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The Flipkart story

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ON A RETAIL HIGH: The Bansals, Binny (left) and Sachin.

TOPICS consumer goods electronic commerce retail

economy, business and finance company information

From a start-up with an investment of just four lakhs rupees, Flipkart has grown into a $100 million-revenue online retail giant in just five years. Ushamrita Choudhury tracks the fairytale.
It came to me as a Christmas gift from my Secret Santa, and it was all about choice, convenience and a new relationship, is how Naveed Ansari, a 26-year-old Project Executive from Mumbai, recounts his first experience with Flipkart. A typical professional from a metro, he's short on time, and he's invariably seeking convenience. So, an e-voucher from Flipkart seemed an ideal fit. This gift marked his initiation into the sphere of e-commerce, and the journey for him has just begun. Many Indians today are embracing e-retailing with enthusiasm. Popular portals such as Flipkart are spearheading the conversion of offline shoppers into online bargain hunters. Adds Naveed, as an afterthought, I felt Flipkart was the best option as the transaction was easy, and the variety of products was a bonus. For Flipkart, this means the unlocking of a vast audience waiting to experience the joys and comfort of shopping online. Sachin Bansal, CEO and one of the co-founders of Flipkart (the other being Binny Bansal), is an ardent believer in the merits of customer service. A simple desire to create a tailor-made product for the Indian consumer has grown into something beyond what we imagined, Sachin muses. A quick glance at Flipkart's timeline shows it was to start as a price comparison platform, but there weren't enough e-commerce sites to compare. So, both the Bansals, who were colleagues at IIT-Delhi, and then at, thought, why not start an e-commerce site? That was the genesis of Flipkart. From an initial investment of $8,000, this humble seed of desire has germinated into a $100 million e-retailing favourite. The founders' passion for the consumer Internet space manifests itself in the brand, which is synonymous with customer service and satisfaction. Don't count your customers before they smile' is the company's operating mantra, and it's a mantra they're applying successfully alright! E-commerce: Good to go? The concept of e-commerce is downloading at a fairly rapid pace in the psyche of the Indian consumer. In the metros, shortage of time is a big driver for online shopping. On the other hand, accessibility to a variety of products makes audiences from smaller towns and cities opt for the online route. Major retailers face challenges in stocking their stores adequately. Often, customers are unable to purchase items of their choice, thus prompting them to resort to e-retailers. 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, ent huses Riddhima Toshniwal, a content writer from Raipur. Such experiences explain the growing popularity of Flipkart in the non-metro regions as well. We will close 2011-2012 with over $100 million in revenue. By 2015, we want to clock in $1billion, but looking at present trends, we may be able to do it sooner, states Binny, Flipkart's COO. This statement doesn't seem far-fetched; a quick overview of India's Internet penetration shows a user base of approximately 100 million. The Government's National Broadband Plan, pegged at $4.5 billion, proposes to connect nearly 160 million additional Internet users by 2014. The spread, and subsequent adoption of e-commerce, thus, only seems logical. With several reputed brick-and-mortar retailers also offering online services, it seems natural the trend of shopping remotely will scale up substantially. The value proposition in either formats of retailing, physical and online, is different. It's the experience of touch-and-feel that makes physical shopping exciting. In the online context, convenience and comfort takes over. There's ample scope for both to grow, Sachin avers. The Devil lies in the detail A robust back-end is a vital pre-requisite for an online business to survive, since once the customer completes her transaction, it's this back-end that connects the dots. 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. Sales projection determines the inventory, and the available inventory accounts for the sales made; it's a self-feeding cycle of sorts. Nearly 60 to 70 per cent of deliveries take place through our own network, states Sachin, who thinks such a model provides for better control over the entire logistics management piece. On the operational front, issues faced by the company pertain to delay in deliveries, or faulty products. As a customer-centric organisation, none of these issues can remain unresolved for long. 