Posted in Marketing & Strategy Articles, Total Reads: 4447
, Published on 17 January 2014
Flipkart went live in 2007 with the objective of making books easily available to anyone who had internet access. Today, they’re present across various categories including movies, music, games, mobiles, cameras, computers, healthcare and personal products, home appliances and electronics, stationery, perfumes, toys, apparels, shoes – and still counting!. Wow sounds an impressive list but reaching this far wasn't easy. As a matter of fact Flipkart and its investors at this stage are seemingly losing money. They pulled out of large electronics items as customer experience was not up to the mark. Their logic was simple if they can’t offer customer a delightful experience they will not do it. Moreover, their online music store Flyte Music was shut down a little over a year after launching it. In the words Sachin Bansal, CEO of Flipkart - Flyte didn’t offer a potential for massive business.
Statistics showed that Flipkart’s music CD section attracted only 1/6th of the traffic but its revenue was 3 times that of digital downloads (pay per download). It churns out a skewed ratio of 18:1 in favor of music CD’s. Digital music is not happening in India right now, it's a niche business. Flipkart realized that customer is against this model and dropped Flyte. Flipkart have always had this experimental temperament about its business and they’ll keep on improvising as a startup is not built to be small, it has to grow big.
However, in the long run it’ll be a different story as E commerce in India has just reached less than 1/10th of its potential. Out of 120 Crore Indian population not more than 1.5 crores use E Commerce frequently. Looking at burgeoning internet users the market should reach at least 15 crore users by 2015. At this stage, as long as they keep getting venture capitalist money they should continue soaking losses if their transaction volume and user base keeps expanding. This year Flipkart clinched a funding of $360mn, the largest-ever funding for internet business in India. With fresh funding, Flipkart now has the impetus to realize its expansion plans.
Answering the question whether Flipkart is a giant in the making is a tricky one. Recently, Alibaba Group Holding Ltd., China’s largest e-commerce company has been valued by analysts at as much as $190 billion (Flipkart valued at $1.5billion), compared with Facebook's $104 billion valuation after its market debut. Alibaba, is now considering a U.S. listing after talks with Hong Kong’s stock exchange fell apart. Amazon, the Global leader in e-commerce has had an amazing growth story since the 1997 IPO. See below some telling metrics about investing in internet IPO’s :-
source: Statista, Yahoo!Finance
Like Alibaba Flipkart also has similar IPO plans however not in the near future. Best thing is that Flipkart has been smart enough to equally focus on what not to do and what to stop doing. Till date it has been on the right track. Let us look at a few parameters for an e-commerce business and Flipkart's status quo with respect to them:-
Diversified Product Portfolio (Right Mix) : The right product mix will minimize risk. Flipkart does have a good product offerings and can capitalize on same.
Merchant Partnerships (More the merrier) : There are a plethora of indigenous and global brands popular among consumers. Flipkart needs to identify the revenue churners and establish partnerships with them.
Operational Excellence (Make it or break it) : This is going to be the differentiator between good and great e-commerce companies
Inorganic Growth (Mergers & Acquisitions) : In a span of 3 years Flipkart has acquired WeRead (an online community of book enthusiasts), Mime360 (a digital content platform firm), Chakpak.com (a Bollywood news site with a huge digital catalogue), LetsBuy.com (Indian e-retailer in electronics) . Flipkart should continue to be observant for any such opportunities.
Delightful Shopping : This has been Flipkart's basic operating principle since inception. But there will always be a scope of improvement in this aspect and question will be whether Flipkart can continue to deliver customer delight.
Online Traffic : Majority of the online marketplace is still untapped. It'll be interesting to see how Flipkart catches on.
These are still early days for Flipkart. In order to scale up to the levels of Amazon and EBay a lot needs to be done. One can say so far so good but there's still a mountain to climb for the giant in the making. “Nothing is predestined. The obstacles of your past can become the gateways that lead to new beginnings.” ― Ralph H. Blum
The article has been authored by Mohit Gaur, NMIMS Mumbai.