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May 31, 2016
Madhav Chanchani & Aditi Shrivastava, The Economic Times
Bengaluru, 31 May 2016
Flipkart’s new big strategy is to cross-sell its services — as well as its customers — to its biggest clients.
Chief
Executive Binny Bansal has stitched together a plan to cross-sell
Flipkart’s commerce, supply chain and advertising services to its
top-selling merchants and deep-pocketed brands such as Samsung . He
also wants to monetise Flipkart’s registered customer base of 75
million by selling insights to these merchants and brands on who and
where the top-paying buyers are and what kind of products they want.
“We
are focussing on cross-selling,” Bansal, who took over as CEO in
January, said in an interview last week. There is a “lot of overlap. We
have seen brands using our services from across the board. For example,
Samsung is using our advertising platform, they sell on Flipkart, and,
hopefully in the future, we will power their supply chain”.
Smartphone
brands Samsung and LeEco have spent sizable portions of their marketing
budgets on Flipkart for the product launches of their latest handsets,
also opening brand stores on the platform. Bansal also wants to
establish Ekart and Flipkart’s payments business as independent brands
focused on business clients.
He said in the interview that he
expects Ekart and Flipkart’s fashion website Myntra to become
profitable first, while the core commerce business at Flipkart and
payments will need more scale to start making money.
The new
strategy, if successful, will help Bansal prove to investors that
Flipkart has a business model that can stand on its own by generating
cash flows from Ekart and the advertising business by next year. While
Flipkart has more than $1 billion in the bank, it needs to keep
replenishing its war chest to fend off an increasingly aggressive
Amazon.
“The focus (on the seller-side) is on large brands
that have the deep pockets to pay and the intent to reach scale,
collect data and better their product portfolio in an efficient
manner,” a person directly familar with Bansal’s plan said, declining
to be identified. On the customer-side, the focus is on offering the
“best-quality goods at the lowest cost in the least amount of time”.
Flipkart
has already begun doing this in categories such as television.
Online-focused television brands Vu Technologies and BPL, among
Flipkart’s top three brands in the category, sell highly competitively
priced sets, leveraging the online platform to overcome distribution
costs.
ET reported on April 5 that Flipkart was working
closely with its top sellers, who are expected to account for 60-80% of
the sales on the platform.
This will help Flipkart comply with
recent regulatory guidelines on foreign direct investment in ecommerce
that bar a single vendor from accounting for more than 25% of the sales
on an online marketplace.
WS Retail, in which Flipkart
promoters owned a stake till 2012, is estimated to account for more
than 25% of the sales on the marketplace as most of the exclusive
merchandise is currently sold through it.
Flipkart is also
relying on brands to give discounts now, as the guidelines disallowed
online marketplaces from directly or indirectly influencing sale
prices. ET reported on May 27 that Flipkart had asked brands to reduce
their margins during its latest Big Shopping Days sale on May 25-27.
Experts
tracking online retail in India said Bansal’s strategy would help
Flipkart manoeuvre around the new policy and at the same time give more
control and information to brands. Leading brands have had a fractious
relationship with online retailers and in the past have objected to the
deep-discounting practices followed by these investor-backed ventures.
“Growing
the share of other merchants via the small merchant route in a
fragmented market like India is extremely resource-intensive, and
availability of both human resource and money is going to get even
tighter than it is now,” said Devangshu Dutta, CEO of retail
consultancy Third Eyesight.
(Published in The Economic Times)
