brings to mind the very same metaphors. But, few have managed to recognize the paradox that is bound to follow. The past few months have brought nothing but blow after blow for the industry. Indian e commerce’s stalwart, Flipkart has found itself in the line of fire not just internally, but externally too.

February saw Morgan Stanley marking down its valuation in Flipkart by 27%, and as usual, the Indian media as ready to jump the gun and termed it as the beginning of the end for major e commerce startups. High profile headlines followed and so called industry experts termed it a fiasco. Was it?

Not even by a long shot. Such devaluations in internet companies are a routine affair and Morgan Stanley’s markdown was in part a reaction to the general shift in VC temperament all over the world. There has been a monumental shift in the entire economic atmosphere across the globe which has prompted investors to lower down their exposure to risk. The Flipkart devaluation was a calculated move rather than a harsh reaction to an underlying problem.

However, this valuation has done more good than harm for the company and also for the entire Indian e commerce industry as a whole. It was about time for the startups to end their nonchalant and bull crazy run spanning a period of about 2 years. Once again, no need to jump to conclusions. The run can be termed as one of the most successful ones in recent years, eclipsing even those in the Western markets. As unbelievable as it may sound, but the truth is, the VCs and investors have a close watch and razor sharp control over what goes about in these startups.

The initial bull run is a market strategy which is employed to gauge the capability of the company and the depth of the market. And it was able to achieve just that and even more. This so called process of tightening the noose has started the much needed process of restructuring and renewal. So, now the metaphor ‘A phoenix must burn in order to be reborn’ must make much more sense to you in this context.

This temporary down phase has been deliberately brought in to re-strategize and regroup and prepare for the coming battle in a much more organized and mature way. This is the coming of age phase for the Indian startups as they move out of their adolescence and into their teenage years.

The biggest indicator for all the good times that are yet to come for the e commerce industry is the constant entry of new and even bigger players into the market. The biggest of these new players being TATA Unistore’s e commerce venture TATA Cliq and Arvind Limited’s latest initiative Arvind Internet Limited, which will engage in the e commerce space with a host of new ventures. No new company will foray into a market that is into decline. And neither have the TATAs and Arvind Limited.

But, they sure have found the sweet spot to enter where the existing giants are fortifying their bases, the new entrants may be able to gain a quick market share, if they are truly worthy of it.

Going forward, the game of e commerce will be fought with the weapons of innovation and customer experience rather than those of discounts and flash sales. Many experts have pointed out that customer experience and feasibility will play a major role in taking the industry ahead. It is common knowledge that the internet user base in India is poised to increased rapidly over the coming years; which will lead to an increase in the opening up of new fronts in this battle for supremacy. These new fronts will be tier 2 and tier 3 town populace who will be riding the internet boom and looking to taking their buying experience online. This will bring up the challenges of creating differentiation and uniqueness across their services in order to please everyone.

Amidst all this one may think that online retail is the only way forward. However, current trends point the other way. Even with the arrival of e commerce big wigs, offline megastores and retailers have had a boom of their own, especially in FMCG. Future Group helmed Big Bazaar, which is the largest supermarket chain in India saw over 15% increase in the FMCG sales year over year. This is a tremendous achievement at a time when the bulk of the retail is shifting online.

FMCG e commerce companies saw a sprout in mid-2015 and were pegged to replace the way India shops for groceries and households. And they started off aggressively, with deep discounts and festival special bonanzas, which sought to pull buyers online. However, the boom that was, turned out to be one of the shortest in recent times. One of the key contenders, Peppertap which was backed by Snapdeal shut down its operations after just over a year of going up.

Others like Grofers, Big Basket, etc. also had to scale down their operations in tier 2 and tier 3 cities where acceptance rates were quite low. This failure can be attributed to the hyper growth and zero strategy model followed by the companies where they were spending too much too early without generating the desired revenues. When they should have focused on localisation and end to end control over its cycle operations, they focused on high profile marketing and heavy discounting.

