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What Flipkart got wrong (and right), on its journey from innovative startup to major business
An excerpt from mihir dalal’s ‘big billion startup: the untold flipkart story’, which goes behind the scenes at india’s homegrown ecommerce giant..
One of the biggest drivers of Flipkart’s growth in 2011 was forced on the company by Sachin [Bansal] against the advice of many colleagues. Even though Flipkart was expanding at an extraordinary rate, Sachin hankered for more. He was particularly unsatisfied with the mobile phones business.
A year after launching the category, Flipkart was selling up to a couple of hundred phones every day. Vipul Bathwal, who had overseen the mobiles category, had left the company to join a rival. In early 2011, he was replaced by Flipkart’s Bombay office head, Indranil Dutta, who had moved to Bangalore to take up the new role.
Sachin had gone to the US for a visit that same year. There, he observed that Amazon and other e-commerce companies offered shoppers the choice of returning or exchanging products that didn’t satisfy them. In India, however, it wasn’t easy for customers to return products as most sites struggled to get products to customers in the first place!
No Indian e-commerce company had built the infrastructure to handle returns; the logistical cost was thought to be prohibitive. This prevented them from allowing shoppers to return unsatisfactory products, who, in turn, would be displeased on being stuck with products that didn’t match up to their expectations.
Since Flipkart’s founding in 2007, Sachin and Binny had known that Indians lacked trust in online retailers, preferring to go to malls or independent stores to buy books, electronics and clothing. There was too much uncertainty online, too many annoyances. This only compounded the customer’s inherent resistance to buying things they hadn’t seen or felt.
Although Flipkart’s unrelenting pursuit of pleasing customers had won over a few hundred thousand sceptics, e-commerce was still just a niche business.
Sachin came to realise that Flipkart would have to constantly coax and lure customers with special incentives to encourage them to overcome their mistrust of e-commerce. He also understood that offering product returns wasn’t even a special incentive; it was an essential feature of commerce anywhere.
In a low-trust society like India, how could a retailer not offer this facility? It would have to be done. In the middle of 2011, he proposed the introduction of an ultra-flexible thirty-day returns policy.
Flipkart executives were shocked. The company had just begun expanding its nascent in-house logistics service; it wasn’t equipped to handle returns. Besides, Flipkart’s overhead costs would shoot up. Even Binny [Bansal] protested, pointing out that their spending might go up by two per cent. To this, Sachin had a ready counter: “But our business will grow as well.”
Another senior Flipkart executive insisted that a returns policy would lead to fraud, that it would be misused. Sachin shot back angrily, “For that one per cent, why would you penalise the ninety nine per cent? We’ll just blacklist them.”
In the second quarter of 2011, Flipkart introduced its returns policy.
Customers could return any product within thirty days without having to provide an explanation. It turned out to be an inspired move. Customers took to the policy immediately and orders increased further.
But introducing the returns policy wasn’t enough in itself. It had improved Flipkart’s popularity with its existing customers, but it didn’t attract large numbers of new users. The problem was that while the company had surpassed its predecessors and peers and greatly improved the online shopping experience, most Indians, even in the cities, were yet to hear about Flipkart. And most of its present users still saw Flipkart primarily as a books retailer that happened to sell other goods.
They were tremendously loyal, but their numbers were insignificant within the overall retail market; Flipkart was still just a cult brand. To take e-commerce to the masses, at least in the urban areas to begin with, the company would have to turn to mass advertising.
Around the time it launched the thirty-day returns policy, Flipkart had started considering marketing seriously. This was hard to believe if one was familiar with the company’s first advertising campaign of April 2011.
Set in an old English village, the ad featured an English grandmother who ordered books online through her pet mouse.
Ordering books online was presented as an act of magic. After ninety seconds, the fantasy abruptly ended with the punchline: “You don’t need magic. Just log on to Flipkart.” Few bothered to.
In 2016, Sachin spoke about how he had unsuccessfully described the concept of Flipkart to his own grandmother, “I have tried [to describe Flipkart to my grandmother]. But I don’t think my grandmom really liked it. I told her, ‘This is a phone. You press a button on it and the product arrives at your doorstep.’ She told me, ‘Why would somebody do that? Why wouldn’t you just go to the shop and buy?’”
By early 2011, Ravi Vora had joined Flipkart as the head of marketing. A short, dour-looking man, Ravi had spent nearly a decade with the consumer goods makers, Hindustan Unilever and Heinz, known for their expertise in marketing and sales. He was unimpressed by the previous advertisement that had been overseen by Sachin and Tapas. Immediately he set to work on a new campaign.
