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Iran's E-Retailer Wave
Sci & Tech

Iran's E-Retailer Wave

Recent statistics published by the Ministry of Communications and Information Technology indicate Internet penetration in Iran reached 82.1% in Q4 2015, including the fact that 58.2% of Internet users have access to high-speed mobile, WiMax and ADSL Internet.
Rankings by Alexa.com and Similarweb.com for both major retailers, Digikala and Bamilo, throw light on the current state of the sector.

  The Old Guard
Founded nearly a decade back, Digikala is Iran’s first general e-retailer platform. Currently it is backed by Sarava Pars.
With a first mover advantage, Digikala has a well-established brand and attempts to serve the premium segment customers with a quality portfolio of products and services. It is determined to sustain its current base of loyal customers despite the entry of new competitors.
Digikala was earlier focused only on consumer electronics (global trend shows early adopters tend to purchase electronics and books online), but was forced to expand its basket with the disruption created by Bamilo's arrival in 2014.

  The Upstart
Backed by the Iran Internet Group (IIG–a subsidiary of MEIG) and MTN, Bamilo has burnt cash 24/7 since its launch in mid-2014 and has scaled operations in a regular manner, but what it lacks is the loyal customer base that Digikala has.
Of the three pillars of marketing strategy, Bamilo relies heavily on everyday low prices and discounts. Hence, it has become a platform for online research with lower than par traffic conversion.
With a competitor that has eight years of first mover advantage, burning cash on marketing and discounts is the best option to lower the strategic barriers of Digikala.
Compared to Digikala, Bamilo has proven to be much more creative–its promotion and marketing campaigns and product launches leverage the learning of MEIG’s experience in launching e-retailers across Middle East and globally, like Black Friday offers it began in 2015.
Bamilo does not focus on consumer electronics (Digikala’s bread and butter) but rather on apparel, pushing it away from direct competition with Digikala for the moment, and managing to grow a new demographic base.

  Lessons From India
The evolution of the Indian e-commerce is a classic example. Two rivals (Flipkart and Snapdeal) go head to head in the battle for general e-retailer dominance, cutting prices and burning cash to push the other out of the market. And then a global powerhouse such as Amazon enters.
 More competition? Nope, as regulation changes and general e-retailer is banned. Marketplace is the only legal route to take.
And what did they discover? It is cheaper and faster to expand the business and all three can swim in the "Blue Ocean" of 1.2 billion people.
And this is where it will hurt IIG the most—it shut down its marketplace venture, Mozando.com six months ago due to increased competition from other Sarava-backed marketplace ventures like Divar.ir.

  The Online Marketplace
All you need to do is build a platform, sign on retailers and assist them with fulfillment and delivery services.
 In India, Flipkart, Snapdeal and Amazon have been delivering products at profit to Tier 3, 4 and 5 cities for more than two years now.
Each has more than 100 fulfillment centers across the country and in partnership with couriers such as India Post, they are managing to achieve two big wins: expand their share of the pie and scale at a faster speed and save on costs.

  Mozando's Failure
Mozando failed for numerous reasons, most of which are internal, including according to some sources, gross staff corruption.
Other issues included lack of financial transparency, management immaturity and the dominance of Bamilo over Mozando among the top three and an inherent nature of how IIG was formed.
For those who might argue that there were technical reasons for Mozando's failure, I would like to refer to the success of C2C platforms such as Divar and Sheypoor. How is it that C2C has managed to gain a market share, but the B2C marketplace has not? The culture exists at an individual level but not at the business level?
Any of the two e-retailers in this article, or any new entrant to the Iranian e-commerce scene, need to crack the code of the business-to-consumer marketplace if it intends to succeed. Otherwise, they will be swimming with many sharks in a red ocean.

 

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