Unicornomy

The Unicorn Economy Decoded

B2B / B2C / E-COMMERCE / MARKETPLACE / AGGREGATORS / INDIAN UNICORN STARTUPS / TECH STARTUPS

Business Model of FlipKart

Posted on March 12, 2016 by Unicorn Economy / 23 Comments

Business Model of FlipKart: An Analysis by Unicornomy.com

FlipKart.com the Indian Unicorn The poster boy of the Indian StartUp Ecosystem, is the center of attention
in everyones living room at the time of shopping for near and dear ones. While shopping and looting the
numerous discount offered by the e-commerce giant many a times people wonder how on earth does
FlipKart make Money? Does Flipkart even make money? What is the Business Model of FlipKart? How long
would FlipKart continue to give discounts to lure customers in? Here is a comprehensive analysis of the ECommerce Giants Business Model for the aspiring learners.

About FlipKart, Facts, Founders, Funders &

Funding
Before we move on to the Business Model of Flipkartor on how does FlipKart make money,here are couple
of things you should know about FlipKart:
Contrary to the belief that FlipKart today is an Indian Company This is not true anymore. Flipkart.com is
the name of the website owned by FlipKart Internet Pvt. Ltd. (Bought over from FlipKart Online Services Pvt.
Ltd.) which in turn is owned by FlipKart Pvt. Ltd, Singapore, Yes its now headquartered in Singapore. This
Singapore based company owns majority of other companies and is a complex structure of many entities
inter-held by various other companies ultimately owned by FlipKart Pvt. Ltd. Singapore (This structure is
covered at the bottom in detail). FlipKartis essentially an E-Commerce companyselling a wide variety of
goods from ear-phones to high end consumer electronics and everything in between the two.
Funding received by FlipKart:Appx 3.5 Billion USD. (as of Janurary 2016, Excluding the Credit Line from ICICI
Bank of 450 Cr).
FlipKart Founders: Founded in 2008 by Sachin Bansal & Binny Bansal (Both Ex-Amazon.com Employees).
Valuation of FlipKart as in Jan2016: 15 Billion USD (Larger than BigBazaar) recently Morgan Stanley
downgraded FlipKarts Value of shares held by them by 25% i.e. Downward Final Valuation of about 11.25
Billion USD.

Business Model of FlipKart (FlipKart.com

Website)
How Does FlipKart work:Flipkart is an e-commerce portal, B2C shopping Portal, for Indian customers or atthe-moment, customers ordering the goods for delivering in India. The model here is : Portal > List Sellers
who sell the desired portfolio products > Get customers browsing through the products > Create appealing
discounts > Customer Shops for the desired products > Seller / Flipkart ships the product to customer >
Product Accepted and Not returned back > Seller gets his agreed price of the product minus the commission
charged by FlipKart for doing everything they do. Thus the core bread and butter of the Model is X%
commission on the total sale value given to the seller
The sale can happen via multiple channels as listed below & For all the sale achieved by FlipKart for a
particular seller FlipKart will charge a percentage (%) cut on the total sale amount excluding taxes.
1. Direct via Website
2. Direct via Web-App
3. Direct via Mobile App (Android or iOS or others)
4. Direct via Tele Sales (Customer calling and Placing order Happens rarely now)

5. Via Affiliate networks (Bloggers, Coupon Websites, Review Websites etc)

6. Social Buy
The percentage commission varies on the type of product and the type of sale that FlipKart makes. It may
range anywhere between 5% to 20% of the sale value (excluding taxes and discounts). The following is an e.g.
of how the billing of FlipKart sale will be recorded in FlipKarts financial books:
Customer A, B & C Purchase 5 Products from FlipKart in a month and these products are a Book, a Stereo, A
Fridge, A Mobile Phone and a Bed sheet from 3 Sellers. Invoice for the Month for FlipKart looks like below
table (Click to Expand):

The total of Col I will be the total revenue of FlipKart from that particular sale, now the numbers here are
small and are taken for the ease of calculation in actuals these numbers are hefty and run into billions of
dollars (Ref: Total Loss of Flipkart for FY 14-15 was about 2000 Cr). This is the basic bread and butter for
FlipKart. There are other Revenue and Business Lines as well that FlipKart has. These are outlined and
explained in details below.
You may also be Interested in Reading: Amazon Business Model

