Flipkart is a company which revolutionised the e-commerce sector of India and in an absolute sense it entails no introduction as such. The year 2007 witnessed the landmark of Flipkart being founded by two employees of Amazon.com – Sachin Bansal and Binay Bansal (the two are not related, the common surname is merely a beautiful and confusing coincidence). The two studied together in one of the most reputed technical institutes of Nation – that is IIT Delhi and further worked in Amazon, the international giant of e-commerce.
“A simple desire to create a tailor-made product for the Indian consumer has grown into something beyond what we imagined.” Sachin muses. However, it’s pretty interesting to know that Flipkart was supposed to be a comparison portal for e-commerce sites. But then the founders realized that there weren’t enough e-commerce sites to be compared! And hence it sparked that why not an e-commerce site itself?
This is how Flipkart came into existence. Within this short span of 5 years (2007 to 2012) Flipkart has grown tremendously. One of the most inspiring and amusing facts about Flipkart is that it was started on a personal investment of merely INR 4,00,000 (though some sources claim it to be INR 5,00,000). It clearly exhibits the confidence of the founders and expresses that they knew what they were doing.
“When we started e-commerce, it was a dead sector, we went to VCs and everybody said basically, this is not the sector we invest in. If you open a travel company, I will probably give you money.” Said Binay Bansal in an interview with CNN.
Growth of Flipkart:
Flipkart started with books (50,000 titles initially) and then expanded to twelve different categories. After Flipkart got established, they were delivering 17500 items per day (6.5 million items annually); however astonishingly, recent data indicates that now they are delivering 30,000 items per day which is 20 products per minute.
“We are clocking daily sales of Rs.2.5 crore ($ 5 mn). Our growth rate has been 100 per cent quarter on quarter,” Sachin Bansal, CEO of Flipkart, told IANS.
This financial year, they expect to show investors Rs 2,500 crore in revenues, a 400 percent growth over last year’s numbers. Nearly 5,000 people, including contractors, work for them. Their closest competitors make do with 700-800 people.
In the BSE (Bombay Stock Exchange) list of MID CAP Companies Market Capitalisation we can list those BELOW 4350 odd crores as a comparison, since Flipkart is valued at 1B$.
In simple language Flipkart is more valuable than – Patni, Bata India, Tata, Tele, naukri.com, Indiabulls, Real Estate, UTV Software, JET AIRWAYS, HT Media (Hindustan Times), Jubilant (Dominos Franchisee in India), Shoppers Stop, EDUCOMP, India Infoline, DENA Bank, and TV18 to name just a few.
These were a few figures, data and facts which make us realize the worth of Flipkart and how it inflated to become India’s best e-commerce site within a minuscule period of five years. Its influence and grip in the Indian market is fortified by the news that it’s the only threat to Amazon to set a base in India.
However, the fact that other e-commerce sites existed and eventually surfaced is certainly undeniable. Then how Flipkart stumped up all its competitors and emerged unrivalled? Were they really good or it were just their stars which favoured them at the right time? A detailed analysis of the company and the market helped in extracting the points which are the evidence of their clever strategies and methodologies. They are discussed as followed:
Factors which supported at the back end and the business Philosophies.
Qualified and Talented Founders
It may not count for plenty but it must be acknowledged that the founders were engineers from IIT Delhi and hence were some of the brightest minds of nation. Moreover, they were Indians and understood the Indian consumer’s psychology very well; they were themselves a part of it after all. Their techniques and strategies were designed while keeping in mind the scenario of Indian market which helped a great deal.
Hence, the qualification and proficiency of the founders must be counted as one of the reasons why Flipkart succeeded.
The founders were employees at Amazon
Before the genesis of Flipkart, both of its founders have been working at the biggest e-commerce company – Amazon. Hence we can say that there was nothing new or innovative in the concept of e-commerce they adopted. More or less they replicated Amazon in India while restricting themselves to books. But the in-depth knowledge and intricacies of the business that they would have learnt at Amazon helped them establish Flipkart better.
Strong and consistent investment from private sector
Though flipkart was started with self funding but it soon got the funding from robust Venture Capitalists. Flipkart is running this marathon with ample support from private equity players such as Accel Partners and Tiger Global, which have collectively invested $150 million in the entity so far. The investors had immense trust on the company and laid a strong foundation for the company.
Right Thing at right time
Perhaps, its timing also contributed to the pinnacle it reached. It surfaced when people needed it most.
“It is the right thing at the right time. With petrol prices being so high, no one wants to go shopping and face crowds. For hassle free shopping online is a great option. Flipkart came up at the right time” Says Ritu Lalit, a reputed author from Rupa Publication.
