Flipkart.com - A legend in the making!?

Things are easier said than Done! To realize our dreams and that also in such a grand manner is really a tough task. The founders of Flipkart have probably conquered their dreams with the amazing success of Flipkart. Flipkart is something which has really opened up the Indian e-commerce market and that also in a big way.


Flipkart was co-founded by Sachin Bansal and Binny Bansal in Oct 2007. Both are graduates from IIT-Delhi and have prior work experience in Amazon.com They both were solid coders and wanted to open a portal that compared different e-commerce websites, but there were hardly any such sites in India and they decided to give birth to their own e-commerce venture - Flipkart.com

Thus was born Flipkart in Oct 2007 with an initial investment of 4 lac (co-founders savings). It was never going to be easy since India has had bad past experiences with e-commerce trading. It was not an easy segment to break into, people were very particular in paying money for something which they had not seen and received. The trust was missing in the Indian customers. So what Flipkart had to do was to instill trust and faith in their customers. And they did exactly the same, will discuss more on how they did so later in the post.


Flipkart began with selling books, since books are easy to procure, target market which reads books is in abundance, books provide more margin, are easy to pack and deliver, do not get damaged in transit and most importantly books are not very expensive, so the amount of money a customer has to spend to try out one's service for one time is very minimal. Flipkart sold only books for the first two years.


Flipkart started with the consignment model (procurement based on demand) i.e. they had ties with 2 distributors in Bangalore, whenever a customer ordered a book, they used to personally procure the book from the dealer, pack the book in their office and then courier the same. In the initial months the founder's personal cell numbers used to be the customer support numbers. So, in the start they tried their best to provide good service, focus on the website - easy to browse and order and hassle-free, and strove hard to resolve any customer issues. Since there were not any established players in the market, this allowed them a lot of space to grow, and they did in fact grew very rapidly.


Flipkart had a revenue of 4 crore in FY 2008 - 2009, 20 crore in FY 2009 - 2010, 75 crore in FY 2010 - 2011, and the revenue for FY 2011 - 2012 which ends on 31 Mar 2012 is expected to be 500 crore. This is indeed a massive growth. The company targets revenues of 5000 crore by 2015.


The company started from 2 employees and now has around 4500 employees.
Flipkart started with consignment model as discussed above, since most of the customer issues like delivery delays etc. result from procurement model, the company started opening its own warehouses as it started getting more investments. The company opened its first warehouse in Bangalore and later on opened warehouses in Delhi, Kolkatta and Mumbai. Today the company works with more than 500 suppliers. As on date more than 80% orders of Flipkart are handled via warehouses which helps in quick and efficient service.


A humble beginning from books, Flipkart now has a gamut of products ranging from: Cell phones, laptops, computers, cameras, games, music, audio players, TV's, healthcare products, washing machines etc. etc. Still, Flipkart derives around 50% of its revenue from selling books online. Flipkart is the Indian market leader in selling books both offline and online, it enjoys an online share of around 80%. The electronic items have a large number of players like Naaptol, Letsbuy, Indiaplaza, Tradus, Infibeam, Yebhi etc. The electronic market share is distributed among them in different unknown proportions.


India has around 13.5 crore internet users today where as the number of homes with Cable and Satellite (C&S) television is 10.5 crore. The expected internet users will reach a figure of 30 crore by 2014 and C&S are expected to be 14 crore in 2014. Thus India has a tremendous internet growth and with the customers getting accustomed to e-commerce, the future of e-commerce sites is definitely rosy. An approximated 25 lac people have transacted online this year, the number is all set to increase with time.
Also to mention most of the Flipkart customers use internet from PC's/Laptops to order goods. The use of mobile internet is very less at the moment, but with the advent of smart phones the use of mobile internet for e-commerce transactions will soar with time. India has 8 crore mobile net users at the moment, the number is expected to swell to 22.5 crore by 2014.