The symptoms are common across the board. There is a lot of excitement and fervour, but too little control over how a startup’s operations have been handled. Its almost as if handing the reigns of the business to a sugar frenzied child, whose only focus is on all things bright and shiny. Consolidation and end to end control should have been the mantra from day one. Better control is an inhibitor, however, it is absolutely necessary while venturing into a space that has no prior precedents.

The temporary failure of FMCG e commerce platforms has ensured that the battle for Online Vs Offline retail remains relevant. The old guard still poses a threat and is not ready to let go of the throne without a showdown. FMCG has been the cause of great divide between online and offline. Even in the United States, online retailers have not been able to perfect the suitable business model to handle and effect FMCG sales online.

The remainder of 2016 will see a level of maturity take over the online retail industry and discounting will continue, for now. But, what is most awaited is the innovations and breakthroughs that are bound to follow as the industry transcends and takes on new challenges.

Not a Man of Steel Anymore? Tata Steel Shuts Shop in Britain

Port Talbot in the South of Wales has long been known as the home of one of the largest steelworks in the World and the biggest in Britain. It employs more than 10% of the town’s own population into the steelworks itself. It is also Tata Steel Europe’s biggest steelworks plant. Tata had initially acquired the entire steel works business of Corus group in Britain in 2007 for £6.2 billion, at a time when Tata steel was quipped to become one of the most successful steelworks in the World.

However, time has not been favourable to the Tatas as news came this month of the group’s decision to sell off its entire UK steel business. This sent out ripples of fear and pandemonium throughout the heavy metals industry as well as the British Parliament over concerns for the number of jobs that would be lost in the process of this sell off. The news came as a devastating blow not only to the crawling steel business in Britain, but also to British pride.

Tata had other sites in Scunthrope and Rotherham, but Port Talbot has been the worst hit due to the sheer scale and history that the place boasts of. The unwinding had started right at the time when the deal was made as one of the biggest financial crises hit the entire world in the form of the great recession of 2007-08. It was as if the deal couldn’t have come at a worse time. The business never became profitable and in recent years, the losses and debt continued to pile on and was affecting other businesses of the Tata group.

According to some estimates, Tata Steel remained under £13 billion in debt which was further expected to grow considering the ballooning growth of low cost steel being dumped by China into the global markets. Tata Steel had come to such a horrendous point where it is estimated to be losing almost £1 million daily.  The problems have been visible for a couple of years now as the industry in Britain has constantly been facing closures and job cuts. Port Talbot itself had witnessed around 1000 job cuts in the January of this year. Another plant owned by the Thai company SSI had shut shop last year leading to a loss of around 1,700 British jobs.

The problem is not just limited to Britain; the entire industry is going through a slow down, mainly thanks to China and the fall in oil prices which have severely hit the use of steel in the petroleum and energy industry.  India, which is considered one of the few glowing stars in a space of darkness, also has not been able to push out steel congruent to the levels it had achieved prior to 2010. The slowdown in the developing countries, mainly led by China has prompted them to offload their excessive supply on the global markets leading to crashing of prices. The developed world cannot bear the brunt of this excessive supply as their output neither has been nor can hope to be as cost friendly as that of the developing economies.

This is because of several factors, but mainly the cost of production and energy charges which steelmakers in the developed economies have to deal with. Countries like the UK and USA have high labour costs and even higher energy costs which leads to a significantly higher cost of production than their competitors on the other side of the World map. Also, the added costs of taxes and carbon pricing put European makers at a severe disadvantage over countries like Russia, China, India, Ukraine, etc.

Amid this crisis, one thing is sure; Tata is heading out and the British lawmakers have their work cut out for them ahead of the impending loss of close to 4,000 jobs from the Port Talbot business itself. There have been calls for building up of tariffs against cheap import of steel, or for nationalizing the entire steel business at a huge cost to the taxpayer. As of now, a few deals have come to the fore, including a recent one involving a straight out management buyout, led by the company’s Managing Director, Stuart Wilkie who has propped a rather outlandish plan where each worker is expected to invest £10,000 to enable a takeover from the Tata group. Another one involves Indian origin Sanveev Gupta’s Liberty House which offered to buy out the business with the support of the British government and in exchange for a number of sweetheart deals.