Technical advancement
Internet was getting accessed by more and more people and the overall society was moving towards a more advanced future. More access to internet, ipads and stuff made Flipkart a more prominent option to shop at.
According to an Associated Chambers of Commerce and Industry of India (Assocham) survey, the online retail market in India may grow to INR 70 billion (over $1.30 billion) by 2015 from INR 20 billion in 2011 as internet access improves.
One may argue that it must have worked in favour of all e-commerce so it shouldn’t really count. But one must also accept that owing to the quality service that Flipkart was offering, it was the biggest beneficiary.
Believed in long term investments and sustainable business. Didn’t hurry to go profitable.
Apparently Flipkart’s hunger for investment was huge and its founders were never reluctant in feeding their baby without caring about the profits. They firmly believed in what they were doing and didn’t rush to extract profits. Rather, they played a long game so as to gain bigger profits.
“Last year, we did about USD 100 million in sales. Can we be profitable at USD 100 million of sales? Yes, definitely, it is a pretty decent amount of sales. But what do we want to be? We want to be profitable at USD 2 billion of sales or USD 3 billion of sales. That is where we want to turn profitable. We see market size at that level, so it will probably be very stupid of us to be thinking about profitability at such small scale.” Said the ambitious CEO Sachin Bansal in an interview.
Volume driven revenues
Flipkart concentrated on volume driven revenues which was the reason it provided heavy and breath-taking discounts. The tempting discounts allured a person to buy more which was the basic motive of the company. The prime motive behind adopting this philosophy was to get established in the market simultaneously.
“We aim to be a USD 1-billion (Rs 4,500-crore) company over the next 3-years. We are growing at a CAGR of 700 per cent in the last two-years and hope to maintain that. We expect revenue to grow multi-fold on the back of our major expansion plan,” Flipkart’s Founder and CEO, Sachin Bansal, said. Flipkart offers around 15-20 per cent discount on every book and have business volume of nearly 2 lakh books every year which is the evidence that its revenues are mainly volume-driven
Though all bookstores get up to 50-60 per cent discounts from publishers, the low overheads — one of the numerous virtues of online stores — enables Flipkart to pass on the savings in the form of discounts.
Factors in execution.
1. Supply chain and logistics
Flip kart’s core competency lies in their Supply chain and logistics which has been perfectly monitored and managed by professionals. This helps in reducing the overall cost of moving the product to consumer’s place. The overall cost of Flipkart was reduced to great extent, all thanks to Blue Dart, the then logistics partner of Flipkart. It is so because the transportation cost has been reduced and therefore Flipkart is able to earn a reasonable margin on the sale of product. It is to note that now Flipkart has its own logistics and transport system.
Well, the latest information that we have says that the Flipkart is going in collaboration with Dabba wallas of Mumbai who have the six sigma accuracy! More about Dabba Wallas some other day maybe!
2. Established its own warehouses.
Flipkart began operations on the consignment model — goods were procured from suppliers on demand, based on the orders received through the website. However, eventually, the books-to-electronics e-shop adopted the warehouse model. The company has its own warehouses, and maintains its own inventory. The company has four warehouses in Bangalore, Mumbai, Kolkata and Delhi and will open more such storage houses.
3. Penetrating in Tier II and Tier III cities
Unlike its other competitors which only concentrated in the metropolitan cities, Flipkart penetrated in semi-metropolitan cities (Also referred as Tier II and Tier III cities in context of business potential)
“I truly believe that tier II and tier III cities are where the growth is going to happen in future. In the next two years, these are the areas which will grow in the market. There are cities where the job is still not done, yet a lot of people are still very apprehensive about it and they still do not trust the medium as a reliable one. I think that is where next two years of growth will come from.” Binay Bansal mentioned in an interview long before. Needless to say that it was implemented and the results were clearly evident.
4. Variety
Flipkart provided a variety which Indian consumers have not even imagined. This made them a one-stop-shop for all sort of requirement (in context of books of course) of Indian customers. Flipkart offer a huge range of titles (more than 7 million) which really sets them apart from the rest of the crowd.
“For books, I usually prefer shopping from physical stores, but so far, only Flipkart has managed to supply me with Manga, Japanese literature, that’s otherwise difficult to find. Plus, it’s often cheaper to buy online. I’m definitely going to be a regular on their site,” enthuses Riddhima Toshniwal, a content writer from Raipur.
Factors which strengthened Flipkart in context of service:
1. Quality service
Flipkart provided the service which was never experienced by the Indian consumers. A few business gurus mockingly say that Flipkart spoilt their customers by providing such services. But the stake was worth it. The service helped Flipkart earn the loyalty of customer which is itself an asset for any company. A door-to-door service with all the perks one may imagine, Flipkart redefined the definition of services provided by e-commerce sites. While most of its competitors failed to deliver products on time and had an unaccountable customer support, Flipkart didn’t miss to score and shot right at the bull’s eye.
