Flipkart to buy into Jeeves in home appliances push


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)