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The Flipkart Phenomenon-Revolutionizing Online Shopping in India

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The Flipkart Phenomenon-Revolutionizing Online Shopping in India
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The Flipkart Phenomenon-Revolutionizing Online Shopping in India

  1. 1. The Flipkart Phenomen on-R e v o lu t i o n i z i n g O n l i n e S h o p p i n g i n I n d i a A Case study By Naushad Sultan Talukdar Email-id: naushadnst@gmail.com
  2. 2. T h e F l i p k a r t P h e n o m e n o n - R e v o lu ti o n i z i n gOnline Shopping in IndiaFlipkart is an Indian e-commerce company synonymous to online shopping as LIC is to lifeinsurance in India. In its initial years, Flipkart focused on online sales of books but it laterexpanded to electronic goods and a variety of other products. The cash-on-delivery modeladopted by Flipkart has proven to be of great significance since the credit card and net bankingpenetration is very low in India.E-commerce RevolutionThe e-commerce is changing economy and affecting all aspects of business globally. Today, nocompany can afford to ignore e-commerce. It is even predicted that e-commerce will becomepart of the „core‟ business functions just like accounting, marketing, etc. India is currently inthe midst of an e-commerce and m-commerce revolution. The arrival of the Internet, followedby the escalating growth of Web-based businesses is leading to e-commerce both on theB2B and the B2C sides. The e-commerce trends in India are in perfect accordance with thesweeping changes taking place in the global markets.The sector started in India during 1999 with companies such as Firstandsecond.com and Fabmartaspiring to become the Amazon of India - the biggest online provider of books. Rediff was oneof the earliest companies to become a part of the e-commerce wave in India and startedoperations with knick-knacks. At that point Apnaloan was one of the leading providers of onlineloans and Sify.com had become a part of the industry as well. Shaadi.com, a leading marriageportal, also started its operations at around that time.Some of the aspects of Indian e-commerce that are unique to India (and potentially to otherdeveloping countries) are Cash on Delivery Direct Imports. Cash on Delivery as a preferredpayment method. India has a vibrant cash economy as a result of which 80% of Indian e-commerce tends to be Cash On Delivery. Direct Imports constitute a large component of onlinesales. Demand for international consumer products (including long-tail) is growing much fasterthan in-country supply from authorized distributors and e-commerce offerings.
  3. 3. FLIPKART.COMHistory of Flipkart.comSachin Bansal & Binny Bansal graduated from IIT-Delhi with a degree in Computer Engineeringwas working forAmazon.com before quitting and launching their own company Flipkart.com.Flipkart was launched in 2007 with the objective of making books available to everyone who hadinternet access initially they used „word of mouth‟ marketing to popularize their company. A fewmonths later, the company sold its first book on flipkart.com-John Wood‟s Leaving Microsoft tochange the World. Along with time, it later diversified across various categories including andin 2010 branched out to selling CDs, DVDs, mobile phones and accessories, cameras, computers,computer accessories and peripherals, and in 2011, pens & stationery, other electronic items suchas home appliances, kitchen appliances, personal care gadgets, health care products etc. Furtherin 2012, Flipkart added A.C, air coolers, school supplies, office supplies, art supplies & life styleproducts to its product portfolio.Flipkart is rapidly expanding its network of warehouses, distribution centers, procurementoperations and 24/7 customer support teams. The company has its own delivery network in37 cities and is set to expand this in the current financial year. With a team of around 4,800members, the company operates from offices and warehouses in seven Indian cities.Today, as per Alexa traffic rankings, Flipkart is among the top 20 Indian Web sites and has beencredited with being Indias largest online bookseller with over 11 million titles on offer. Flipkartbroke even in March 2010 and claims to have had at least 100% growth every quarter since itsfounding. It has registered sales of nearly 2.5 million items across all categories and sells morethan 20,000 units per day or 14 items per minute. With path-breaking features like Cash/Card onDelivery, 30 Day replacement policy and EMI options.Marketing EffortsDespite of being on online platform, Flipkart has started with word of mouth marketing strategybecause Flipkart was started on a modest budget. The initial capital was sourced from personalmoney and did not have a huge marketing budget. Hence it was relied heavily on word-of-mouthmarketing to promote the site. Moreover, when it comes to mediums like e-commerce, word-of-mouth marketing works extremely well as customers rely on the experience and feedback of theirfriends and peers before they try out a site.India with its growing number of users makes Facebook a very potent force for marketing forEcommerce websites, flipkart is no more exception in this case. Flipkart in its social mediainitiatives aims at facilitating an easier conversation channel for customers and users.Conversations are to the point and are targeted at specific issues, thoughts and ideas.