Lets discuss the factors that lead to the grand success of Flipkart:


1) They always strove to provide great customer service. Flipkart customers are more happy than with some of their competitors like Tradus.in, Indiaplaza.com; i have myself experienced this a couple of times.
2) Their website is great, easy to use, easy to browse through the products, add products to wishlist or to a cart, get product reviews and opinions, pre-order products, make payments using different methods, in short hassle- free and convenient.
3) A very important point is that they introduced the option of cash on delivery and card on delivery. This way people demonstrated more confidence in buying products. An interesting fact, today Flipkart sells 20 products/min and have a massive customer base, still more than 60% of the Flipkart's customers use Cash on Delivery and card on delivery methods. This is because of two reasons, one is many people do not know how to make payments online. And secondly people do not have immense trust in e-commerce in India. Flipkart also provides a 30 day replacement guarantee on its products and EMI options to its customers for making payments.
4) Flipkart's reason of success is that it has a great customer retention rate, it has around 15 lac individual customers and more than 70% customers are repeat customers i.e. they shop various times each year. The company targets to have a customer base of 1 crore by 2015.


Flipkart marketing strategy:


Flipkart has been mostly marketed by word of mouth advertising. Customer satisfaction has been their best marketing medium. Flipkart very wisely used SEO (Search Engine Optimization) and Google Ad-words as the marketing tools to have a far reach in the online world. Flipkart.com official Facebook page has close to 9 lac 'likes'. Flipkart recently launched a series of 3 ads with the tag line - "No Kidding No worries"
Kids were used to create the adverts to send out the message - if a kid can do it, you can also do it.

The message is very clear to make people more comfortable with Flipkart, to generate a great customer relationship and loyalty on the basis of great product prices and excellent customer service. All in all to create a great customer experience.


Future road map:

Going forward electronics will be given more focus. Flipkart has recently added a string of electronic items like calculators, water purifiers, microwave ovens, washing machines, dish washers, vacuum cleaners etc. 


Flipkart has opened a music store which sells CD's and DVD's of movies' music releases and music albums. Flipkart has also acquired Bollywood movie content from Chakpak. Since digital media in going to rise in near future, Flipkart is geared up for the same. Soon it will start offering digital content like movies and songs online, as in the customers can pay and stream online digital content. Flipkart will also provide e-books very soon.



Threats in future:


There are no major foreseeable threats in the future.
The company has built a great brand name, they just have to maintain and enhance the same. Need to keep introducing more products, adapting to the changing needs of the customer with time.
The entry of Amazon.com in 2012 in the Indian e-commerce space has been cited as a big challenge to Flipkart. However i think that Flipkart is a respected Brand name in India and should be able to compete with Amazon. Remember Amazon being a very big company can bring in serious competition to Flipkart, since Amazon can bear more losses in the beginning to gain customer base. But again Indian market is growing at a rapid pace as access to internet increases and people become more aware of e-commerce sites and start trusting the same; hence Indian market is sufficiently big at-least for these two giants to co-exist beneficially. 




Thus in the end i would like to congratulate Flipkart founders for the determination and hard work they have put in to realize their dream. The rewards they are reaping are a natural follow up.  The company is currently valued at around 1 billion dollars i.e. 5000 crore. More importantly Flipkart has ushered in the e-commerce era in India. This has generated massive interest in e-commerce sector, people are opening websites to sell anything from shoes to apparels to jewels to baby care products etc. This has helped in creating a lot of job opportunities and thus helps the Indian Inc. growth story as well.


Flipkart CEO Sachin Bansal's mantras to all the budding entrepreneurs vying to build a product company:

1) Be very focused on consumers.
2) Build amazing experiences for the customers.
3) Continuously innovate the product. 

Update: Flipkart raised a Round D funding of $150 Million in Aug-Sept 2012. The funding was spearheaded by South African media giant Nasper and ICONIQ Capital, besides participation from existing investors Tiger Global and Accel Partners. There were reports floating around that Flipkart just had enough liquid assets i.e. cash to sustain its operations for 3 months only ! The company has already raised $ 80 Million in its 4 rounds of funding so far.  Flipkart's revenues for year 2012 are expected to be close to 2000 crore i.e. around $ 400 Million. But we have no record of the company's profit and loss statements. It is just expected to break-even this year.  

A critical review of Flipkart's latest round of funding: http://startupcentral.in/2012/08/why-flipkarts-bansals-are-in-the-market-for-funds-again/  

It will be interesting to see how effectively the company manages this latest infusion of cash. Will it shine and become the Indian Amazon outpacing Amazon (junglee.com)? Or there are chances that the dreams will crash a-midst huge debt and competitive Indian online landscape (IndiaPlaza, Amazon, Myntra, Yebhi, India Times Shopping, Infibeam, Tradus etc.)? What if some VC decides to pull out? Should the company try and go for an IPO rather than the take the VC path? The Flipkart story is definitely something to watch out for. 

Cheers,
Ankit