Key Issue

1 . Flipkarts strategy of growth over profits leading to

losses
2. Direct attack from Amazon with their entry into the
Indian market
3.

Hyper competition leading to reduced margins

E-Commerce Industry

Indian E-Commerce Space

Online Retail market size & growth in Rs. Bn
600
500
400
300
200
100
0

Major Drivers of E-Tailing

504

334
224
15

24

38

58

91

139

Changing Consumer Lifestyle

- Emergence of time poor yet brand aware
consumers
- Rise in purchasing power of consumers in
small cities

Technology Penetration in India

Top reasons for buying online

Predominant Youth
Demographic

Source: http://www.pwc.in/press-releases/2014/technology-making-online-shopping-popular-but-trust-will-be-the-biggest-driver.jhtml

Flipkart

Background

Objectives

1/5 of the online retailing market

share with a market valuation of
$1.5 bn

To become Market leader with

dominant market share across
different categories

Strategy

Breakeven

Preference for growth and

customer delight over profits

Need to make sales of $2 bn in a

year to break even

Product categories

Hybrid Model

Started with books and diversified

into 12 product categories

Own Inventory based model to

Online Market place Model

Timeline
2007
FOUNDED

2011

2014

- MIME 360, digital

content platform
company
- Chakpak.com, a
Bollywood news site
that offers updates,
news, photos and
videos.
- Launch of E-wallet

2013

2010

April- Launch of
Marketplace
platform, and Ekart
Logistics
June - Shutdown of
Flyte
Launch of 'One Day
Delivery (Dec.)
Launch of PayZippy,
a payment gateway

- WE READ, a social

book discovery tool

- Started offering 'Cash
on Delivery (COD)'

2012
- Letsbuy.com, an
Indian e-retailer in
electronics
- Flyte Digital Music
Store (February )

Feb, March: Exclusive

partnership: Moto G,
Philips Grooming
May Acquires Myntra.
Launches
Same-day
guarantee
June: Launches Digiflip
Aug - Shutdown of
Payjippy
Sept Alliance with
ngpay
2014: $ 1.8 billion total
funding

Value Proposition

Which
customers?

Which
needs?

urban middle class population

well versed in using technology
comfortable shopping online
Books & Apparels
music to videos
mobile phones to computers
healthcare to personal care products

discount
Which
Relative
price?

Flipkarts Round of Funding

250
200

200

150

160

150

$ million

100
50
0

1
2009

10
2010

20
2011

2012

13-Jul

13-Oct

Product Mix

Category

Gross Margins (net

of discounts)

Average ticket
size(Rs)

Product mix

Books

5-10%

300-600

10%

Electronics- Mobiles

4-6%

2,500 3,000

30%

Electronics- Others

8-12%

1,500 2,000

30%

Fashion(lifestyle)

25%-30%

1,000-1,500

25%

Others

10-12%

300-500

5%

Flipkarts Competitors

Top E-Commerce Site by Traffic

14000
12000

13173

12649

12425

11924

10000

8447
8000
6000
4000
2000
0
Unique Visitors (000's)

8109

E-Commerce Strategic Groups 2012

HIGH

Reach

LOW
10

20

30

40

No of categories of products

50

E-Commerce Strategic Groups 2014

HIGH

Reach

LOW
10

20

30

40

No of categories of products

50

Entry of Amazon- Predatory Pricing

One-day Delivery
GUARANTEED

Competitive
Pricing

FREE delivery of
products

Analysis & Insights

Flipkart Vs. Amazon

Background

Background

Strong financial capital of Amazon

Global revenue of $61 billion in
2012

$1 billion by 2015
Demand potential of Indian online
market : $500 million

Set of beliefs

Set of beliefs

Indias online market expected to

grow by 100 percent
Compared with Alibaba & Ozon;
Flipkart better chance of survival

Indian e-retail market in India is

hypercompetitive implying both
co-exist profitably

Brand image

Venture capitalists

Better brand image, wider

selection, lower prices & faster
delivery
Philosophy of growth over profits

Scale up with the help of VC for

funding, IPO in 2015/26
Focus on customers shopping
through mobile phones

War: Flipkart Vs. Amazon

Flipkart raised $1
bn, which was
the largest ever
in
ecommerce
segment
Amazon
announce $2 bn
investment just
the next day.

On big billion day, if you open bigbllionday.in, it redirected to amazon.in

Mobile App: The Changing Consumer Pattern

http://searchenginewatch.com/sew/study/2332195/30-of-ecommerce-site-trafficcame-from-mobile-in-2013-study

Market Place vs Direct model

Transaction
Transaction

Inventory-led Model

Marketplace Model

Flipkart switched from Direct E Retail to Marketplace because of:

a. Competition
b. Regulation
FDI policy in India does not allow companies having FDI to operate Direct Model of E-retail, which
forced many companies including Flipkart to change their model to Online Marketplace

Customer preferences
Parameters

Flipkart

Amazon

Search Engine

Search engine is good but have to

invest in technology to match that of
amazon

Search engine is far superior than

flipkart, Technology

Online shopping
experience

Hassel free shopping experience

Vast Product mix, its enviable

consumer reviews from across the
globe

Convenience

Highly convenient

Highly convenient

Price

Customers still find a wide gap b/w

flipkart and other online stores

Perceived to be offering lower prices

Brand (trust)

Since it introduced online shopping

for the first time in India, it has lot of
trust amongst consumers as Home etailer

It is banking on its global brand

image to build trust amongst Indian
customers , Good packaging/Quick
deliveries is the usp of Amazon