  4. 4. Flipkart.com began activities to make its presence felt on Facebook and Twitter about a year ago.The company has also used LinkedIn to connect with people. The popularity of Flipkart hasgrown through recommendations, people recommending the site to their family, friends and co-workers. And what better platform than social media to leverage „word-of-mouth‟! Flipkart.comrecognized that using social media is about being human. The people who manage their channelsinfuse Flipkarts culture and personality in what they do or say in tandem with their ownpersonality.“Social Media have feedback mechanism built into them, which needless to say benefits both thecustomer and the brand,” says Mr. Sachin Bansal, CEO and Co-founder of Flipkart.com. “Whatskey is to listen to what is being said about you (as opposed to hear), and for that matter beingsaid directly to you. Users will be brutally honest if you give them an opportunity. The onus thenlies solely upon you and your brand, about what you do with the feedback. Thats where weveseen tremendous benefit.”“Transparency and Honesty is the key. If you value these traits as an organization, Social Mediawill help amplify it,” adds Mr. Bansal.Flipkart very wisely used SEO (Search Engine Optimization) and Google Ad-words as themarketing tools to have a far reach in the online worldThere were particularly 2 things that are worth mentioning.a. Yahoo News: It was really interesting the risk they took, until last year Flipkart had a feed ofYahoo News on its product pages to increase the keyword density and introduce „original‟content on the page, as the product description across all books sites is same. This was removedlater as it was violating the Yahoo‟s copyright on using the service for a commercial site.b. We Do Not Sell Used Books: This is one more SEO trick. If we check theWaybackmachine we will find the following text.  We Do NOT sell old books or used books. All the books listed at Flipkart.com are new books.  The books listed at Flipkart.com are NOT available for free download in ebook or PDF formatThe magic of this text is that if one search for “<book name> free ebook” or “<book name> pdfdownload” would always get Flipkart among top results.as a result Flipkart.com has a strong presence on Facebook, with a staggering number of fans.The company has more than 1,112,431 fans, 15,547 talking about this and has used easy,
  5. 5. interesting conversations to engage them. Flipkart.com has more than 22,500 followers ontwitter. Flipkart.com‟s Alexa global ranking is 262 while its India ranking is 13.TECHNOLOGY ADAPTIONFlipkart Drives Innovation through Intelligent use of ITThe objective was to allow Flipkart‟s engineers to launch multiple versions of its website in realtime, IT drives a new level of innovation.The Main idea:Amod Malviya, VP engineering, Flipkart, that came with a caveat. “We had to be careful to notlet our rapid growth kill the innovative spirit of the company,” he says. That‟s a valid fear. In thebusiness of innovation, complacency holds no ground. Malviya knew he would have to empowerusers with new tools to innovate and stay ahead of the pack. But creating a new process wasn‟tthe solution. “Processes force people to do things in a certain way, killing their creativity. If youremove the bureaucratic headache, people are encouraged to think freely," says Malviya. Whilehe admits that this approach opens new doors to risk, he knows that it also encourages a fearlessculture of innovation—a must-have in the e-commerce business.The Project:With that goal in mind, Malviya implemented a framework. The framework has twocomponents: One measures the performance of the website through various defined metrics. Thesecond, more interesting one, uses an A/B framework (used to test the success of web marketingcampaigns), allows multiple versions of the site to be live simultaneously. This helps thecompany conduct live experiments by siphoning off a small portion of the traffic and studyingthe results. Both components work in tandem. The metrics tool is a dashboard that measures thewebsite‟s performance on various parameters. For example, if the transaction rate falls below acertain limit, systems are immediately alerted. With the A/B component, Flipkart‟s engineers canalso rapidly implement their ideas. “When someone proposes a new idea, a lot of precious time isspent debating what-if scenarios. Now, we can implement an idea, while mitigating its risks.”For example, whenever an engineer wants to change the design of the homepage, the A/Bframework redirects 10 percent of Flipkart‟s traffic to the new design. They can evaluate theimpact of the change with the metrics collection tool. If it leads to a dip in sales, they canimmediately roll it back, and less than 10 percent of traffic is impacted.“We started streaming metrics on large screens on the engineering floor so that engineers couldtrack performance in real time—unlike most websites that review their performance only once ina week or a month,” says Malviya.This has been a huge hit with business users who can nowfloat new products and toy with business ideas.
