Flipkart: Transitioning to a

Marketplace Model

Presented to:- Prof. Kalyan Agarwal

Presented By:- Group B1
 Introduction: Indian Digital
Market
 The Indian E-commerce market is expected to grow to US$ 200 billion by 2026 from US$ 38.5

billion as of 2017.

 As of August 2020, the number of internet connections in India significantly increased to 760

million, driven by the ‘Digital India’ programs.

 E-retail market is expected to continue its strong growth - it registered a CAGR of over 35% to

reach Rs. 1.8 trillion (US$ 25.75 billion) in FY20.

 Introduction: Flipkart
 Founder: Sachine Bansal & Binny Bansal

 Year: 2007

 Opened as an online book seller platform.

 Business Opportunity :To overcome the bad quality service offered by the competition.

 Started with a capital of $3125.

 “When a customer placed an order, one of us would visit several small distributors to
locate the book, then drive over to the post office and mail the book to the customer”
 Introduction: Flipkart
 Challenge – Low internet banking and credit card penetration in India. • Most customers who even

had cards preferred to pay through cash only – April 2010 – Cash on Delivery was introduced.

New Mission
 “To transform commerce in India through technology”

 Aimed to overcame the prevailing belief that it was the consumer’s job to check quality.
 Logistics System
 Just in Time Delivery Model – Ordering from suppliers upon receiving customer orders.

 Challenge – Poor infrastructure and limited capabilities of Indian shippers.

 2010 – Investments in Supply Chain.

 Hub & Spoke Model – Five fulfillment centers in five cities – North (Delhi), West (Mumbai),
East (Kolkata), South (Hyderabad & Bangalore)

 Mother Hubs – At the center of 200km zones that had cities with highest demands.

 Fulfillment centers -> Mother Hubs -> Hubs -> Homes

 Growth
 October 2011 – Ad campaign – highlighting three key propositions – COD, Original
products and Warranties (30 day replacement policy).

 March 2012 – Advertising between IPL (Traffic jumped from 2.5 lakhs to 1.5 million)

 2012-13 – Addition of new product categories – including a foray into fashion –

Acquisition of fashion site Myntra.

 With increasing competition from Amazon, Flipkart rethink its new strategy and
implemented that in their marketing plans.
 Shift to a marketplace model ( Adopting Alibaba’s strategy rather than Amazon’s mixed

inventory model)

i. Flipkart could no longer get long tail selections through handful of sellers as inventory risks were high.

ii. Sellers responsible for inventory and Flipkart handles logistics and billing.

iii. Flipkart used competition between sellers to drive down prices

 To run eKart, Flipkart’s logistics business, as a separate division enabling other

ecommerce companies to employ as logistic partner.

 Marketing place
 Product strategy:
Model
I. Majority revenue from a few fastmoving categories out of total 70

II. Cheaper than offline, not cheapest online

III. Regular sales and discounts- new buyers

IV. Alternate revenue via fees to advertise

V. Niche long tail items contributed up to 25% sales

VI. Flipkart advantage program- FA tag wins customer trust

 Attracting sellers:

I. Application screening by a team

II. Only registered sellers were invited and then trained to sell on Flipkart

III. Listing was free, commission on sales

IV. Sellers were assisted with data

V. Sellers were closely scrutinized by Flipkart

 Building customer base:

I. Objective was to garner more transactions from existing customers and acquire new
customers in other cities gradually

Organizational Structure
The commerce – Mukesh Bansal, supply chain – Binny Bansal, new initiatives – Sachine
Bansal and fashion head (Myntra) – Ananth Narayanan.

 Commerce was responsible for offline fulfilment and meeting services and delivery
promise to customers.

 Supply-Chain: a separate entity altogether ‘eKart’ an independent vertical potentially

serving other companies.
 New initiatives: focusing on advertisements – discovery (search ads) and branding
(display ads). Also focused on growing new brands. Digital marketing consulting was
offered to sellers leveraging its own consumer data.

 Fashion front (Myntra): In 2014 Flipkart integrated some back-end operations to get in
sync with Myntra. Deserted the desktop channel for Myntra to have an app only model.

Path to Profitability
 Investors pumped in $3 billion to make it a $4 billion GMV in FY2015.

 High margin categories – furniture, homes and travel bookings.

 Avg expenses of 1.35times GMV – heavy discounting, marketing, free shipping etc. were
offered.
 Current redressal for profitability by Mukesh Bansal – through greater efficiency, lower wastage,
reducing the cost of logistics, and better negotiations with partners. As, it has remained a highly
debated issue.

Future
 Scaling up the marketplace model and introducing new categories would enable them in growing
faster.

 Criticism – issues with delivery and customer experience

 Service levels fell in 2015 as Flipkart expanded to small metros. Making customers dissatisfied with
the overall online experience.

 With a desire to build something transformational would require a great team and efforts to become
a premier online e-tailer.
Questions:-
1. What does it take to build a digitally operating business in India?
Ans. Building a digitally operating business in India requires several factors including :-
• understanding the unique market and consumer dynamics.
• Developing a robust logistic and supply chain infrastructure.
• Establishing partnership with sellers and suppliers.
• Leveraging technology to create a seamless and user friendly experience for customer.
2. Is Flipkart’s decision to move to a marketplace the right decision at that time?
Ans:- I think Flipkart should have a hybrid approach:

i. Continue to sell mobiles and mobile phone accessories, consumer durables and kitchen appliances,
Laptops, notebooks, tablets, and home furniture directly consumers as sales in these categories
amounts for 76% of total sales (as of 2014.) The company can’t afford abandoning such a large market
share as in this kind of business winner takes all and it will be easily overtaken by one of its
competitors.
ii. Increase the capacity of the marketplace platform to keep up with the market trends
iii. Adjust the investment in the two revenue streams above based on performance and market
response.
iv. Describe Flipkart’s value proposition for sellers (in the marketplace model).
3. What is Flipkart’s path to profitability? Would you invest in this company?

Ans:- Flipkart plan to profitability consist of:

1- Increased focus on high margin categories such as furniture boosting GMV to 12 billion a
year

2- Increase shipping from 8 million to 1 billion unite per month

3- Serving 100 million customers by 2018

4- Increase the number of sellers from 30,000 to 100,000

5- Improve customer experience and delivery experience

6- Improve efficiency, lower wastage, reduce the cost of logistics, better negotiation with
partners (sellers) to maintain good value proposition for consumers.
The path to profitability depends on a few external factors:

1- Consumers get used to convenience

2- Customer in smaller city get used to having access to unavailable products in their cities

3- Consolidation and dimensioning money flow will result in reduction of discounts\

promotions I would invest in the company because they have a proven business model, and
insider knowledge of the market. I believe that the plan to profitability above will make
Flipkart a market leader in the ecommerce industry in India.