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'. Binny pitches in saying, Bigger investments in our supply chain and technology will enable larger warehouses and increased process automation. Our bigger objective is to redefine the way India shops. Consistent customer service is the hallmark of Flipkart. The founders don't think discounts can replace the customer's satisfaction of being serviced promptly and efficiently. Similarly, the trust-building exercise is accorded a lot of importance. Flipkart connects with customers in real-time, through Facebook and Twitter. Yes, honesty is the best policy for this ecommerce trailblazer. We've trained our customer service executives to take spot decisions. Addressing customer concerns and owning up to our mistakes reassure customers we have their best interests at heart. In our business, delivery drives delight, Sachin articulates. Kart'apulting into the future Positive word-of-mouth gives Flipkart an edge on the customer side of the business. Backstage, the story's no different. Their recent acquisition of will result in a faster expansion rate. Binny's long-term outlook includes scaling up the firm's self-delivery network, and alliancing with like-minded businesses. We are open to partnerships that'll help us attain our goals, he signs off. Both the founders are happy to see increased venture capital participation in the e-commerce space, which, according to Sachin, still needs lots of investment to bolster its back-end. Like a typical entrepreneur, he opines innovation is the key to the company's success. Extending services like cash-on-delivery and credit card payment at doorstep were introduced to provide ample choice and comfort to customers. Now, the attempt is to widen Flipkart's reach in the digital domain through Flyte, the portal's recently launched paid music download service. Customers can buy music in MP3 format from over 700 genres, and 55 languages. The files, which are digital rights management (DRM) free, can be played without any restrictions on any type of device and for an unlimited number of times. Innovation is just one aspect of the business universe. Today, the premise of any business, traditional or modern, rests on its ability to harness data, which prompts the question, how does Flipkart utilise its data to generate consumer insights? Since the industry is still in infancy, there is no history one can to refer to. Gathering and analysing data, hence, becomes crucial for planning the business's future course of action. This practice, in a way, adds to the surprise and delight' factor for customers, because they're then treated to offers that are most suited and relevant to their preferences. Sachin reiterates, All our efforts are invested in matching customers' expectations, and we'll do our best to bring e-commerce into the forefront. In this industry, the scope for growth is immense, as is the risk of failure. Consulting firm Technopak Advisors estimates India's digital economy at $600 million currently, with the potential to balloon to $70 billion by 2020. K. Vaitheeswaran, e-commerce veteran, and Founder and CEO,, one of India's earliest, compares the vertical to a hard-fought marathon. It's not like a 100-metre dash. Globally, we operate on the lowest margins, but we're still seeing real growth. There's still no formula for 100 per cent success. Flipkart is running the 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. Although profits after tax remain negative, the company's valuation is soaring thanks to eager participation of these private equity players. The acquisition of signals FlipKart's ambitions to capture the domestic online market. A burgeoning consumer class, coupled with a rising web-literate population and zealous venture capital funding may just propel Flipkart to become India's answer to! Uncovering India's online avatar is a fascinating process. Only those companies that can successfully engage customers through novel ideas, quality products and seamless services will flourish. May be it is sheer genius, or simple common sense the e-retail hero has been able to accomplish all this during its formative years. Summing up the Flipkart experience, Abhishek Asthana, a marketing student from Pune, has dedicated an ode to the portal. He tweaks the famous MasterCard campaign to sound something like There are some things you can't buy online For everything else, there's Flipkart!