  6. 6. Flipkart Scales PHPFlipkart generates thousands of sales every day which means the engineering team that keeps theshow going have a tough task to do. Even a minute of downtime would mean serious loss ofbusiness and the responsibility is quite high on the engineering team. So the Engineering team atflipkart scales PHP to manage a highly scalable environment.Flipkart uses Open Source Technology which is flexible, inexpensive and well trusted. FlipkartRun on LinuxHA instead of expensive hardware LBs. The site was moved from Apache to nginxfor better performance and as a results 10x improvement in performance.Flipkart Supply Chain ModelThe role of logistics in the successful functioning of an e-commerce venture is indispensable. Allthese innovative services will be ineffective if the products do not reach the customers on time.Here are some Best Practices of the Supply Chain of Flipkart:Building the Suppliers baseThe Company has established a network of more than 500 distributors and only stocks frequentlyordered items. Items like the Long tail are almost always sourced from suppliers in real time andas and when the customer places an order.Building Infrastructure for OperationsThe Company has 4 offices in 4 metros cities with more than 500 employees. Warehouses of thecompany are located in 7 cities including the metros. Company has tie-ups with more than 15courier companies like Blue Dart, First Flight etc. to deliver their products and Indian post forareas where courier do not reach.The Process of Supply ChainThe first step in buying the products like books online from the Filpkart.com site by makingpayments using payments options like credit/debit card, cash-on-delivery, net banking,cheque/DD and money order and enter the phone number and address where the items need to bedelivered. Depending on items purchased they are packed and shipped accordingly for examplemobile phones and books are packed differently as per requirement and also all items havetransit insurance against theft and damages that may be caused while they are in transit. Flipkartbears the cost of delivery and this make them give a reason/motivator for improving efficiency atevery point of supply chain. This also makes them differentiate from their competitors.Now for delivering the items depending upon the area where the item need to be delivered eithercourier, Indian post or own internal logistics arm is used. The delivery time varies between lessthan 24 hours and 3 weeks depending on the location and availability of the product like the
  7. 7. products which are imported take 3 weeks time to get delivered to the customers. The inter-city,trans-zone deliveries are made using air cargo. For satellite cities and others in close proximity,products are transported overnight by train or truck. For the local parts of the cities where thewarehouses of the company exist products are delivered using two-wheelers, bicycles, or on footdepending upon the proximity of the place and because of this many of the deliveries are madewithin a day of the order being made. All the Team Members have been trained to workefficiently to meet customer expectations.Use of Information system The Company use sales to predict the inventory levels. The warehouses are split into multipleareas — inventory, packing, shipping and so on. The stocks are replenished every 24-48 hours.In the Back End, Flipkart stores details of all the transactions that need to be carried out. Theyhave an understanding with their associates for order tracking, reconciliation and MIS(Management Information Systems) reports. The private courier companies in turn have theirown ways of tracking every package. The customer is also updated about the status of hisshipment via message, email or through the website. When the product needs to be returned thendue to the companies understanding with the courier companies it happens without any disputesor problems efficiently. Flipkart takes care of the after-sales needs of its customers with regard todelivery of an item or addressing grievances including delayed delivery by the logistics partner,or addressing issues when an incorrect product is delivered. In the case of electronics, warrantyand after-sales service is largely the responsibility of the manufacturer. Flipkart does howeverfacilitate interaction between the customer and manufacturer/service center as and when the needarises.