Analysts and experts suggest that demand for unspecialized steel will continue to fall as other businesses which depend on the metal, cut their demand in favour of alternative materials. This makes it imperative for the entire industry to undergo long pending structural changes, mainly revolving around cutting down costs and managing optimum capacity. However, there is little doubt that even after these consolidation measures, some jobs are bound to be lost. The industry will have to restructure and shift to small scale efficiency units in place of bigger and costlier ones. What becomes of the Port Talbot steel works can only be known as things play out in the span of the coming months. 

Infibeam’s Botched IPO

Technology companies have seen relative success in their Initial Public Offerings over the years. That success has been the cause for both attention and amazement. The first technology company to ever debut on the Indian Stock Exchange goes by the name Info Edge. The name might now ring bells in people’s minds at the first go, but, Info Edge owns some pretty hot shot internet classified portals such as Naukri.com, Jeevansathi.com and 99acres.com to name a few.

The company was listed on the BSE in November, 2006 at an overpriced valuation which was surprisingly oversubscribed 54.7 times and closed with a gain of around 80% from that of the initial list price. The cause for fanfare was evident from the growing income of the company from Rs 84 crore to 500 crores in 2015. Another big IPO that came next was that of JustDial in June 2013, which also got the support of Bollywood megastar Amitabh Bacchan. In a similar scenario, the company was valued at 60 times its previous year’s income, investors rushed to buy the stock.

The main edge that these two companies had was that of strong financial models and a robust business model. These two companies presented the Indian Stock exchange with an option of investing in homegrown tech companies which were making tremendous progress.

Fast forward to 2015, the next big thing in technology in India is undoubtedly, E-commerce. But, the biggest names in Indian e commerce have not yet lingered even near the thought of making an IPO. Up until now. Infibeam is the first Indian e-commerce firm to trade on the Indian Stock Exchange. The company is hoping to raise around 450 crores from the market and has fixed the price band at Rs 360-432.

But, this time the IPO has received a cautious start with around 10000 bids in the first hour of trading, but, by 4PM, the stock was subscribed 0.20 times on the BSE and the NSE. There is a cautious nature to the amount of subscriptions that the company has received on the very first day. The reasons for that may be several.

One key reason is that Infibeam is not a major e commerce player in the market as yet. Although it is at par in its operational longevity with Flipkart and Snapdeal, however, it has never gained the amount of attention and success that the former have. It is similar in model and approach to them, yet is not nearly near in terms of volume of sales and revenue.

Also, the markets are in a state of volatility and there is some concern over the world economy. In such a period, getting backing for a technology startup; and that too an e-commerce one is difficult.  It is a known fact that profits are a mad man’s dream in e-commerce. Even the biggest companies such as Amazon and Flipkart are yet to post profits. Flipkart posted a loss of Rs 2000 crores in FY15. Such indicators are sure to turn away investors looking for safe bets in times of uncertainty.

The e-commerce industry is expected to see a huge growth spike in 2016, but, that does not necessarily bode well for Infibeam. Its IPO success is marred by its small scale, absence of funding, small market share and the absence of popularity that other e-commerce players enjoy.

The lower valuation comes at a time when most e-commerce companies and other service based technology startups are facing increasing pressure over their supposedly over hyped valuations. Some people fear that it is similar to the bubble of internet companies that burst in 2000 over similar concerns.  The poor show of Infibeam In its IPO has only further aggravated those concerns.

Industry experts have hinted that the era of deep discounting is a thing of the past for e-commerce companies. For the next phase of the chart, the firms should shift focus to product differentiation and improving the overall customer experience to promote loyalty.

As of Infibeam’s IPO, it feels like a rushed move which is poorly thought and implemented. Out of the four domestic investment banks, two have already backed out due to concerns over pricing. Kotak Mahindra Capital and ICICI Securities have withdrawn from the issue, spelling even more problems and concerns over the success of the issue.

Whether Infibeam will be able to overcome these problems is still unclear, but one thing is certain, the e-commerce industry’s welcome party to the Stock Market is turning out to be more of a sleeper than a hit. It will be interesting to see what turn of events follow this IPO.