Flipkart has been riding high since the launch of the new Moto G smartphone, which was launched exclusively on the retail website. According to Flipkart, the Moto G launch saw their traffic increase two-fold from normal days, while as much as 67 percent of its traffic was driven by Moto G. It added that the Moto G page alone saw 1 million page views on launch day while Flipkarts total mobiles sales were five times that of its usual daily mobile sales.

Firstpost spoke to Flipkart CEO Sachin Bansal on the success of the Moto G and the future of e-commerce in India. Edited excerpts from the interaction.

Response to Moto G? How has it been compared to say other smartphones that were also launched on the website in the past?

From a demand point of view, this has beaten all our expectations. It has been the fastest selling mobile phone for sure on Flipkart. We have run out of stock for the 16 GB version and weve put them on pre-order. People are still pre-booking for this smartphone

Have other pre-orders and launches also done well in the past for Flipkart? Have non-electronics products also done well?

We have been running pre-orders in the past as well. This is the first time that we had an exclusive on a mobile phone. In books for instance, weve been doing pre-orders for all new releases in India. Weve seen pretty good numbers on pre-orders for books as well. Just to give you an example of that, the book release of Amish Tripathis The Oath of the Vayuputras, had nearly 50,000 pre-orders and we delivered those 50,000 books on day one itself. We have already developed this capability of taking pre-orders and living up to to the expectations of the customers.

Do you think its possible to repeat this kind of success with Moto G, where you do an exclusive launch with other products as well, which are not necessarily says smartphones or electronics?

Well it is the first time that a brand like Motorola has done this, and even for India, it is the first time that a product is available only online. We are watching the data closely for Moto G, we are seeing what more products we can launch just online and will take a call on that.

What kind of smartphones would you say tend to do well in online sales? Are budget smartphones outdoing premium ones online as well?

So what has happened is that the mid-segment has grown the fastest in India. Its not just the really cheap budget phones that have done well. Of course if you want to buy an Android phone for Rs 3000 or Rs 4000, those are also available on Flipkart. But that

segment doesnt really do that well, because the quality of phones is not always that great.

Most people who aspire to own a smartphone, want to own a good quality smartphone, which kind of starts at around Rs 10,000. The mid-range smartphones have done very well for us, rather than budget phones.

Which two segments of products would say is expected to grow fastest in India where e-commerce is concerned? Which products is Flipkart expecting will grow the fastest?

Weve positioned ourselves as a trustworthy place to shop from. So where products are concerned, we are also looking from a quality perspective. We dont sell low-quality products at all. If you push out such products, you might see decent amount of sales, but yes in the end we are happy to let that go, because we dont want to be seen as someone whos cheating their customers. We want to be known for quality products.

From a segment point of view, what weve seen is that online shoppers are very aspirational. They have high aspirations and they want to own a well-developed product but at a cheaper price. So thats where e-commerce comes and were seeing that aspirational products are doing well.

Can you elaborate on how youre looking at aspirational?

So, for instance when it comes to clothing, were looking at some brands that tend to well such as Puma, or even other well-known brands of sports shoes. Then in shirts brands like Peter England. In electronics, of course Samsung is doing well. Even as a category, in smartphones, were seeing a lot of premium smartphones doing very well.

Is there a particular strategy for tier II and tier III towns? What are the obstacles you see for growth in these cities?

These towns and cities are definitely the next level of growth. They will be a bigger driver of growth for e-commerce in India in the coming years. Metro shoppers have by and large taken to e-commerce but the tier-II and tier III is starting to grow. There are two aspects for our strategy here. One is to make sure that we have the products that those customers want. Second is whether we have a service level which is up to a standard that is acceptable to the customers in those markets.

These are the two aspects that we really need to push on over the next few years in these markets.

Which platform do you think will see bigger growth in these towns for ecommerce? Mobile or still desktops and PCs?

Mobile will be soon be a bigger proportion in those cities, because broadband connections are still easier to get in larger cities but in smaller cities, its less prevalent to used broadband. Also the way people are getting converted into smartphone users across the country, we believe that over the next 5-6 years, over half of the mobile users will shift to smartphones.

We believe that a majority of customers in tier-II and tier-III cities will probably have a mobile only device and not even have a PC or desktop. For them, Internet access will only be on mobile and they will shop only from mobile.

Lastly what sort of reactions do you see from offline stores, the brick and mortar retailers, to the growth of e-commerce players in India?

Indias market is so nascent from an organised retail point of view that I think theres a huge scope of growth for both offline retailers and e-commerce platforms to grow. You will see more and more partnerships between e-commerce platforms and offline retailers. Offline retailers will come on the e-commerce marketplaces and sell their products online. We already have some examples of those and youll see more of that in the future.