Motorola’s largest customer, Flipkart, will make a fifth of its total gross merchandise value (GMV) from sales of Motorola phones including the recently launched Moto E (2nd Gen). The American firm, which sells only through Flipkart in India, had sold 3 million mobile phones by December 2014, said Amit Boni, general manager, Motorola India.
“We are Flipkart’s biggest customer. They do a lot of profitable business with us,” said Boni.
On an annual basis, Flipkart will sell about 4 million Motorola phones, which have an average selling price of $200, or Rs 12,000. Taking that into account, the total value of Motorola phones sold through Flipkart will be close to Rs 5,000 crore ($833 million), a fifth of its GMV of Rs 24,000 crore ($4 billion).
Flipkart officials confirmed that Motorola and Chinese mobile maker, Xiaomi, had played a big role in boosting phone sales on the e-commerce site. “In the last one year, Flipkart has seen a 200% rise in mobile sales,” the officials said. Cell phones alone make about 45% of Flipkart’s total sales, and Motorola accounts for a chunk of that.
But this is also a risk — should Motorola choose to switch to another e-commerce company lock stock and barrel, Flipkart will see an erosion in GMV. “Electronics is the largest category for ecommerce companies. If you over-invest in one company, it is a challenge,” said Ashvin Vellody, partner, KPMG.
Through Flipkart, Motorola is able to reach up to 21,000 pin codes in the country. About 60% of its buyer base is tier-2 and tier-3 towns. The model also allows Motorola to cut costs by 20-22% and reach a wide user base. Also, analysts say that e-commerce companies make better margins with exclusive deals, such as the one with Motorola.
According to VCCEdge, Flipkart reported a Rs 400- crore loss in 2013-14, higher than both Amazon and Snapdeal, which made losses of Rs 321 crore and Rs 264 crore, respectively.