Video Streaming Makes a Splash in India

Television sets made a debut in India in the year 1975. However, all they did for the next five years was sit on the shelves of some premium retailers, if any, at that point in time.  It was in the early 1980s that Doordarshan was launched and the first ever Television series was produced in India. But, even then, the penetration of Doordarshan was severely limited to big cities and select towns.  It was in the later part of the 1980s when things finally picked pace and people started purchasing television sets. This heralded a turning point in the cultural history of the country, as the advent of the multimedia era was going to affect each and every corner of the country.

By early 2000, Hindi general entertainment channels or GECs had taken over the larger part of India’s huge subscriber base. Cable television was an instant hit and became more of a cultural phenomenon.  Over the years, there would be hardly any home without a television or a cable service subscription. After the saturation of cable, came DTH providers and then came IPTV.

However, since the past couple of years, television seems to have reached its prime. The newest thing to catch people’s fancy is the internet. Affordable mobile devices and access to internet has landed a mini TV in everyone’s personal pockets. The internet brought along with it a horde of multimedia services to consume as well as create content.

Amateur Videography was an instant hit among the youth and every other person with a camera phone in his pocket. This boom gave rise to a host of video sharing as well as hosting services such as YouTube, Dailymotion, etc. However, among this barrage of video hosting services, Google driven YouTube has managed to stay ahead of the lot with a whopping 55 million unique viewers per month from India.

It was the perfect cocktail of music videos, movie trailers and a host of different content to catch the attention of the average Indian youth. YouTube has been present in India since 2007; however, the real progress has been made in the last couple of years. All the latest music, the latest movie releases as well as episodes from mainstream Hindi GECs landed up on YouTube to provide a humongous base of content to its users.

2015 was the year when India went a step ahead and did a bit of catching up with the world.  Several independent min- series or web series web series were produced solely for free viewing on YouTube. These series opened up the metaphorical flood gates to anyone with a mobile device and an internet connection. Series like TVF Pitchers, Permanent Roommates found immense success with the urban youth, who could easily relate to their content.

But, the content was not free in the actual sense. With an increasing user base, YouTube added more and more advertisements to its videos. But, nevertheless, this had no effect on the user growth rate even by an inch. The channels behind these successful series found overnight fame and success as well as monetary gains. There is no actual disclosure by YouTube on its remuneration for uploaders who subject their videos to advertisements, but according to estimates, A 30 second ad pays a channel $1 for 25 views.

Sounds complicated? That’s because it has been made so. YouTube pays its uploaders on the basis of Ad engagement or Cost per Click (CPC) or Cost per View (CPV) model. That means the more the users engage with the advertisement, rather than the actual content, the more money a youtuber makes.

Long story short, almost every dedicated YouTube channel features advertisements and the number of views per video range in the millions. Even after handing out fat pay cheques to YouTubers, YouTube itself earns handsome profits.

That very same cash kitty and viewer base has attracted the attention of many and has invited a host of new streaming services aiming to grapes that ever increasing mobile user base and internet penetration in India. Hotstar is one such service which was launched by the media major Star. It is a collection of all the content being aired on Star owned channels on the Television.  Apart from that, Hotstar exclusively airs live cricket and other sports matches and also produces original content solely for its hotstar user base.

However, it is not truly a video streaming platform as the shows uploaded on the website are one day behind their original schedule. So, it is still in reality a hosting service and not a dedicated streaming service. But, January 2016 brought the world’s leading video streaming service Netflix for the first time to India.

Netflix sets itself apart from other streaming services in the point that it is subscription based and is not a free service. However, as a promotional offer, they are giving 1 month free access to Indian users. The subscription starts from Rs 500 and goes up to Rs 800. What makes it unique is that it is offered as a standalone subscription which can then be viewed on any device, even simultaneously.

