Flipkart Flexing Muscles – Will The Unicorn's Efforts Help It Battle Amazon?
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It’s been a tough year so far for Indian e-commerce firm Flipkart, which not only needs to fend off competition from local competitor like Snapdeal, but also has the task of fighting it out with U.S. retail giant Amazon. With Jeff Bezos’ Amazon continuously lapping up market share and pouring investments in India, Flipkart has taken several steps to combat the U.S. giant’s efforts.
Return of old tigers
Flipkart, which has seen a series of markdowns and the exit of one of its most valuable hire Punit Soni, has taking a number of steps off-late to recapitalize itself. One of the major steps includes the return of three senior executives back into the company. One of them is Kalyan Krishnamurthy, who has joined back in his previous role as Head of Categories. Kalyan – managing director at Tiger Global Management, the largest investor in Bengaluru-based Flipkart.
Commenting on Kalyan’ s re-appointment, Rajat Agarwal, investment professional at Mattrix Partners said his return was a positive sign for the company. “...The fight with Amazon was never more fierce and Binny needs his most loyal and best people around him during this time,” Rajat said.
“Flipkart’s market share has dropped by about 6% in last one year. It is only natural that it is going back to its trusted execs to tide over these times,” Fazal Ahad, Director at Merisis Advisors said.
More changes and rejigs
On Monday, the company decided to shut down its social chat feature Ping,that allowed friends and family to chat on its mobile app, and replace it with a feature that would allow sellers and merchants to connect. Ping and product search feature was a part of Punit Soni’s product innovation program. This was preceded by its decision of getting Myntra back on desktops, ending a dream of an app-only platform for the company.
“Flipkart is well aware about its weakness and strength and playing well the same. While market is devaluing them but they are working on every front be it customer delight or vendor management or logistic or anything else they are working on every front to make ship move with leadership position. They have taken actions not time will only tell whether they would pay the dividend or not,” Anil Joshi, Managing at Unicorn India Ventures.
Crucial times ahead
The new round of changes comes at a point when the ecommerce space is gearing is strengthening its operations to battle it out during the crucial festive season. The e-tailer was targeting GMV or value of goods sold on its platform, of $10-12 billion (Rs 64,000-76,000 crore) by June 2016, more than double the $4 billion it achieved in 2014-15., according to ET.
Sellers on Flipkart, are listing their products as out-of-stock for a day, to protest against the firm’s move to increase its commissions and charge them a fee for customer returns.
Talking about the increase in commissions, Anil Chhikara, Principal, Jaarvis Accelerator, said that the step clearly indicates the shifting focus of ecommerce players from topline and “growth at all costs” to profitability.
“This is inevitable and painful but had to be done sooner than later. Whatever commission Flipkart or any other ecommerce player charges has to reflect the reality - if not charging enough to cover costs at least minimising the gap considerably. Till now the VC funded deep pockets have been used to burn cash for this and deep discounted sales. But with funding becoming tight, valuations growth slowing down, institutional investors more and more are looking at bottom-line and a foreseeable path to profitability,” Anil added.
Sachin Bansal’s Flipkart drew a lot of negative commentary this placement season, after it decided to defer joining dates of a handful of IIM graduates by six months. This led to an increased speculation about the shortage of funds.
It will be only a matter of time when the industry will get to know if Flipkart would emerge victorious against Snapdeal and Amazon in the forthcoming festive season.