What You Need to Know About Flipkart’s Strategy
India has the fourth largest eCommerce market in the Asia Pacific region behind China (#1), Japan (#2) and South Korea (#3). But India’s retail eCommerce sales are growing quickly, up 27% last year to reach $67 billion and by the end of next year India’s retail eCommerce sales are expected to surpass $100 billion. That market opportunity as well as the fact that India has the second largest population in the world with over a billion people has attracted a lot of international attention.
One of the international companies looking to tap into the Indian retail market is Walmart. In 2018 Walmart purchased a controlling interest in Flipkart a popular eCommerce company in India. Flipkart is a homegrown company and has provided Walmart with a way to access Indian consumers which are increasingly buying online. If you curious about Flipkart’s growth and strategy then consider these ten facts about its business.
1. Flipkart was founded by two former Amazon employees in 2007. Like Amazon Flipkart started off by selling books. One of the reasons Flipkart started with books is because books have a relatively low price point. With a lower price point the founders believed they had a better chance of getting consumers to give their eCommerce service a chance.
The logistics of shipping and handling of books is also easier than with other categories. Imagine starting an eCommerce business where you had to sell and then ship bulky furniture of varying sizes, that would be challenging right out of the gate. “When we started Flipkart, we were really focusing on books, just one category and focusing on getting the customer experience right for our books,” said Binny Bansal, co-founder of Flipkart. Being very focused was critical to the success of Flipkart in the beginning. “That really built a great brand for us from a customer service standpoint.” The founders didn’t want to want to be like their competitors at the time who were in “each and every category under the sun.”
2. Flipkart has amassed a large customer base with more than 350 million users and more than 300,000 sellers that sell 150 million products across 80 product categories.
3. In 2018 Walmart made its largest investment ever when it invested $16 billion to acquire a 77% stake in Flipkart. The deal is the single largest foreign direct investment made in India ever. “Flipkart is a great business whose growth and potential mirrors that of India as a whole—that’s why we invested in 2018 and why we continue to invest today,” said Judith McKenna, president and CEO of Walmart International.
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4. Flipkart is the largest eCommerce retailer in India with a 31.9% share in 2020 while Amazon had a 31.2% share during the same time period.
5. Within the last few years Flipkart’s valuation has doubled to reach $37.6 billion in 2021. Flipkart’s valuation speaks to the fact that India’s retail sector is lucrative. It is rumoured that Flipkart might file for an initial public offering later on this year.
6. Flipkart has grown by selling reasonably priced goods to lower and middle consumers that live in small cities in India. "A significant ... number of people in India look for value for money," said Rajneesh Kumar, Flipkart's senior vice president and chief corporate affairs officer. "If you provide the right value and the right customer experience, you will win."
7. Flipkart is a majority shareholder in PhonePe, which is the largest online payments platform in India. The payments platform has more than 300 million users and more than a billion transactions per month. PhonePe could be valued at as much as $10 billion. “We believe that payments will reach a billion people,” said PhonePe CEO Sameer Nigam. “After mobile data and cheap smartphones, I think we will get there. And unless everyone migrates to digital payments, the eCommerce markets [in] all these other categories won’t even really scale up. It’s almost an infrastructure issue.”
8. 90% of retail sales in India come from the 20 million small retail businesses called kiranas. Kiranas typically sell groceries and day to day necessities. “A kirana store is accessible, timely, convenient, and in some cases even more affordable than larger supermarket firms. A kirana store armed with a technology-enabled delivery partner is much more accessible, especially in smaller markets where deliveries can take place within hours instead of slotted days,” said Aravind Sanka, co-founder of Rapido, a bike taxi company.
With this in mind Flipkart works with 1.6 million kiranas providing them with a wholesale channel for bulk purchases across a number of categories including grocery, general merchandise and fashion. Kiranas are also seen as a way for eCommerce companies to reach the last mile without having to build the infrastructure themselves. “If Amazon, Reliance, or Walmart want to scale significantly, kiranas can be their passage to India,” says Ankur Bisen, senior vice president at retail consulting firm Technopak Advisors Pvt Ltd. “Big-box retailers killed mom and pop stores in the West, but India’s retail script will look very different.”
9. Small businesses in India have protested that large retailers like Amazon and Flipkart are a threat to their livelihoods. They have asked the government including anti-trust regulators to reign these companies in who they believe use unfair practices like deep discounting to lure customers in.
10. Flipkart is the largest tech start up in India, larger than Paytm or Byju’s.
Source: Bloomberg