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Flipkart, an e-commerce firm founded in 2007 as just another Internet start-up, has now emerged as the country’s largest online retailer.
The intention of the founders, Sachin Bansal and Binny Bansal, both alumni of the Indian Institute of Technology (IIT), Delhi, was to make shopping easier. The duo, who had quit their jobs with the world’s largest online retailer Amazon.com to start Flipkart, decided to start an online price comparison site. But then they stumbled upon something much bigger: the emerging opportunity of e-commerce itself.
Started with an initial capital of about Rs 4 lakh, of which Rs 2 lakh was invested to buy computers and furniture, the company started by selling new books.
It now banks on technology to sell everything from apparels to consumer durables, and has its own logistics firm and is valued at nearly Rs 10,000 crore.
In an interview toBusiness Line, Sachin Bansal, who is also the online retailer’s Chief Executive Officer, says e-commerce is still at a nascent stage in India with just 10 per cent of the people shopping online. But it’s growing fast.
The company, which jostles for space in leading campuses, is also on the hunt for talent, offering compensation packages starting from Rs 12 lakh a year.
Edited excerpts:
Flipkart started operations in 2007, when e-commerce was unheard of. Now you have a business model that looks quite sustainable. Back then was it sheer guts that made you take the plunge?
We just jumped into it. Majority of people in India still look at online as a secondary option and the fear of buying things online is still there. We are still on the path of making it happen, and we are getting there soon.
Did your work experience at Amazon help?
No. At Amazon, we were not working with the e-commerce division, but with the Web services team. We started Flipkart completely from scrap. Moreover, the whole shopping behaviour and infrastructure challenges in the Indian market were different from that in the US and European markets. We had to rethink the strategies and create customised solutions here. Binny and I were glad that we didn’t know much about those markets. There was no baggage and the thinking was fresh.
What did you do to educate the buyers and remove the phobia associated with online purchases?
We try to make faster deliveries and sometimes on the very same day, while our cash-on-delivery process has helped us win customer trust. We have also built more secure and convenient payment options.
Offline retailers have accused online players of predatory pricing? Are you taking business from them?
No, customers are taking away the business. They are voting for online players. There is nothing called predatory pricing, our sellers are completely free to price the way they want. E-commerce is an efficient model, which provides better pricing. We actually don’t have any control over pricing.
Is Flipkart a technology firm, a retailer, an e-commerce company or a mix of all these?
I think, we are a technology company that tends to do e-commerce. Both Binny and I love solving problems using technology and so, we have built in-house technology instead of sourcing it. We are able to capture data points through our own technology and this is helping us make business decisions. With technology, we were able to automate a lot of things.
How did you overcome your challenges?
It was definitely the supply chain. We had to build our own, since five-six years ago India didn’t have the supply chain capabilities required to support a large operation such as Flipkart.
Do you see Flipkart emerging as the Amazon of India?
No, we will be the Flipkart of India (laughs). The challenges in India are different. I think there are more learnings and inspirations to draw from Chinese companies, such as Alibaba, 360Buy and Baidu. Eight years ago, the Chinese were at a stage where we are today, from the infrastructure point of view, price purchase, Internet and also from demography and consumer behaviour.
What are your hiring plans, what are the offers you made this year?
We are looking at hiring from both IITs and management schools, with offers starting from Rs 12 lakh a year We don’t go out with a hiring target. If we see good talent, we hire them.
You have raised $360 million this year, the largest funding raised in the e-commerce space. How do you propose to utilise this? Also, are you looking to raise more funds?
Technology, supply chain and human resources are three major areas where we are investing massively. We are also hiring from overseas. The investment depends a lot on how fast the market grows. If we see bigger potential, investments will go up. For example, if 4G takes off, we might also have to ramp up our expansion plans. No, I am done with funding.
MIH, an investor in the company, has valued Flipkart at Rs 9,900 crore? How did they arrive at this figure?
Valuation depends on several factors. From an investor angle, they look at leadership position, management and what the company’s offerings are. I think these three things got 5/5 for a company like Flipkart and that is what is driving valuations and growth.
When valuations soar, entrepreneurs want to sell off their companies? What are your plans?
No never. I will never sell Flipkart.
Do we see Flipkart going global? Any IPO plans?
India is keeping us very busy. The growth here is going to be super crazy and we are betting big on that. But yes, Flipkart will go global, but not in the near future. Right now, we are too focused on executing things. Maybe we will start looking at an IPO in a year.
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