Netflix will bring the video streaming revolution to India as its entry will cause more than a splash in the Indian media industry. And, on top of that, YouTube will finally have a worthy competitor. It is still too early to make a judgment on the relative fortune of the company in India, as these waters are untested and extremely choppy. Will the subscriber model succeed in India? Will Netflix be able to create exclusive content suited to Indian audiences? Well that judgment must be reserved for another article.

Back from the Dead- Spicejet’s Magical Turnaround Story

Exactly a year ago a feature in this series had covered the perils of airline investing and pondered on Spicejet’s remarkable fall from the heavens. In the December of 2014, Spicejet had dealt a serious blow to the Indian aviation industry by disclosing its internal troubles and abruptly scrapping all operations of the airline. The news came as a huge shock to the entire industry and the company’s shares went into a free fall.

At that point in time, almost the entire industry had prematurely declared that Spicejet was officially dead. It was widely believed that like Kingfisher Airlines, Spicejet too had fallen prey to the perilous aviation troubles. The news soon faded into oblivion and everything seemed calm. Gradually, the company even started its operations in limited capacity. But, analysts and pundits had already given the call- that Spicejet would for a long time be irrelevant in the Indian aviation scenario.

Exactly one year has passed and its time that we take stock of where the company stands right now. One might expect the company to be still dragging behind, trying to fix its operations, bring in some additional investment. Well, some of that is happening. But, the most astonishing fact is that the company is actually making a comeback.

For comparative perspective, take for example Air India, the age old airline which has been riddled with losses since its inception. The national carrier still lies there. But, Spicejet has been able to pull a feat so remarkable that it really does deserve the Best Airline award in terms of the company that did the most catching up. Spicejet has been in the profitable category for the past three months. Just 9 months after it almost went bust, forget about revival, the company is already heading towards a growth trajectory.

The company has also been boasting a consistent capacity level of around 90 percent, which is not shabby at all for an airline which nearly shut its operations almost a year ago. And this is the biggest success the company has achieved in the past one year. Managing the operations and restructuring the company is one thing, however, regaining the flyers’ confidence is a whole different ball game; and that too of the Indian flyers.

 It’s as if a favorable wind was enabling the airline to still stay afloat in the skies. Before falling apart, the airline held around 20 percent market share of the Indian Aviation industry. It lost a lot of ground, but the level of catching up it has done is phenomenal.

Spicejet’s revival is closely linked to a few important market factors which have a direct bearing on the airline’s day to day operations. The most important of those has been low oil prices. Aviation fuel prices have been at their lowest as compared to the past few years.  In addition to that, the annual increase in passengers has also added to some increased capacity generation. All in all, favorable environmental factors have given Spicejet enough leeway to get its Act in order.

The excellent show from Spicejet does not mean that they were the only ones that outshined in the entire sector. The Gurgaon based Indigo Airlines has come out on top once again this year. While Spicejet was still scrambling to cover lost ground, other airlines and especially Indigo has registered tremendous growth in their market shares and revenues.

In all of this, one man alone has been hailed as the savior and guiding angel for the airline. That person is Mr. Ajay Singh who has been bringing in a slew of changes to bring the airline back on track. Spicejet’s closing balance sheet for this year will be the sole marker for the huge improvement in the fortunes of the company and of Mr. Singh of course. The biggest asset of Mr. Singh has been his contacts in the industry which enabled him to easily negotiate with financers and aircraft leasing firms and securing terms which were favorable for the airline. An effective operation is the name of the game; yet it will not be completely moral to give the entire credit to the team currently running Spicejet. Had the crucial environmental factors not pitched in, this congratulatory story would have gone in whole different direction.

But, the good thing is that the owners do accept this humble fact and are not ostensibly buoyed by the magnanimous performance of the carrier. The best way to cope in these challenging times is to remain focused at keeping costs low and gauging all the factors before taking any path breaking decisions.  According to market forecasts, crude oil prices will be gaining normalcy in the latter half of the coming year 2016. That will mean that the new model of Spicejet will be put to the real test. However, given their current trajectory, there is not much to worry about. The carrier is back again in good hands.

The European Data Protection Regulation

The European Union has always been a staunch protector of its citizens’ privacy and protection on the worldwide web. This led them to come up with the Data Protection Directive in 1995, which was nothing but a set of rules and guidelines for companies for securing and ensuring scrupulous use of private data.

