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October 22, 2014
Mihir Dalal, MINT
Bangalore, 22 October 2014
Flipkart, India’s biggest online retailer, is close to buying
a large stake in Jeeves Consumer Services Pvt. Ltd, which provides
after-sales services on large home appliances and electronics,
two people familiar with the matter said.
Flipkart is buying into Jeeves partly because the company plans
to launch its private brands in home appliances such as televisions
and refrigerators as well as electronics, said one of the people.
Flipkart has already launched a range of tablets under the Digiflip
brand in June and is planning to launch private brands in the
large appliances category, one of the persons said. Both of them
requested anonymity.
Jeeves, which provides maintenance, repairs, product guarantees
and other services, could also help Flipkart deal with pressure
or possible moves by offline retailers and brands that have threatened
to stop offering guarantees on products sold online. Jeeves has
signed up with a network of brands including Samsung, Toshiba,
Dell and others to provide after-sales services.
Mint couldn’t ascertain the value of the transaction. Flipkart
did not respond to an e-mail seeking comment. Jeeves declined
to comment.
Flipkart and other e-commerce firms such as Snapdeal and Amazon
are confronting resistance from consumer goods makers and distributors
to offline retailers as they try and grab a larger share of the
consumer’s wallet by dangling attractive discounts.
Offline retailers are fighting for survival and are lobbying hard
with the state governments and Centre to curtail e-commerce companies’
operations while brands complain that the artificially low prices
online hurt their image. This hasn’t stopped online retailers
from pursuing discount-heavy, high-cash-burn strategy of attracting
customers.
India’s e-commerce market, excluding travel, is expected
to surge sevenfold to $22 billion in five years from $3.1 billion,
according to a November 2013 report by brokerage firm CLSA.
Flipkart, which has raised nearly $1.8 billion from investors
since starting out in 2007, including $1.2 billion this year,
is looking to aggressively push sales of high-value large appliances
such as TVs, refrigerators and air-conditioners.
Having an after-sales service provider such as Jeeves Consumer,
especially an efficient one, would help Flipkart build credibility
on these products with customers, said analysts.
“There are two factors at work when consumers decide
to buy large appliances online. One is price and the other is
service support,” said Devangshu Dutta, chief executive at
consultancy Third Eyesight.
“After-sales services are crucial to gain customer trust
in buying large appliances and electronics, especially as people
in the past have bought these kind of products online only to
realize that the after-sales support was poor.”
Jeeves Consumer was started by former BPL executives Alok Sen
and R.N. Balasubramanya in 2007. The company was financed by Sen,
Balasubramanya, some of their employees and relatives until 2012.
In May 2012, early stage investor Seedfund agreed to put in about
`12 crore in tranches for a stake that could have risen to 30%
over time, documents with the Registrar of Companies show.
Few online retailers in India offer large appliances due to difficulties
in delivering them to buyers. In April, Flipkart said it started
selling television sets on its website, re-entering the large
appliances category nearly a year after it was forced to withdraw
because of delivery problems.
Rival Amazon Seller Services Pvt. Ltd, the Indian unit of the world’s largest online retailer, said earlier this month it will offer appliances from brands including LG, Samsung, IFB, Panasonic, Voltas and Godrej as well as from retailers such as Viveks and Next.
(Published in MINT)