Business Model of FlipKart (Company as a

Whole)
Now as I mentioned earlier in the above section that FlipKart is not an Indian Regulated company any more, it
is registered in Singapore and has many more subsidiaries to carry out related businesses to diversify and
derisk its revenue model from those of the competitors. Following are the various revenue lines that FlipKart
has for additional sources (allied to its core business) of revenue:
1. Web Portal (E-Commerce : Highlighted Above so not getting into the depth of this)
2. Web Portal Listing Fee and Convenience Fee (Sellers charged listing fee for selling on FlipKart and
Customers charged Convenience Fee for faster Delivery)
3. Payment Gateway (Governed by FlipKart Digital Pvt Ltd Earlier and now owned and operated by FlipKart
Payments Pvt Ltd Singapore, Website shows no more subscriptions by any one seems on the way to
shutdown for 3rd party users)
4. Logistics (FlipKart Logistics Pvt Ltd Singapore To ship products of sellers)
5. FlipKart Digital Media (Selling Ads (to sellers and brands) and other related products like co-branding
and co-advertising)
6. Myntra (Competing with its own online fashion category but a big boost to the overall online fashion for
FlipKart)

7. FlipKart Cash and Carry (FlipKarts wholesale division)

8. FlipKart Nearby(FlipKarts Grocery Division Now Shut Down, No description below)
9. Product Launch (Unofficial I think they do charge people to launch a product on their MarketPlace)

Business Model of FlipKart from Listing and Convenience Fee

FlipKart might start charging (or may already be charging) a listing fee for the sellers to be able to sell on its
platform, which eventually adds up to the total revenue of the company. Also the convenience fee billed to
customers for gift wrapping, faster delivery add up to the total revenue of the web portal.

Business Model of FlipKart Payment Gateway PayZippy

You may also be Interested in Reading: How does PayTM Make Money
PayZippy is a payment gateway just like any other of the 1000s of payment gateways out there and provides
service to FlipKart and the likes of other E-Commerce players out there. The business model is pretty simple
they charge a transaction processing amount to every transaction that goes through their payment gateway
infrastructure. How payment gateways make money is something that you need to read in detail. I will give
an overview of the various modes of payments here. Basically transaction processing charges differ from
mode to mode like it is lowest in Debit Card and Net Banking (around 0.75% to 1.00%) of the transaction
amount. Credit Card (1.5% to 2.25%), American Express Cards (3.00% to 3.50%) So depending on the mode
that the user selected to make the payment the e-commerce company will get an amount after retaining the
transaction processing charges e.g. I buy a Book for 1000 INR and pay using AMEX Cards via PayZippy the
selling e-commerce portal from where I bought the same would get 965.65(1000 * (1-3%*(1+14.5% ST))). And
similarly for other payment modes the transaction processing fee will be retained by payment gateway.

Business Model of FlipKart Logistics

Earlier EKart Logistics used to exclusively deliver FlipKart Sellers and ordered products, later on it got spun
off (removed from FlipKart) as a different entity that now ships for all platforms. Logistics company charges
sellers as other courier companies to deliver their goods to those users who have ordered the same from an
E-Commerce Player. Charges are flat depending on within city or inter-city or size of the package.

Business Model of FlipKart Digital Media

FlipKart sells three kinds of Ads as follows:
1. Co-Branded Banner Opportunities on Home Page: The Slider that you see on home page of FlipKart
presents opportunities to lots of sellers, brands and product launchers to present themselves to the
millions of pageviews that FlipKart generated on a daily basis. This is for a handsome fee that FlipKart
counts as the total revenue. (Picture SourceFlipKart.com)

2. Co-Advertised Physical Product across Publications: The large ads that you see in newspapers and front
pages of the magazines (if any) are shared with the brand that they are advertising. For e.g. If its a new
phone that is being launched and FlipKart hits the newspapers with a front page ad (the cost of ad is
shared with the other brand that is advertising the product).
3. Targetted Search Results: The moment you search for a product, FlipKarts algorithm decides which
sellers products come at the top. This space can be sold by FlipKart for additional revenue (I dont know
whether they are doing this as of now, but they will as news suggests)

Business Model of FlipKart from Myntra

FlipKart has its own Fashion Category but the sales and revenues that it achieves from Myntra is pretty high
as compared to its own sales. The revenues of Myntra are also accounted in FlipKarts total earnings.
You may also be Interested in Reading: How does Myntra Make Money

Business Model of FlipKart from WholeSale (Cash and Carry)

FlipKart recently started the cash and carry arm which caters to wholesale of goods to its seller base. Its very
similar to other cash and carry businesses (like Metro Cash and Carry) which is dedicated for Retailers,
WholeSellers (Basically B2B) the revenue from this line will be exactly similar to the Web Portal Revenue that
FlipKart gets from selling goods on its platform.