But, 1995 has come and gone a long time back. The current scenario of the web necessitates the updation of the directive. In 2006, the EU came up with the concept of The Right to be Forgotten. The rationale behind this concept is that individuals should be able to decide how their private data is stored on the web; if at all. This concept is a reflection of the European ideals which have been associated with forgiveness and the right to move on with one’s life after some mishap. For example, a criminal after having completed his term has a right to equally access the country’s services without any caveats about his past life, which banks, insurance companies and employers may find online.

But, a mere concept was not enough to rein in the big names in internet business. The EU went on a limb to openly find an Anti-Trust Allegation against Google for violating its Directive and also the Right to be Forgotten. According to the charges filed by the European Court of Justice, Google is guilty of deliberately fishing favorable search results in place of more generalized results in its search. It was also accused of favoring its own shopping results algorithm versus that of Amazon, Yelp, EBay, etc. The fact is that Google is actually guilty of all these charges, but the reason why the Court of Justice cannot nail them so easily is the thinly written privacy laws and guidelines.

There is much ambiguity in the way these laws can be and should be applied. But the EU is finally looking to change that. In a notification in January of this year, it was announced that The Data Protection Directive would be replaced by the much bolder and much more concrete European Data Protection Regulation. The change from Directive to Regulation means that it will be universally applicable to all Euro member states, without any caveats and loopholes.

Emboldened by the new regulation, The European Court of Justice has renewed its efforts to bring Google to task on the issue of data privacy. Till now, the court was single handedly going after Google. It was understandable because Microsoft, Yelp, TripAdvisor and some other search companies had been pushing the EU to ensure fair competition. But, in October this year, came a huge blow that was going to affect not just the giants of the industry, but the entire gamut of internet based companies, a major chunk of which lies in the US.

The European Court of Justice ruled the Data Sharing Pact with the United States to be illegal and invalid. The court deliberated that personal data sent to and fro through US servers is unsafe and a violation of its privacy laws. This ruling deals a major blow to all major tech companies in the United States, who would now have to look for data centers in Europe.

The entire proceedings done by the EU are truly in the favor of liberty and personal privacy as well as freedom. However, the big question that arises is why did the EU suddenly decide to be the flag bearer of individual freedom and liberty?

The short answer is that the European Union is spooked. And the thing that spooked it into action is the revelation of massive surveillance operations being conducted by the US on European leaders. In 2013, Edward Snowden leaked classified documents containing sensitive information about government snooping on European leaders, among other people. This whole scandal made the EU come into action and bolster its internet defenses by attacking the theft and handling of its data by US servers.

The result is that some 4500 companies which were till now using US servers to store data from all across the globe, will have to install separate servers in Europe to ensure that their data does not leave the continent.  Quashing of this agreement also means that sooner or later Google will also have to bow down to the EU and make the desired changes to its search algorithms.

This is a big win for the masses at a time when Net Neutrality and other Internet security issues are gaining concern. However, sadly, the rules of this regulation apply only within the European borders.  At a time when India is also being subjected to massive hacks of government and defense installations, it is necessary that the country’s leaders look Westward for inspiration and work to protect the interests of the fast growing internet population of the country.

The Era of Flashy Product Launches

A simple Google search for the history of product launches brings up a plethora of links leading to Apple’s high profile WWDC launch events. But, that may be because of some SEO at work. Product Launches, are in principle an extension of marketing. It is very hard to trace back the very first product launch that ever occurred, but, it is safe to assume that it was not as ostentatious as the ones in the 21^st century. But then, launching a bar of soap would not have invited much fanfare back in the 1900s.

Over the years, marketing has been subjected to various schools of thoughts. The ideologies usually changing every decade or so, in response to global events, and sometimes, even mishaps. A Product, for a business is very much akin to a baby; it starts with an idea, undergoes gestation, and is eventually delivered. That product will later become the extension of the company itself. And like any proud parent, the company likes to show it off to the World. Product Launches are the platform for that showcase.