  8. 8. Flipkart AcquisitionFlipkart has acquired many organizations for expanding its business and to give a good experience to itscustomer in online shopping.Year Name of the Description Organization2010 WeRead A social book discovery tool. The stated goal was to give Flipkart a social recommendation platform for buyers to make informed decisions based on recommendations from people within their social network.2011 Mime360 Mime360, a digital content platform company2011 Chakpak.com a Bollywood news site that offers updates, news, photos and videos. Flipkart acquired the rights to Chakpak‟s digital catalogue which includes 40,000 filmographies, 10,000 movies and close to 50,000 ratings.2012 Letsbuy.com Letsbuy.com is Indias second largest e-retailer in electronics. Flipkart has bought the company for an estimated US$25 million.Letsbuy.com had been closed down and all the traffic of Letsbuy is diverted to Flipkart
  9. 9. StatisticsHigh Impact Search Queries for flipkart.comPopular queries that are relevant to this site and areactively targeted by competitors advertising on searchengines. Click on queries below to discover who isadvertising for these queries.Query Impact Query QCI Factor Popularity Query Competition Top Search Queries for index Flipkart.com buy books online 3.98 32 57 Query Percent offlipkart.com 3.59 37 16 Search Trafficonline shopping 2.85 48 54 flipkart 20.72%buy books 1.76 27 58 flipcart 1.74%www.flipkart.com 1.21 29 14 Flipkart.com 1.19%Watches for men 1.13 30 48 www.flipkart.com 0.46%samsung galaxy 1.10 65 26s3 Buy books online 0.36%buy laptops .85 19 59 filpkart 0.29%Flipcart.com .79 26 15 Flipkart.com 0.27%Demographic Information Audience Demographics for Flipkart.com
  10. 10. user visits following sites immediately preceding User visits following sites immediately afterflipkart.com leaving flipkart.comFlipkart Revenue **Revenue for the FY 2011-2012 is expected to be 5000 million
  11. 11. What makes Flipkart a super successful ecommerce portal?Customer ServiceThey always strove to provide great customer service. Flipkart customers are more happy thanwith some of their competitors like Tradus.in, Indiaplaza.com. The founders passion for theconsumer Internet space manifests itself in the brand, which is synonymous with customerservice and satisfaction. „Dont count your customers before they smile is the companysoperating mantra.First Mover AdvantageFlipkart still enjoys the top-of-the-mind brand recall as far as buying books is concerned. Otherportals such as Uread and Dial-a-Book are still struggling to register their brands into theconsumer‟s mind. Over the years, Flipkart has diversified quickly; they now sell electronics tomobiles to home appliances.Cash on DeliveryOne area where Flipkart has scored strong is reading the virtual Indian consumer mind. Thoughthe ecommerce user has matured, a large segment is still hesitant to make transactions usingcredit/debit card. The cash-on-delivery model has undoubtedly got them with going with the webconservatives.Well-MarketedIt initially started with word of mouth and social media, and the Bansals have carried on themomentum well. Apart from investing in technical, operational and logistical capabilities,Flipkart, like any other strong brand, have invested a lion‟s share in advertising, thus giving thebrand a significant visibility. Today, Facebook likes stand close to 1 million.Easy to BuyAgain, Flipkart has understood the factors that dissuade an online user in India, by allowing themto buy products without registering. Alternatively, there‟s Facebook and Twitter sign-in. Thismakes its user to buy a product without registering and remembering another online password.Moreover, one get a 15-20% discount on every book purchase and free shipping for every orderof more than Rs. 200. I can tell from my own experience that the delivery is superfast if theproduct is in stock.E-commerce in the DNAA critical factor in Flipkart‟s success, especially during the initial years, is that the founders areex-Amazon employees, hence bringing in the required expertise and skillset needed to run and
  12. 12. grow an ecommerce portal. Sure they possess great entrepreneurial skills too, which whenblended with vertical knowledge, has spun great success for the 5 year old Flipkart.Customer Retention RateFlipkarts reason of success is that it has a great customer retention rate, it has around 15 lacindividual customers and more than 70% customers are repeat customers i.e. they shop varioustimes each year. Acquisition of customers can cost five times more than retaining currentcustomers. The company targets to have a customer base of 1 crore by 2015.Future Prospects:India has an internet user base of over 100 million which shows that the e-commerce industrywith the increased internet penetration will be the service sectors growth engine in India. Amongthe challenges faced by the industry is its dependency on the service providers like suppliers,logistics service providers, etc. whose service in not up to the expectation and are affecting theservice of the online companies. Seeing the prospects of growth a lot of new online retailers havecome up and there is a price war going on to attract more and more customers which is puttingpressure on the profitability of the companies so it has become extremely important to managecost to increase profits which is only possible by building an efficient backend- a nationwidedelivery network, warehouses , inventory management , logistics, efficient teams to manage allthis therefore supply chain management becomes an important factor on which companiesdepend to sustain in this industry. Flipkart obtains funding from various sources which is beingutilized by the company to include more diversified product, innovation, for strengtheningsupply chain capacity and upgrading technology platforms, including automation at warehouses.

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