Beginning of a downfall?

After the entry of global e-commerce giant - Amazon in India and as severe competition rose
across the country due positive sentiment for budding businesses, Flipkart seems to be out of
strategies to shield itself from the competitors and has been losing heavily to them. According
to an article by Economic Times, the companys dominant market share based on number of
shipped goods has been shrinking year-on-year, from 43% at the end of FY 2014-15 to 37% at
the end of FY 2015-16. Meanwhile, Amazons market share has improved substantially from
meagre 14% at the end of FY 2014-15 to 21-24% at the end of FY 2015-16 and Snapdeal lost
its market share from 19% at the end of FY 2014-15 to 14-15% at the end of FY 2015-16.

Adding to its woes, Morgan Stanley Fund in November 2016 had slashed valuation of
its holdings in Flipkart by an alarming 38% which raised serious concerns on the companys
potential and also on the growth of Indian E-commerce industry. This is not the first time
Flipkart encountered a valuation cut. Earlier, in the month of March 2016, some of Flipkarts
investors had cut its value by 23%, sending a signal of no-easy money to them. In May 2015,
Flipkart was valued at $15 billion while its current value stays around $5.54 billion.

Amazon has already beaten Flipkart in several non-financial parameters. Amazon had
an average monthly user visit of around 180 million against Flipkarts 120 million. Also,
Amazons plan to tie up with India Post could leave Amazon with an edge over its competitors
by providing better reach to its customers, especially to rural customers who constitute almost
70% of the total Indian population. Even in number of sellers, Amazon with over 120,000
sellers across India enjoys higher popularity than Flipkart which has over 95,000 sellers
registered. Apart from these issues, Flipkart has a bad hiring policy compared to its peers. Due
to these policies, it used to hire in large numbers who turned to add no value to the firm or the
service it provides. Influence of investors in filling up leadership positions also pose serious
problems to Flipkart. The companys upcoming CEO Kalyan Krishnamurthy was a former
employee of Tiger Global, one of its major investors and the current CEO, Binny Bansal would
take reins as CEO of Flipkart Group. These kinds of interventions may inhibit the growth of
customer-centric practices in an organization like Flipkart.

Another major concern for Flipkart is its financial performance. The revenues for
Flipkart havent been growing at a rate as anticipated by the firm whereas Amazons revenues
have been rapidly increasing due to heavy spending on promotions, discounts, advertising etc.
Following graphs (in Figure 1) depict the growth of Flipkart against its rival for FY 2013-14
to 2015-16. Please note that the firms in question are Amazon Seller Services and Flipkart
Internet Pvt. Ltd. which is the marketplace for Flipkart.

From these two figure, one should note that the scales of the two figures which differ
heavily from any other industries. The losses appear to be significantly higher than their
revenues for both the companies, indicating the levels of funding thats been getting pumped
in.

(a)
(a)

(b)

Figure 1*: (a) Revenue battle and (b) Whos the loser?: Flipkart Internet Pvt. Ltd. Vs
Amazon Seller Service
*Based on the data provided by Times of India and Trak

It is also apparent that Amazon has been shelling out lots of money to garner popularity
among Indian consumers by trying to provide them with impressive offers, experience and
service. By doing these, Amazon wants establish customer loyalty to its platform. Hence, it
should be Flipkarts priority to understand what its customers expect from its website and what
it could do to improve their experience and finally, achieve customers loyalty to stand out
from its competitors. To understand the customer satisfaction, a metric has been commonly
used among the e-commerce firms in India. That metric is Net Promoter Score (NPS). By
looking at this score for Flipkart, Amazon and Snapdeal, preliminary nuances can be derived
about how the customers feel about using either of the marketplace platforms. Earlier, it was
Gross Merchandize Value (GMV) that was of major concern to firms to prove their mettle in
the industry; but slowly focus was shifted to NPS as the firms had realized the importance of a
consumer-centric approach towards their business operations.

Based on a study conducted by RedSeer Consulting, a customer research firm which

conducts several studies for start-ups, Amazon India among the top three platforms maintains
high NPS score.

Firm
Item

NPS Score 85% 88% 69%

*Source: Indian Online Seller (IOS)

The study was based on 1800 online shoppers across the country. The scores were based on
the percentage of customers who rated their shopping experience to be more than 4, on a scale
of 1 to 5.

Though Flipkart has lots of problems that need to be resolved, it should prioritize
winning customers over the competitors as its prominent hindrance to be Indias number one
online shopping platform. According to NPS score, Flipkart trails behind Amazon implying
that, being a preliminary-mover, it was unable to capture the growing needs of online shoppers
and to service them appropriately. It is hence of paramount interest to understand why Flipkart
has been unable to achieve the growth rate it anticipated and to comprehend why Amazon
enjoys a better quality of service rating over Flipkart and Snapdeal through a consumer-
centric approach. To achieve these objectives, one needs to understand consumer behaviour of
an Indian online shopper so that a company like Flipkart could align its strategies responding
to turbulent sensitivities of the complex, dynamical and ever-evolving online consumers in
India.
References:

http://economictimes.indiatimes.com/industry/services/retail/amazon-pips-snapdeal-to-
become-indias-2nd-largest-online-marketplace-after-flipkart/articleshow/52017176.cms

http://www.wsj.com/articles/morgan-stanley-fund-cuts-valuation-of-its-holding-in-indias-
flipkart-1480509197

http://www.wsj.com/articles/flipkart-valuation-cuts-spark-concern-for-indias-billion-dollar-
startups-1456920275

http://www.firstpost.com/business/morgan-stanley-cuts-flipkart-valuation-by-a-steep-38-to-
just-5-54-bn-3131352.html

http://timesofindia.indiatimes.com/companies/Amazons-flagship-India-unit-beats-Flipkarts-
in-revenue/articleshow/55741529.cms

http://trak.in/tags/business/2014/11/06/flipkart-amazon-snapdeal-revenues-losses-
comparison/

https://yourstory.com/2016/06/amazon-flipkart-website-traffic/

http://economictimes.indiatimes.com/industry/services/retail/how-ecommerce-giants-like-
amazon-and-flipkart-are-piloting-rural-distribution-model-to-cater-small-town-
customers/articleshow/47635478.cms

http://economictimes.indiatimes.com/small-biz/startups/amazon-india-triples-its-seller-base-
ahead-of-festive-season/articleshow/54340555.cms

http://indianonlineseller.com/2016/05/amazon-steals-the-number-one-spot-from-flipkart-yet-
again/