It would be remarkably wrong to say that the Era of Product Launches was started by Apple (as many people would like to believe); yet in all certainty, they are the ones to make it look like an opera. Modern day launches are extremely flamboyant, even more widely publicized and involve several months of prior planning.

Flashy and over the top launches were brought into fashion by the late Apple CEO Steven Paul Jobs. His bold statements, reality distorting antics and sometimes egotistic rants left the audiences completely enchanted and somewhat disillusioned with the actual product. These events usually culminate with performances by pop stars and rock bands.

In today’s scenario, launch events are far from conservative; but so is marketing as a whole. Conservatism has given way to flamboyance while subtlety has been replaced by theatricality. The norm of the day is- “If you have it, then you got to flaunt it”. Most launches today happen in the tech world and increased consumerism has translated into fast riches for many tech firms.

This has resulted in oversized cash piles and highly increased marketing budgets. Publicity is more important than product differentiation. The scholars from the old school of marketing may find this irksome, but the modern marketing manager with his fancy B-school degree may reply that –“This is what works”.

And in all fairness, this form of marketing is most definitely translating into success. The go-to Mantra is – Be Revolutionary. The impact of effective product launches can be seen almost instantaneously; 300,000 units of the iPad were sold on its very launch day, while the company recorded the sale of 1.7 million iPhone 4 units in the subsequent three days of the launch. The numbers are mind boggling and appalling at the same time.

But, if one were to think hard, the amount of costs and manpower that goes into planning such events should in fact lead to such results, in order to level the cost-benefit ratio. Some companies, however, despite their glitzy product launches are not able to sum up decent numbers that quickly. But, in the long run, this marketing strategy does help a lot. It generates a lot of buzz, maintains the hype around the product and the company for even a month after the culmination of the event and even the press have a field day covering the event left, right and centre.

It is human tendency to try to milk the maximum utility from a tool, regardless of the exhaustion of that option. Many firms tend to do the same with highly common and successful marketing tools. But, the truth is that too much of a good thing never leads to happiness. The same thing is happening to product launches and other corporate outreach events. Sooner or later, you do run out of ideas on how to make a good thing even better. In a bid to stand out, companies today are going for multiple events all round the year, spending loads of money and efforts into making the next one ‘more epic’ than the previous one. But, that cycle DOES eventually come to an end.

In the process of meeting deadlines and consumer expectations, the company not only stresses its employees, but also threatens to jeopardize the quality of the product itself. The launch is centered on the product and not the other way round. There have been several gaffes where CEOs have had to face onstage embarrassment and even media ridicule in the event of the product failing during its demonstration.

An embarrassed Satya Nadella after Cortana Demo Failure

The list of problems includes venue problems, power failures, and failed demonstration and so on. During one of its launches while giving a demonstration, Steve Jobs literally asked everyone in the audience to get off the wireless networks after the newest iPhone failed to load a webpage due to cramped wireless networks. Recently, an overworked CEO of BMW fainted on stage right before launching their newest offering in Germany. Satya Nadella of Microsoft was subjected to immense embarrassment when their highly publicized voice assistant failed to respond to the CEO of the company himself. Such incidents sound more funny than grievous, but, they are slight hints that somewhere, something is very wrong.

BMW CEO Fainting On-Stage

According to a leading market research firm, approximately 75% of product launches of today end up in failure. Some of the products fail to earn back their cost even a year after their initial launch. One may not realize but, product launches are a dual edged sword. On one hand, they give an amazing jumpstart to your product, but when that happens, the company is subjected to the real test of managing its supply chain; and that’s where most companies fail. The bottom rule for a company should be that no single department should ever be given free reign over company decisions. A balanced approach to running a company is what earns dividends over the years.  Too much free reign to the marketing department will always lead to insurmountable costs and haphazard outcomes.

There is an inherent need today for companies to return back to the original ideas of business; some degree of conservatism never hurt anybody. A company should strive to first strengthen its core principles, bolster the product and deliver the best that it can. Marketing it, should come secondary to product development. Yet, a little hype around the product never hurt anyone at all.