“When we started, the customer experience offered by e-commerce sites was below average. Our aim was to address this. We feel that it’s this focus on customer satisfaction and ownership of the customer experience that has worked in our favour.” Stated the CEO Sachin Bansal.
“We face significant challenges in reverse logistics. It’s a big task to track unsuccessful orders, which are quite costly to manage,” he continues. Hence, Flipkart stresses on customer service — it aligns with the firm’s philosophy of ‘making better our service promise’.” Added the COO Binay Bansal.
“It is user-friendly, offers a bulkier discount, and knocks at our doorsteps pretty early, mode of payment is easy, and of course back base is two IIT graduated students!!” Says Samarendra Patra excitedly who is a student at SRM Chennai and has two poetry books on his credit.
2. Extended services like Cash on delivery and credit card
Flipkart well understood that Indian consumer is reluctant to use credit cards online and they introduced a solution which changed everything. The concept of Cash-on-delivery multi-folded the number of consumers and revenues soared higher than ever. It is interesting to know that around 60 per cent of Flipkart’s orders are cash or card on delivery.
“Indian consumers are much more cautious about shopping online as compared to the West. They are reluctant to divulge credit card details. The cash on delivery service has helped a lot of traditional consumers turn to online shopping,” Sachin Bansal explained.
“Right from browsing to delivery, you can track your order. You can pre-order an unreleased book, get good prices, even the customer service is very strong. Raise any issue, it’s resolved.” Said Nethra Anjanappa, an avid reader and certified customer of Flipkart.
3. Positive word of mouth
Flipkart used Word of Mouth as their best marketing tool to sell their product. A satisfied customer tells others also about a good experience, and this how the business of Flipkart depends. Flipkart has been using different Social Networking Engines to promote their product. Promotions on Facebook, twitter and other social sites helps in gaining some attention, but to some extent, the rest has been done by Services offered by Customer. Its true they invested blindly in providing better services, however the investment can be considered compensated noticing how much they saved in marketing. Clever indeed!
“All our clients request to link Flipkart rather than any other e-commerce store in the advertisements we provide. This explains how much people trust it.” Says Arnab Chakrabarty, COO of a marketing company of books.
4. Gathering and analysing data, storing your likings and showing accordingly
Largely on backended infrastructure, building consumer trust, be able to use user behaviour to be able to influence and help them buy more; these are the challenges that Flipkart accepted happily and completed triumphantly.
The ‘Surprise and delight’ factor for customers, because they’re then treated to offers that are most suited and relevant to their preferences. “All our efforts are invested in matching customers’ expectations, and we’ll do our best to bring e-commerce into the forefront.” Sachin Bansal stated.
Flipkart stores the information and use it to offer you what you may like to buy. It’s like a super-clever-automated-shopkeeper whom you visit regularly.
“flipkart is not at all biased and it shows professional comments. Plus, it features best sellers regularly that helped me get the sales high. I sold more than 60,000 novels via flipkart itself.” Said Nikhil Chandwani, an author from Power Publishers.
However the current situation of Flipkart is under concern and the future is uncertain. Some experts claim that if Flipkart doesn’t get more investors, it may have to eventually shut down. The tension thickened and the silent-storm reached its crescendo when Forbes magazine wrote about them in their feature story exposing how they flew to Newyork to get more investors but had to return empty-handed. It also included comments on the way they were giving heavy discounts and Cash on Delivery services. It’s ironical that charms like these discounts and COD helped them reach the pinnacle and are now pulling them down. Undoubtedly, the losses caused by returned orders and discounts given were not handled well which is the reason Flipkart is in a shaking position.
Disclaimer:
All the facts, figures and information in the article have been taken from the internet through various portals. All the statements of CEO/COO or other officials from the company have been extracted from the interviews they gave on different web-portals. The authors can’t be accused for the inaccuracy or inconsistency of the facts. However, if there is a mismatch between the facts in this article and in the information through the following references, author is liable.
References:
www.mediapanther.co.in/marketing/the-flipkart-success-story
http://www.thehindu.com/arts/magazine/article3290735.ece
www.sedatedworld.com/?p=1310
http://archive.ciol.com/News/News/News-Reports/The-success-story-of-Flipkartcom/157619/0/
http://forbesindia.com/blog/editors-blog/flipkart-ceo-responds-to-our-cover-story/
http://www.moneycontrol.com/news/features/flipkart-story-new-ideas-for-biz-successindia_733561.html
http://en.wikipedia.org/wiki/Flipkart
http://en.wikipedia.org/wiki/Talk:Flipkart
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