The Internet is a booming retail venue, and, in this virtual era everything is just a click away. Click, click, click! Anything you need is available on the World Wide Web, and even though India climbed onto this wagon a few years late, Indians have started to buy almost anything online. Books, DVDs, mobile phones and even jewellery. With the advantage of sheer convenience, competitive pricing, and an array of modes of payment, the attraction is evident. Wait a few days and with the ring of your doorbell, your item of fancy is at your doorstep.
And several Indian websites are composing this very brew and one among them is FlipKart.com (FlipKart). Based in Bengaluru, FlipKart began by selling books at discounted rates and that has enabled them to expand and now, offer other products too. We take a look at their journey and explore the possibilities of an Amazon-esque future.
Binny Bansal and Sachin Bansal graduated from Indian Institute of Technology, Delhi and after playing the work field they decided to branch out on their own in 2007. Due diligence delivered the realisation that there really were not any good e-commerce sites in India and with supporting market research, the duo ventured into a portal for the sale of books with the awareness that the price point per purchase could be as low as Rs. 100. As Sachin Bansal, chief executive officer and co-founder reiterates, “For a startup, customer trust is easily gained through small transactions and the risk is low at the customer end as well. Hence, our entrepreneurial journey began by setting up an online bookstore.”
The business model is a simple one – a user-friendly web page and a vast array of books, music, movies and now mobile phones for customers to choose from. Their interface helps customers browse and place orders easily. Once the order is placed, the book is sourced from the inventory, packed and couriered the same day. In case of unavailability of a requested title, it is purchased from a supplier.
However, logistics is key to the success of a business like FlipKart. With 300 distributors and 15 courier service providers across the nation, they pride themselves on being able to address every concern a customer might have (At The Smart CEO, we tested their system. Our order arrived on time and in good condition). It is a model that works and their expansion is proof of its durability.
But, the journey was not sans challenges. Ensuring that it listed what a customer may want; cutting deals with distributors, ensuring the goods arrived in good shape and payment methods contributed to the long list. Another challenge that FlipKart chose to take on was the Cash-On–Delivery option, which is hugely popular considering the Indian mindset. After all, Indians do like to pay for purchases after they are in possession.
Spinning the tale
In the three years that FlipKart has been present online, they have graduated from a portal that sold only books to one that has expanded to movies, music and even mobile phones. And the future looks loftier still, with an impressive growth rate. With a seed capital of four lakh rupees, their turnover for the first year of operations was Rs. 2.5 crore (2008-09) and for the financial year that has just passed, their turnover is a striking Rs. 25 crore. Bansal says, “We have grown ten times over the last one year and aim to touch the Rs.100 crore mark by March 2011.” The company has managed to attain a strong customer base of two lakh customers with a repeat purchase rate of 50 per cent. “Currently, we are selling more than a book a minute and with around six million visitors a day, we are four times larger than our closest competition,” adds Bansal.
With success comes expansion. So, why the choice to expand into other product lines such as mobile phones? Bansal reiterates keeping up with a market that is as dynamic as India is not an easy course to steer. The choice to venture into other product lines were supported by high customer loyalty and proven business model. Considering FlipKart’s targeted turnover of Rs. 100 crore this fiscal, the diversification to music, movies, games and phones makes sense.
FlipKart is far from an original business venture. So, what are the elements that set them apart and give them an edge? The only real difference between FlipKart and other online biggies such as Amazon is that they operate out of India. And the biggest challenge that the Indian market could pose would be the logistics of distribution and delivery. And the fact that FlipKart has overcome this challenge has set them apart as a business.
To add to seamless delivery, competitive pricing (almost all the items sold are done so at a considerable discount) is another factor that has attracted and retained customers for FlipKart. “Pricing becomes an important criterion for bestsellers and new releases as they help induce trials and with our 50 per cent repeat purchase rate, these offers that induce trials are justified. On the other hand, books we sell depend on volumes and our excellent supplier relationship help us to keep our costs low,” states Bansal while justifying their pricing.
A definite game changer in e-commerce is FlipKart’s Cash-On-Delivery model. It is a simple model where you pay by cash upon delivery of your online purchases. This option has considerably extended the customer base for FlipKart and accounts as the mode of payment for about 30 per cent of all transactions, with a mere 2 per cent rate of non-purchase on order. As it addresses segments of the population such as students where penetration of credit and debit card is low, this system has enabled the company to add a whole new layer to their customer base.
The Cash-on-Delivery facility is currently available in 29 cities (tier-1 and metropolitans), with plans to expand to tier-2 and tier-3 cities as well. Bansal expects the sales through this model to surpass sales from online payment options like credit and debit cards and net banking in the next three to four months.
India’s e-commerce field is one that has barely been explored. The usual suspects are no longer the only ones choosing to buy online and portals like FlipKart are not only here to stay, but, to reshape the way India shops.