Business Saga

FLIPKART: Flipping all the Karts?

By Prerana Singh

E-Commerce in India has long been riding the crest of a wave due to rising standards of living, easy access to the internet, busy lifestyles, affordable prices and availability of a wide range of products online which are just a click away. Flipkart is one such Indian Ecom company which is riding high ever since its inception.

FLIPKART- An Overview

 The Second largest e-commerce giant in India – FLIPKART was founded by two graduates from IIT Delhi in 2007 – Sachin and Binny Bansal. It is primarily headquartered in Bengaluru, Karnataka and spreading its roots to Singapore as a private limited company. Inspired by Amazon, the bansal duo together launched Flipkart as an online bookstore.

Their budding dream began by investing a total of $5600 in developing an online bookstore. 2 years down the line Flipkart gained enough acceptances to raise $1 Million from Accel India and Tiger Global to raise a total of $20 Million by 2011. Towards the end of 2013, it garnered an additional $200 Million from other investors like Naspers and Iconiq capital.

Little did anyone know that it would go on to become India’s most valuable ecommerce company and be acquired by WalMart in a whopping $16 Billion deal.  

Navigating its Business Model

Flipkart works on a B2C (business to consumer model). Flipkart commenced its business with a direct-to-consumer model by selling books, before turning to an open market model which connects sellers and buyers. Today, it merchandises in almost everything from electronic devices to furniture to FMCG goods.

Flipkart has created an online retail destination for the small and medium scale sellers and it already claims to have lakhs of sellers on board from across India who roll their products on Flipkart’s platform. To facilitate this transaction and fulfil the order, Flipkart charges a certain percentage of commission fees from the seller.

Its Big Billion Day Sale offers its consumers huge discounts and massive price cut on various products and devices across the categories making it the most awaited and celebrated day across the nation.

Understanding the Revenue Model

Flipkart has worked its way up the corporate ladder by actively involving in creative and attractive advertisements, reliable delivery system, E- wallet and product recommendation.

The company generates its maximum revenue from smart phones which has been their central idea since the very beginning. Flipkart earned INR 30,164 Cr in revenue for the Financial Year 2018. The company also multiplied its losses fivefold reaching INR 46,895 Cr.

The major expense which increased the losses for the year ending March 2018 was finance costs, mostly under “fair value loss on derivative financial instruments”, which increased nearly tenfold to INR 40,937 Cr in FY18 from INR 4,309 Cr in FY17.

Flipkart has also recently introduced private labels such as MarQ and SmartBuy, which sell products in various categories. One of the biggest contributors to Flipkart’s annual revenue is during its big sales with huge discounts around festivals such as The Big Billion Day.

In recent months, this discounting has come under the government scanner and this could impact the company’s revenue in the long-term.

Here’s a look at the Flipkart Group investment in the India business over FY 2018-19:

Other Sources for Revenue Generation

  • Seller Commission: Flipkart charges a decent commission from the sellers since it provides a platform for sale for them
  • Convenience Charge: Flipkart charges a convenience fee to the buyers for faster delivery
  • Logistics: E-Kart is Flipkart’s logistics company and facilitates the fulfilment of orders from sellers to buyers through its logistics arm. It charges a fee from the sellers for the same.
  • Advertisement: Flipkart sells advertising space on its website. This offers leverage to the companies buying the advertising space as they are presented first to the millions of customers visiting the Flipkart website on a daily basis.
  • Media: Flipkart releases ads for certain brands in the popular newspapers, radios, televisions, etc, in doing so, Flipkart charges a sum from the brands.

Acquisitions: Flipkart Takes a Big Leap

In April 2021, Walmart-owned Flipkart announced the proposed acquisition of the online travel aggregator Clear trip. It will acquire 100% of clear trip’s shareholding. Clear trip will continue to operate as a separate brand under Flip kart’s colossal umbrella, retaining all its employees. 

Its tough competitors lead Flipkart to develop a lot of in-house innovations and acquisitions. In 2016, Flipkart acquired a fintech company called FxMart and released a payments service called PhonePe. PhonePe offers a UPI-based payments app as well as support for billing, recharges, ecommerce and other online services. As per the UPI data released for August 2020, PhonePe was the leading app for UPI payments in India.

Post the acquisitions by Walmart last year, Flipkart has progressively turned towards a hybrid sales model. It recently opened a FurniSure experience store to help customers touch and feel the furniture products before making any purchase.

Besides ecommerce, Flipkart has recently acquired a food retail license, which it will use to run its fresh, locally-produced food retail business under the name FarmerMart.

In January 2017, Flipkart made a $2 million investment in TinyStep, a parenting information start-up. Flipkart invested $35 million in Arvind Fashions Limited’s newly formed subsidiary Arvind Youth Brands that own flying Machine for a 27% stake in the company.

In 2016, Flipkart also acquired its online fashion competitor Jabong.com for $70Million

In April 2015, Flipkart acquired Appiterate, a Delhi-based mobile marketing automation firm and stated that it would use Appiterate’s technology to enhance its mobile services.

 With its eyes on retail market, Flipkart also acquired Letsbuy, an online electronics retailer, in 2012, and Myntra, India’s favourite apparel shopping destination for an epic $280 million in May 2014. 

Flipkart Wholesale recently launched a digital platform for small scale shops and MSMEs. In October 2020, Flipkart acquired a 7.8% stake in Aditya Birla Fashion and Retail for $204 million.

Major Investors

The start up budget of Flipkart was  ₹400,000 (US$5,600) which was later funded and raised to $10Million by venture capital firms Accel India and Tiger Global by June 2011.

The company announced on 10 July 2013 that it had raised US$200 million from existing investors, including Tiger Global, Naspers, Accel Partners and Iconiq Capital.

On 29 July 2014, Flipkart announced that it raised US$1 billion from Tiger Global, Accel Partners, Morgan Stanley Investment Management, and a new investor, Singaporean sovereign-wealth fund GIC.

In December of 2014, after it received $700 million from another round of funding, Flipkart had reached a market cap of $11 billion.

On 20 December 2014, Flipkart announced its filing application with Singapore-based company regulator ACRA to become a public company. This announcement came after the company received $700 million in long-term strategic investments from more than 50 Indian investors. The $700 million in funding raised by Flipkart added new investors to the company’s board, including Baillie Gifford, Greenoaks Capital, and Steadview Capital.

In April 2017, Flipkart underwent another round of funding, receiving $1.4 billion in funding from investors including eBayMicrosoft, and Tencent. On 10 August 2017, Softbank Vision Fund invested another US$2.5 billion in Flipkart.

On 19 September 2018, Flipkart Marketplace Singapore infused ₹3,463 crore into Flipkart Internet.

Conclusion

Flipkart has redefined shopping in India by focusing on bringing back local brands to its platform to improve both buying and selling experience for its users. Flipkart has amassed several revenue generating streams and invested heartily in almost every possible shopping dimension. The facilities like merchandising, packaging, cataloguing and delivering has created more than 1, 00,000 jobs in a single year. This Ecom industry leader is anticipated to further widen its horizon by multiplying its business internationally.

 

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