Flipkart, which has proved a key revenue driver for Walmart, is planning a big thrust on groceries, where it is the number two player now and an under-penetrated segment where it sees considerable potential to add value for customers.

Though groceries are staples that everyone buys, in terms of e-commerce it is less penetrated along with the food segment and Flipkart intends to drive growth in this area, according to Chief Executive Officer Kalyan Krishnamurthy.

Krishnamurthy recently had a detailed chat with brokerage firm Jefferies, where he spoke about the opportunities in the Indian e-commerce market, its potential and Flipkart’s plans to cash in on those opportunities.

He pointed out that three-fourths of the e-grocery market was slotted delivery or traditional delivery “where we operate. That market is growing fast, and the opportunity size is huge.” The e-tailer entered the grocery segment in 2019 and has rapidly scaled up.

As the second biggest player, “we are doing well in grocery. That is the segment we want to work in and add value for the customers, as 99 percent of India is value-conscious. We think we can deliver value and selection along with speed while being operationally effective,” he said.

Travel is another segment where the company intends to expand, having onboarded 400 million users over the past 12 months. Travel and ticketing being digital-led, it is a market opportunity and the company has the capability, he said.

Vital component

Flipkart has become a very vital component in the overall growth of Walmart, which owns 72 percent stake in the homegrown retailer. In last month’s earnings call, Walmart CEO Doug McMillon said that Flipkart’s positive contribution margin was impressive and expanding while a lot of Walmart’s revenue growth, and gross merchandise value (GMV) growth was coming from its Indian subsidiary.

“We see great progress over there. They continue to be a strong player in the market that they operate in,” he told analysts.

He pointed out that Flipkart was able to scale up its digital infrastructure at a low marginal cost over the last three years to “where, now, we’re able to see that contribution profit continue to expand.”

Market expansion

Krishnamurthy expects the grocery segment to grow the fastest, followed by apparel & fashion, then general merchandise, home products, and mobile phones and electronics. Earlier, it was mobile phones that drove the e-commerce sales contributing about 45 percent to the gross merchandise value, but now growth there has moderated with higher penetration.

He pegged the Indian retail market at $900 billion, of which about two-thirds was food & grocery and other categories having the remaining share. The e-commerce market is about $50-60 billion and the bulk of this is catering to categories other than food and grocery.

The global e-commerce market is over $3 trillion, of which China has a size of $1.4 trillion and the US has close to a $1 billion. Krishnamurthy said that India had a long way to go, and it was well on its way with an expected annual growth of 25 percent over the next decade.

Flipkart, which has a GMV of about $23 billion, is also aiming to increase its presence in smaller cities, to raise its customer base in tier 2,3 cities to 90 per cent from 70 per cent now. In order to appeal to regional customers in the hinterland, it has also launched vernacular interfaces in 11 languages. Shopsy, its value platform, is spearheading this penetration.

Krishnamurthy said that the company will continue with its strategy of market expansion as part of its focus on the customer, rather than looking over its shoulder at the competition.

Related Topics
comment COMMENT NOW