Flipkart, India’s largest e-commerce company, is gearing up for competition from the world’s largest e-tailer Amazon.
Flipkart recently raised $200 million from existing investors, making it the single largest round of funding in the Indian ecommerce market. The Bangalore-based company is on a growth track without worrying about profits for a next few years. It is bracing itself for challenges arising from its transition to being a market place from being just a book e-tailer.
Sachin Bansal, founder and CEO, speaks to
You have been talking about changing your business model. What does that mean for the company? Has the process started?
Moving to a market place is more like an evolution and we have evolved.
It is a bigger place and a more scalable model with larger scope of capturing a bigger share of the market.
The process has started but it will take a few years - at least 5-10 years to make a complete shift.
Does this mean you will be doing away with the original model?
No, it is a mix thing. We are moving very fast and already have 500 sellers on our platform. We are targeting one lakh sellers on our site. By end of FY 15, we hope to acquire at least 10,000 sellers.
Of late, there have been several consumer complaints on non-delivery, delayed delivery and cancellation as well. Is this due to the transition? How are you tackling the issue?
Every time we make changes, there are challenges. We are facing some problems as we overlooked a few things. Service is in our blood and we are very proud of it. Recently, I would admit that there were a few problems and we are agonised due to this. But we will bounce back. It is a temporary mess on the supply chain side. We are working towards fixing the problems in a few weeks time.
The last round of funding will be used in setting up a good supply chain and logistics infrastructure. It will also help filter out good sellers from bad sellers. Also invest in creating a process that will manage the same and also develop talent.
Does moving to a market place mean more profits? Is the company nearing the breakeven point?
In India e-commerce has happened, but it is still far behind the developed countries. Currently, it is at $1 billion and is expected to reach $76 billion by 2020. Our funding proves that investors are now willing to put their money in this growth story. The focus at this point in time is to get more customers to shop online and make it a regular activity. Right now, it is about achievements and not thinking about profits for the next few years.
Are you shelving your initial public offer (IPO) plans for now?
We haven’t started thinking about IPO. We are well funded at the moment which will take care of our growth for a few years. That apart private markets (private equity and venture capital) are looking good at this moment. Investors have gained confidence.
Any acquisitions on cards as you have raised a large amount recently?
We keep looking at opportunities. We are interested in two types of companies – a company which is doing something we haven’t or can not do; second, companies with technical expertise that can help us scale up. We are in talks with 20 companies at the moment.
You have discontinued selling consumer durables, any specific reason?
We will be soon coming back with consumer durables. We are building a different supply chain for shipping large and bulky items, this will also include furniture.
We will soon have furniture as a category. We are shipping electronics items to only 50 cities as of now. With the new supply chain, we will be able to serve to each and every customer having a broadband connection.
There have been rumours of several e-commerce firms trying to get into pharmacy. Any plans on that front?
No, we have not considered it as a category.
Amazon has entered the Indian market and many others are planning to enter. Besides, several offline players are also betting big on e-commerce. Does this bother you?
We were very sure that as soon as the market starts getting bigger, several players, including the brick and mortar players, will be making plans. This means that the market is on an upswing and we are well prepared for that. Competition is expected and our strategy will be to maintain our leadership position.
What will be the next game changer for Flipkart?
As the marketplace is getting bigger, the issues related to payments are also getting bigger. We launched payzippy.com, a safe and secure payment gateway. We are looking at something exciting here. The new technology will help reduce the payment failures, help customers manage their payments by allowing them to store their money online and more reliable. We will be announcing it soon.