​​​
  1. Flipkart has changed; but will people still buy?

Flipkart has changed; but will people still buy?

With Amazon India sn'app'ing at its heels, market leader Flipkart is in course correction ‘mode. From reshuffling roles of key people to trimming costs, re-working vendor commissions and reviving desktop websites, CEO Binny Bansal, who took over from Sachin Bansal in January, is trying to fix just about everything.

By: , and | Bengaluru | Updated: June 27, 2016 6:50 AM
With Amazon India sn'app'ing at its heels, market leader Flipkart is in course correction ‘mode. With Amazon India sn’app’ing at its heels, market leader Flipkart is in course correction ‘mode.

With Amazon India sn’app’ing at its heels, market leader Flipkart is in course correction ‘mode. From reshuffling roles of key people to trimming costs, re-working vendor commissions and reviving desktop websites, CEO Binny Bansal, who took over from Sachin Bansal in January, is trying to fix just about everything. He’s even switched from talking about GMV to a more nebulous ‘net promoters score’(NPS), a metric to gauge the loyalty of a firm’s customer relationships. And he’s overhauling the operations. Because although Flipkart may not be short of funds, it doesn’t have Amazon’s war chest of $3 billion.

To start with Flipkart has upped charges by about 5-6% on average. Anil Goteti, Head, Marketplace, says the e-tailer has made some big changes to ensure it runs a good low cost operation. “Earlier the cost of a return was borne by the seller and us together but now it will be picked up by the sellers. If a customer returns product because it’s damaged or there’s a problem with the packaging, the seller will bear all costs including shipping charges,” Goteti told FE.

While weeding out poor quality vendors —which is the objective of the exercise — is a good idea, sector analysts caution the e-retailer mustn’t become uncompetitive. To be sure, president, eSeller Suraksha, Sanjay Thakur’s claims the higher commissions will drive up prices of the products by 20-25%, sounds exaggerated. Moreover, Flipkart is right when it says vendors must pay for their mistakes. Analysts point out, however, that the e-retailer must ensure it stays competitive. Goteti claims Flipkart’s commissions and fee structure are competitive. “In almost 70% of the categories, our commissions are either at par or 4%-7% lower than those of our competitors. While we charge a premium on certain margin-heavy categories where our commission rates are about 5% higher on an average, we also have certain verticals where the rates are up to 18% lower than the competition,” Goteti explained.

It’s important that Flipkart keeps the sales momentum going. Over the last seven months starting November, Amazon’s desktop and mobile websites together generated 33-62% more visits per month compared to Flipkart, according to data from SimilarWeb sourced by Kotak Institutional Equities (KIE). Moreover, App ranking data from AppAnnie reveals the gap betwen Flipkart and Amazon India —in terms of app installations and rankings—appears to be narrowing.

Analysts point out reviving its mobile website and Myntra’s desktop and mobile websites could be a sign Flipkart wants to grow share among the non-app user base.

With the app-only strategy for Myntra backfiring badly, Bansal has been reshuffling roles to make the operations more efficient. Peeyush Ranjan, earlier engineering head has been promoted to the position of group chief technology officer. The firm also acquired a mobile payment start-up phonePE in April to get two of its former employees Sameer Nigam and Rahul Chari back into the company.

After chief product officer Punit Soni, who was reportedly making $one million annually, left the company in April, key executives are now working closely to improve customer experience. The focus areas: order-to-delivery time, customer support and the return and refund policy.

According to data from consulting firm Redseer, Flipkart’s order to delivery time is slower by 50% than that of its competitors. Flipkart has introduced a zero interest EMI scheme to attract more buyers and offers attractive exchange schemes for used mobile handsets. Analysts believe the game has become all about customer retention rather than the overwhelming focus on GMV. However the biggest change at Flipkart, according to those that have been working with the company, is the culture. “Binny is trying to be more pragmatic. All those crazy experiments seem to have stopped,” said one top executive.

That’s probably why the monthly cash burn at the firm too is understood to be down by about 40%. Analysts say the company which has raised $3.2 billion so far is generating a reasonable amount from the advertisement and fintech segments. But it’s the core business that needs to buck up; else the firm’s valuation, which has already slipped from $15 billion to less than $10 billion, could fall further.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Go to Top