Business Model of FlipKart from Product Launch

FlipKarts enormous user base, daily visits and page views offer a fantastic way to launch any new product in
India. E.g. Xiaomi launched all of its phones and other products exclusively in partnership with FlipKart in
India. This gave FlipKart revenue in terms of margins on product sold for Xiaomi and the advertising revenue
from launching the products on its own platform.
You may also be Interested in Reading: How does SnapDealMake Money

This was the ultimate combo of the Business Model of FlipKart from all its revenue models across the product
chain and user base. Hope you love reading this. Please share and drop comments for any queries.
Disclaimer: The analysis of the business model of FlipKart or How does FlipKart Make Money is of the Authors
himself, neither the company (FlipKart) or its affiliates have confirmed the same to the author and the
descriptions, stats, facts and figures are either obtained through secondary web research or interrogation of the
users / sellers or other resources on the web. Please use your own discretion to use this info when required and
by continuing to read you agree to indemnify the author from all liability arising out of using this info on your
own.

Business Model of FlipKart, Does Flipkart Make Money, Flipkart Business Model, Flipkart Profitability, Flipkart
Revenue Model, FlipKart Valuation, How does Flipkart Make Money, How does Flipkart work, Revenue Model of
Flipkart

Unicorn Economy

View all posts by Unicorn Economy

23 Comments

Pingback: Analysis of a Payment Gateway Business Model

Pingback: PayTM Business Model & How does PayTM Make Money

Pingback: Amazon Business Model and How does Amazon Make Money

Pingback: Business Model of Myntra - Unicornomy Analysis

Pingback: How to Make a Killer Deck with this Pitch Deck Template

Dushyant Sawne
April 14, 2016 at 12:27 am

Fantastically put.. Was looking for such an explanation for long.. Thanks.

Unicorn Economy
April 14, 2016 at 12:37 am

Thanks Dushyant.

Sam
April 14, 2016 at 12:29 am

Ecommerce in India is a bubble. As usual, were 20 years behind the US. The internet bubble in the US burst in 2000.
We have about 4 years to go before everyone realises how poor the fundamentals of these companies are.
P.S. Amazon hasnt made money in 25 years.

Unicorn Economy
April 14, 2016 at 12:37 am

Hi Sam, Thanks for dropping by. Regarding bubble time will tell, but with amazon, both .com and AWS are 500
Million USD profitable since last financial year.

Sam
April 15, 2016 at 12:02 pm

Yes. After 25 years! And their stock got hammered that day.

pupul koley
April 14, 2016 at 12:35 am

superb analysis, can you also do snap deal ? they have three four investee co. which do not go with their ecomm
model, want to eagerly read that. tx.

Unicorn Economy
April 14, 2016 at 12:37 am

On the way

Chaitanya
April 14, 2016 at 7:51 am

Great read. Original content.

Please keep doing this work.Bookmark your site (first time I ever bookmarked any website based on one article)

Unicorn Economy
April 14, 2016 at 10:44 am

Thanks Chaitanya, Appreciate it.

Kunal Bansal
April 14, 2016 at 1:54 pm

Great Article. Clear, crisp and easy to understand. Will look forward for you to decoding other ventures. Will like to
see AirBnB and Alibabas Business model, if you can.

Unicorn Economy
April 14, 2016 at 5:39 pm

Thanks Kunal. both in pipeline.

ayush singhal
April 14, 2016 at 4:30 pm

really appreciate your work analysis. can you work on servicing and logistics sites.subscribe the newsletter.so we
connected with you and get updates time to time.

Unicorn Economy
April 14, 2016 at 5:44 pm

Thanks Ayush.

Senthil
April 27, 2016 at 6:37 am

Simple and to-the-point. Many thanks!

Question Flipkart gets commission on the listed price from the seller but makes (or has been making) losses
because it sells at a discounted price ?

Unicorn Economy
April 27, 2016 at 12:39 pm

Yes, not only by selling at discount, but also because of high marketing expenses and user acquisition cost.

Pingback: Unit Economics & Growing Your Startup 100X

Pingback: Business Model Examples Ultimate and Definitive Guide

Pingback: SnapDeal Business Model and How Snapdeal Works and Makes Money

 2016 Unicornomy
Powered by Eyes and Brain | Business Model Analysis by Unicorn Economy