Refund

Easy return and refund policy

Easy return and refund policy

Promotions

Cannot match Amazon in best prices

High financial muscle power gives

promotions an edge over its
competitors

Perceived risk(security)

Moderate

Moderate

Is Amazon really more famous than Flipkart: Google Trends

Item

News

Flipkart raises $180 mn

Flipkart raises $210 mn

Samsung Galaxy available for 19499 at Flipkart

Challenges faced by Flipkart

Imitation of Jabong
Competition on the basis of prices, user friendliness of the website,
product options, variety & speed of delivery
Aggressive marketing strategy by Jabong (3 times higher)

Entry barrier
Low entry barrier; Market was under developed due to low penetration
rate of internet usage
Unique positioning of online retailers was almost negligible

Supply chain issues

Frequent complaints of non-delivery and late delivery
Multiple bookings from multiple third-party retailers led to delay in
reconciliation

Recommendations

The Way Forward

The deal oriented mindsets

Discounted prices are a big crowd puller for online stores across globe. A global
study revels that price remains the topmost factor for 64% of the consumers while
choosing an online store for making purchases however it is no the only factor

Price sensitive customers on a look

out for good bargains
E-tailers in a bid to acquire customers
offer discounts,often below cost price
A high customer acquisition costs
an avg. of Rs.1000 /customer
Each customer needs to transact at
least 3-6 times for a player to justify
such costs

Enhance product &

Improve interface

Efficient order fulfilment

Build trust & loyalty via

service offerings by
having the latest design &
variety

experience to overcome
the try touch and feel
barrier

by having deliveries at
customers convenience

online assistance, friendly

returns & social media
presence

Source: http://www.rasci.in/downloads/2012/e-tailing_%20india_pushing_retail_frontier.pdf

Private Labels Where the next battle

Private labels can:
Create value & build brand identity: E-retailers can use the traffic coming to their sites
to promote their in-house brands, create touch points and tie-up with celebrities
Offer high margins & revenues: Private labels offer huge margins. E-tailers make about
35-45 percent from regular brands while private labels contribute anywhere between 60
and 65 percent gross margin.

Myntra retails its own fashion products, has about 10 private

labels, which account for about 20% of its sales
Ensure supply consistency
Offer wide range of products
Enhance customer engagement

The differentiated buying experience

Create a shopping experience
equivalent to in-store
Currently, customers may be shopping for
something entirely different than the last time
they were onsite but are still presented with
images and offers of items they looked at the last
time. This leads to customer frustration, wasted
time and a missed opportunity by the retailer to
more quickly get the customer what they want.

Foray into M-retailing

India is the 2nd largest mobile
phone market in the world
Smartphone penetration in
India is very high
Increasingly easy access to
cheap smartphones

Solve customer pain

points
Virtual try-on & Virtual fitting room
Consolidating orders into one
delivery

Create a personalised customer profile

The profile should contain shoppers
information like vital stats, their lifestyle,
tastes and preferences, typical shopping
habits, music they listen to, etc.

Let customers choose their

delivery options/slots.

When a customer logs in to their profile

Their preferred music sets in. They get
recommendations based on their pre fed
information and what they are searching
for at that moment. Suggestions like
what should go with what etc. They
should also be able to post fashion
related queries which could be answered
by fashion designers. In short, recreate
the experience of physical shopping
coupled with additional services.

Source: http://www.accenture.com/Microsites/retail-research/Pages/consumer-research-results.aspx#results

Enable more customer to share

product/service reviews across
social media so that more people
can benefit from it

Leveraging Social Media

Platforms
o Facebook selling: set-up
storefronts on FB to help
consumers buy products
o Increase traffic & interaction
on twitter and Facebook
through interesting contests

Enhance Website Interactiveness

o Virtual Fitting Room: Enables trying products virtually
o Co-shopping: Enables users sitting in different locations
to view the same product page and chat in the same
window to discuss about the product, thereby assisting in
the purchase decision
o Customer Tagging: Enables registered consumers to tag a
certain product (describe or comment on it) that acts as a
guide for other consumers

More than just E-tailing

o Fashion blogs and videos capturing
the latest haute couture
o Online store radio customized to the
visitors music preference
o Artwork and information on each
brand that is carried

Innovative & Integrated loyalty

programs : online, in-store, on social
media, via mobile and tablet Loyalty
programmes that give incentives /
discounts on bundled purchases

Efficient delivery & return mechanisms

o No questions asked return services for loyal customers
o Delivery scheduling according to customer convenience
o Ensure proper product packaging to avoid spoilage etc
o Aligning & upgrading vendors to e-tailers requirement for
quick delivery
o Creation of B2C logistics capabilities for last mile delivery

Convenient Payment options

> Innovative payment solutions
like prepaid cards, EMI options.
> Promote usage of net banking
and credit cards by incentivizing
payments (e.g. additional
discounts on use of these )

Further Fine Tuning E-Commerce Practices

Past
Satisfied customers are 6 times
more likely to purchase
Acquisition cost is
retention cost*

5-6 time

Future

Ross, 2005

Personalization &
customer
experience

Customer
Lifetime
value

Adding
Human
Touch

Cross-selling, Up-selling
by tailoring the offering

Present
Online interface lacks the human
interaction and feeling. A call
made after high value delivery will
create stronger relations. Big
Billion Dollar Apology was a good
example by Flipkart

Further Fine Tuning E-Commerce Practices

Ensure favourable outcomes in videos that compare

Flipkart and Amazon

One thing that Amazon does not have but Flipkart does
have, is Indian-ness. May be Flipkart can try out
emotional patriotic appeal in its marketing
communication to hold ground against Amazon