Too early for app-only play, Myntra finds out

A year after shutting down its website in favour of an app-based model, the e-retailer has taken a U-turn, highlighting the flaws of the smartphone ecosystem

There are too few new-age Indian Internet companies that have more than 15 months of data on what happens when they shut down their websites and switch over to mobile apps only. This meant that when fashion discovery portal Myntra shut down its website in favour of its mobile app in May last year, it essentially went in blind.

Fast forward to a year later and Myntra is bringing back its website, and just as the Flipkart-owned company did last year, it's kicked off a raging debate about the viability of app-only business models. It's clear that not having a website was hurting the company in some way, but what changed in these past 12 months?

APP-ONLY: STILL TO BE TRIED AND TESTED

Pros

• Better unit economics   
• Higher user engagement on app    
• Works best for services used frequently        
• Better product focus

Cons

• High cost of customer acquisition
• Lacks hooks to bring customers back
• High drop-offs for transaction-led businesses
• Reduces customer choice

Myntra had justified its move to an app-only platform last year saying that 90 per cent of its traffic at the time came from the app and so did 70 per cent of its revenues. Mukesh Bansal, co-founder of Myntra, had said that he wasn't too worried about the short-term attrition in sales. Now the company says it expects a 15-20 per cent increase in revenues for this year, after the return of the website.

Bringing in a new perspective is Sujayath Ali, the co-founder and CEO of Voonik, a fashion discovery portal and competitor to Myntra. Voonik says it began focusing on its app-only model about six months before Myntra, after it saw healthy uptake for its Android app, back at a time when the market for fashion discovery apps was still virgin territory.

"There's one key piece that everybody has missed: the app gives you very good retention initially, but slowly, users will start uninstalling (the app) for various reasons. After 15 months when we look at the data, we realise that there's no way to reach them, unlike on desktop or mobile website," said Ali at a start-up conference in Bengaluru recently.

The key premise of his argument is that apps, unlike websites, are not reliant on search to bring people back on to the platform. Especially in a transaction-led business such as e-commerce, which no single person uses every day, the justification for a user to keep an app installed for long periods just does not exist.

Citing Voonik's data, Ali said that the uptake of the mobile app in the first six months was extremely encouraging, but what ensued in the next six months made it clear that the company needed to bring back focus on its website.

It's exactly what might have happened at Myntra, and it's something the company would not have been able to guess without going ahead with its app-only plan.

Different needs
Today, there are several services in India that are predominantly app-only, take for instance food ordering or taxi hailing. Many of these services have never had websites altogether, but experts say this only works when the service is used on a regular basis.

"There are some businesses that are transaction led where users visit once in a while, but ours is a daily use business and for us mobile apps work. When users want to sample our product or simply share it, the mobile web works. The app is for power users who want to read all the time," says Virendra Gupta, co-founder and CEO at Dailyhunt, an online media start-up which has over 100 million downloads.

Myntra, on the other hand, is a transaction-led business, which makes it more prone to uninstalls, even though it uses its seasonal sales to keep customers engaged. However, given that the company is now going back on its app-only decision, it's clear that either sales didn't work to reduce uninstalls or the cost of using them to retain users was far too high. Parent Flipkart did the same with its BigBillionDay sales by restricting deals only to the mobile app.

The cost of customer acquisition for food delivery services is among the highest due to intense competition in the space, but ideally it's still a one-time cost for the service. While food delivery services have a long way to go in figuring out sustainable business models, for Myntra, the cost of customer acquisition in its app-only avatar is a recurring cost, hurting the company's bottom line.

"Because of this, a lot of companies end up paying a higher cost for customer acquisition. Very few people know what happens to an app after 15 months or 12 months; that these users don't come back. Basically, when you don't offer them (the users) that choice, you're going to lose that loyal customers," added Ali.

The way to go
With 250 million smartphones in use today, India is definitely a mobile-first market; however, the same can't be said about it being a mobile-only market. Experts unanimously agree that for e-commerce, being platform agnostic is probably the best way to go forward for now. It's a model that has been proven by giants such as Facebook, Google and Amazon, and it's got a lot to do with offering customers choices.

With over a billion people accessing its services on mobile, Facebook continues to innovate for the web, giving each and every one of its 1.6 billion users a choice.

The Myntra debate is especially important since it has uncovered one of the biggest flaws of the smartphone ecosystem: it isn't a self-sustainable model just yet. Web search is still a big way through which customers find products to buy online and websites act as a funnel to bring more users onboard, and while there's a lot of innovation around app-install ads by Google and Facebook, they're still too expensive.

While this may portray smartphone apps in a negative light, several businesses agree that apps earn them more money. For Voonik, the unit economics of its app are two to three times better than that of its desktop website and mobile website, and it says every sale it makes on an app is close to becoming cash positive. If the same is true for Myntra, while the relaunch of its website will boost revenues, it could hurt margins and could even upset the company's plans of becoming India's first e-commerce player to become profitable.