There is still a lot of headroom for us to grow: Flipkart CEO

Flipkart, the country’s largest online company, has over the last few months brought in foreign companies, especially smartphone makers, just by itself. For Motorola, Xiaomi and many others, Flipkart is the only selling point. However, the company says the Indian e-commerce market is still at a nascent stage. In an interview with BusinessLine, Sachin Bansal, Co-Founder and Chief Executive Officer, Flipkart, spoke about the industry and the company’s plans. Edited excerpts:

Is it a trend now for device makers to sell only through the online market?

Yes, it is, especially new companies entering India now. They are seeing offline as a big road block. The brands had been apprehensive about entering India because of the amount of time they had to take to set up operations here. But, now it’s much faster, through the online market.

Isn’t lack of Internet penetration an issue in India?

But there are a big number of Internet users (200 million) right now and most of them (around 80 million) are on 2G.

We have around 20 million users registered with us, which is still low. Only 10 per cent of Internet users are buying online out of the total Internet population in India. So, there is still a lot of headroom for us to grow. Therefore, this model is working pretty well for us.

Do you see other companies/brands coming to you?

Yes, we are seeing interest from many companies, especially the ones who are not yet in India. As Indians, we have seen many brands selling awesome products outside India, but they are not available here.

But, now that is changing pretty fast and there are products like Moto E, which were launched first in India and at the same price and in fact better priced for India.

Is this a model in other markets as well, companies only using online?

No. This is unique only for India because the market is very big and e-commerce has become good in terms of quality of service. So, both we and our partners are approaching each other for such business models.

But how long can you sustain this model of selling with heavy discounts?

It’s already sustainable because the costs for our operations are lower. And, hence, we are passing on those benefits to customers most of the time.

In fact, we are selling on a positive margin. We are not selling anything at a loss because of the efficiencies that we have.

Having said that we can only control what we have control over. There are going to be customers who will never come to us because of various reasons. But, the same issues were there in the US until the brick-and-mortar stores realised that customers really don’t care whether it is online or offline.

What about companies that sell the bulk of their products offline but also use e-commerce as a channel? There were some issues as a few firms posted notices telling customers not to buy from some websites. Has that been resolved?

The whole process of customers buying products is changing fast. E-commerce is a new thing and anything that comes new causes natural apprehensions. But over time, people will settle into it and that is what is happening now. We are seeing big partnerships from brands. The same brands, which were resistant to this change, are now coming onboard.

How about buyers from the country’s smaller towns or cities? Are they comfortable buying stuff online?

It has changed a lot. Even for clothes and shoes, people are very comfortable buying online. Because of the fact that we have provided options, such as replacement/ return guarantees, we have built a lot of trust with customers.

A lot of brands come to us because of our reach in tier-II, III cities. If you look at products such as Motorola or others that we have today, in the traditional channel, it would have taken weeks if not months to see that product or pay the same price.

So, brands are actually coming online because they can take that message clearly — give it to everyone in India in one format and everybody pays the same.

They (companies) want to get to smaller towns and cities. And, they know we can do that.

What is your long-term plan? How much of a threat does the competition pose?

We are now distributing products only in 250 cities and that is nothing. India has 10,000 cities, so we need to grow much further into every city and make sure we reach everywhere.

There is a lot of work left over there and then the other aspect is that we are also in e-tailing, which is less than half a per cent of the total retail market in India, so there is lot of room. But, profitability is definitely not in our top three metrics.

Our top three metrics are customers, reach and overall retail space.

In terms of the threat from competitors, India is still nothing compared to China or the US in terms of the number of e-commerce companies. I think we will grow with the market.

Has the integration with Myntra happened or still in process?

As a company, it is running independently and we intend to keep it entirely separate because Myntra has a strong fashion DNA and we want to preserve that. We are careful about that.

What’s your take on the entire FDI policy?

I am not a policy expert and it is the Government’s job. They (Government) need to understand the entire ecosystem and take a call on that from what makes sense for India. The Government should only decide on what is good for India overall, not for any player or anything…they are the expert.

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