Key Issue

1 . Flipkart’s 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

Top reasons for buying online

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

Major Drivers of E-Tailing

Technology Penetration in India

Predominant Youth

Demographic

Changing Consumer Lifestyle

- Emergence of time poor yet brand aware

consumers

- Rise in purchasing power of consumers in

small cities15 24 38 58 91

139224

334

504

0

100

200

300

400

500

600

Online Retail market size & growth in Rs. Bn

Indian E-Commerce Space

Flipkart

Background

• 1/5 of the online retailing market share with a market valuation of $1.5 bn

Objectives

• To become Market leader with dominant market share across different categories

Strategy

• Preference for growth and customer delight over profits

Breakeven

• Need to make sales of $2 bn in a year to break even

Product categories

• Started with books and diversified into 12 product categories

Hybrid Model

• Own Inventory based model to Online Market place Model

2007

FOUNDED

2010

- WE READ, a social

book discovery tool

- Started offering 'Cash

on Delivery (COD)'

2011

- MIME 360, digital

content platform

company

- Chakpak.com, a

Bollywood news site

that offers updates,

news, photos and

videos.

- Launch of E-wallet

2012- Letsbuy.com, an

Indian e-retailer in

electronics

- Flyte Digital Music

Store (February )

2013

• April- Launch of

Marketplace

platform, and Ekart

Logistics

• June - Shutdown of

Flyte

• Launch of 'One Day

Delivery‘ (Dec.)

• Launch of PayZippy,

a payment gateway

2014

• 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

Timeline

Which customers?

• urban middle class population

• well versed in using technology

• comfortable shopping online

Which needs?

• Books & Apparels

• music to videos

• mobile phones to computers

• healthcare to personal care products

Which Relative price?

• discount

Value Proposition

110

20

150

200

160

0

50

100

150

200

250

2009 2010 2011 2012 13-Jul 13-Oct

$ million

Flipkart’s Round of Funding

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%

Flipkart’s Competitor’s

13173 12649 1242511924

8447 8109

0

2000

4000

6000

8000

10000

12000

14000

Unique Visitors (000's)

Top E-Commerce Site by Traffic

No of categories of products

Reach

HIGH

LOW

10 20 30 40 50

E-Commerce Strategic Groups 2012

No of categories of products

Reach

HIGH

LOW

10 20 30 40 50

E-Commerce Strategic Groups 2014

FREE delivery of

products

Competitive

Pricing

One-day Delivery

GUARANTEED

Entry of Amazon- Predatory Pricing

Analysis & Insights

Background

• Strong financial capital of Amazon

• Global revenue of $61 billion in 2012

Background

• $1 billion by 2015

• Demand potential of Indian online market : $500 million

Set of beliefs

• India’s online market expected to grow by 100 percent

• Compared with Alibaba & Ozon; Flipkart better chance of survival

Set of beliefs

• Indian e-retail market in India is hypercompetitive implying both co-exist profitably

Brand image

• Better brand image, wider selection, lower prices & faster delivery

• Philosophy of growth over profits

Venture capitalists

• Scale up with the help of VC for funding, IPO in 2015/26

• Focus on customers shopping through mobile phones

Flipkart Vs. Amazon

War: Flipkart Vs. Amazon

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

• Flipkart raised $1

bn, which was

the largest ever

in ecommerce

segment

• Amazon

announce $2 bn

investment just

the next day.

http://searchenginewatch.com/sew/study/2332195/30-of-ecommerce-site-traffic-

came-from-mobile-in-2013-study

Mobile App: The Changing Consumer Pattern

Flipkart switched from Direct E Retail to Marketplace because of:

a. Competition

b. Regulation

Transaction

Transaction

Inventory-led Model Marketplace Model

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

Market Place vs Direct model

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 e-

tailer

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

Customer preferences

Item News

A Flipkart raises $180 mn

B Flipkart raises $210 mn

C Samsung Galaxy available for 19499 at Flipkart

Is Amazon really more famous than Flipkart: Google Trends

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

Challenges faced by Flipkart

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 &

service offerings by

having the latest design &

variety

Improve interface

experience to overcome

the try touch and feel

barrier

Efficient order fulfilment

by having deliveries at

customer’s convenience

Build trust & loyalty via

online assistance, friendly

returns & social media

presence

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

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

Private Labels – Where the next battle

The differentiated buying experience

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

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

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.”

Create a personalised customer profile

• The profile should contain shopper’sinformation like vital stats, their lifestyle,tastes and preferences, typical shoppinghabits, music they listen to, etc.

When a customer logs in to their profile

• Their preferred music sets in. They getrecommendations based on their pre fedinformation and what they are searchingfor at that moment. Suggestions likewhat should go with what etc. Theyshould also be able to post fashionrelated queries which could be answeredby fashion designers. In short, recreate

the experience of physical shopping

coupled with additional services.

Solve customer pain

points

� Virtual try-on & Virtual fitting room

� Consolidating orders into one

delivery

� Let customers choose their

delivery options/slots.

� Enable more customer to share

product/service reviews across

social media so that more people

can benefit from it

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 )

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

visitor’s 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

Personaliz-ation &

customer experience

Cross-selling, Up-selling by tailoring the offeringPast

Customer Lifetime

value

Satisfied customers are 6 timesmore likely to purchase

Acquisition cost is 5-6 timeretention cost*

Present

Adding Human Touch

Online interface lacks the humaninteraction and feeling. A callmade after high value delivery willcreate stronger relations. Big

Billion Dollar Apology was a good

example by Flipkart

Future

Ross, 2005

Further Fine Tuning E-Commerce Practices

Ensure favourable outcomes in videos that compare Flipkart and Amazon

Further Fine Tuning E-Commerce Practices

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