I enrolled to the Stanford University – Technology Entrepreneurship course and finished my first assignment today. The assignment was to pick a local startup and mention 5 reasons for its success. I picked Flipkart and here are the reasons I think it succeeded – your thoughts?
Start-up – Flipkart.com
Description of Business –
In simple words, Flipkart.com is the Amazon.com for India. It started out as an online bookseller in 2007 but later expanded to electronics and digital music. Initially bootstrapped by its two founders, flipkart has raised over $180 million in funding from VC firms. Their revenue for 2012 wes expected to be $100 million (from wikipedia). It is arguably the online retailer with the biggest marketshare in its sector with sales of 20 items per minute.
Reasons for success –
- Product category selection
Flipkart started with books first – a product category with high margins, low maintenance and items that are easy to transport. Books are also non perishable items and their value does not go down with time. Flipkart did not have to maintain inventory in the initial days when orders were low, as books could be procured directly from distributors based on the number of orders from customers. Added to this, delivery time of books was not extremely critical for initial customers as they ordered mostly for reading at leisure. This choice of product category helped Flipkart ensure better customer satisfaction in the initial years.The product categories that Flipkart (electronic goods and digital music) chose to enter after their success in books also allowed them similar advantages.
Flipkart offered the convenience of buying books to customers without stepping outside their homes or offices. Considering that most of their initial customers were corporate employees living and working in large metropolitan areas, the convenience offered by Flipkart freed the customers’ leisure time on weekends. Also, Flipkart saved them the hassle of facing traffic on their way to shopping. For the customers in smaller towns and remote areas, the catalog offered by Flipkart was much more comprehensive than any local store could offer.
- Supply chain efficiency
Flipkart’s biggest differentiator and the gamechanger in the market was their supply chain efficiency. Although not the first ecommerce player in India, Flipkart managed to solve the biggest problem anyone ordering online in India had – reliable delivery of goods. By tying up with national courier companies in the initial days, they were able to ensure their first stage of their marketing via word of mouth, with customers telling their friends how quickly their orders were fulfilled. However, to improve their service levels and ensure better control on the customer experience, Flipkart did what no other player in India had attempted earlier – they set up their own delivery service. This service has been so succesful that it has now been hived off as a separate company. I would not be surprised if the new company offers its services on hire to other e-commerce players in India in the future.
- Focus on customer service
While the other ecommerce players in India were spending heavily on high decibel marketing, Flipkart put its money in customer service. In a country where online payment is flaky at best, with 25-30% failure rates, Flipkart’s practice of calling up customers whose transactions did not go through was a stroke of brilliance. Not only did this improve their conversions, but assured customers a personal touch where they felt that someone was concerned that they were inconvenienced. Also, unlike many other online retailers, Flipkart’s customer service department did not operate in a silo and actually ensured coordinated resolution to issues.
- Discounts and free shipping
When Flipkart started as an online book seller, one of their biggest draws was the discounts they offered on each book. Books are a high margin product category and even the neighborhood book seller can afford to give discounts to customers. However, many times this requires customers to explicitly ask for a discount, which is not always a pleasant experience. Also, customers in tier-2 towns do not get this advantage as the local bookseller may not have an advantage of high volumes. Flipkart on the other hand, offered the same quantum of discounts no matter where the customer lived, which of course they could do because of the higher aggregated volumes from across the country. Free shipping offered for every order, was an added advantage. Unless a customer needed a book immediately, it made much more sense to buy online at Flipkart. They have since moved on from being a cheaper destination for buying books, in fact even shipping is not free anymore below a certain bill amount now, but in the initial days, these were definitely one of their best customer acquisition strategies.