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)