It had two primary goals – to attract new users, people who had never shopped online before, and to position Flipkart as an all-purpose retailer that sold a range of products from phones and laptops to cameras, and not just books. The overarching feeling that the ads would need to cultivate among viewers was that of trust.
It was decided that this would be best achieved by promoting Flipkart’s cash-on-delivery and flexible returns policies, its low prices and expansive product assortment. After some hesitation, Ravi retained Happy Creative, the agency that had helped create Flipkart’s first ad.
Work on the new campaign went on for more than three months. A few weeks before Diwali, it was ready.
The ads featured two children conversing in would-be adult voices about shopping on Flipkart. One child was sceptical about online shopping, their scepticism playfully dismissed as ignorance by the other, who pointed out the various benefits of shopping on Flipkart. The tagline “No Kidding No Worries” suggested that one could shop on Flipkart without anxiety, and it was so easy that even children could do it.
The ads were memorable and created a general feeling of warmth and familiarity about Flipkart. In the weeks and months after the ads were released, Flipkart’s brand was transformed. The company saw a huge increase in traffic and sales. It continued to run the campaign for two years.
Internally, Flipkart executives cleverly transposed the message of the ad campaign. Flipkart had once been dismissed as a kids’ enterprise by cynical suppliers, investors and rivals alike. The company had now proved that the kids could hold their own.
The Kids campaign, as it came to be known, was launched towards the end of a spectacular year for Flipkart. The gross sales of Rs 10 crore in December 2010 had more than quadrupled a year later. The company was hurtling from one milestone to another, month after month, demolishing barriers, becoming stronger and greedier for more.
Flipkart’s rise had helped spawn an entire startup ecosystem in the country. Naturally, it also attracted critics. Future Group CEO Kishore Biyani continuously predicted that the end was near for Flipkart and other internet startups that burned through investor cash with no concern for profitability. The larger corporate world was similarly dismissive. But in its early years, the most vociferous Flipkart critics were from within the startup ecosystem.
Prominent among them was Mahesh Murthy, the chief of Seedfund, a venture capital firm. There were many others. They had valid and irrefutable reservations about the poor economics of e-commerce, as evidenced by the fact that Flipkart’s soaring sales were offset by its losses. It was commonly believed that this trend would continue for many years.
Sceptics also thought it was futile to invest in a business that would some day have to compete with Amazon.
While these reservations were legitimate, Flipkart was mocked for being a “copycat” of Amazon, one of the most innovative companies in the world. This analogy would come to be well established. It also happened to be nonsensical.
Selling goods to people was not an idea for which Amazon deserved credit. It wasn’t even the first company to think of selling products online. What made Amazon inventive was that it discovered, through trial and error, a series of business innovations that made buying online a habit for a majority of Americans, and Amazon the country’s most compelling shopping destination which remained indispensable to its customers through constant improvements to its service.
In effect, Amazon had invented the rules of e-commerce. Even if a new competitor entered the field, that company would have to operate within the paradigm Amazon had created. Flipkart had done the same thing in India. There was no doubt that it had taken inspiration from Amazon. But e-commerce in India had few similarities with the retail space in the US.
The innovation of cash on delivery, the creation of unique warehousing and logistics processes, the introduction and implementation of the product returns policy, the unique methods of managing everyday dealings with customers, and dozens of other smaller inventions particular to the Indian ecosystem, are what comprised the paradigm of e-commerce in this country. Here, Flipkart had set the rules of the game. Amazon’s entry later and its adoption of these ways and means would validate just how innovative Flipkart had been as a company.
Sachin had come up with a pithy counter to the “copycat” argument. A venture capitalist who had remained sceptical about the company had once told him, “So what’s the big deal about Flipkart – you’re just copying Amazon.”
Sachin had replied, “Haan, theek hai. Tu kar ke bata de.” Yeah, sure. You show us how it’s done.
Story of Flipkart: How Sachin Bansal and Binny Bansal Built India’s Leading Ecommerce Startup
Introduction
It is hard to imagine that one small company can completely transform the way we shop. But that is exactly what Flipkart has done. In 2007, ecommerce was still considered a niche business and most Indians did their shopping offline. Internet was taking over the world and Steve Jobs had just launched the world’s first iPhone in 2007 which was about to disrupt the entire smartphone industry in the years to come.
Two software engineers in India, Sachin Bansal and Binny Bansal did notice the changing dynamic of technology and realized the potential of ecommerce. Even though there were only 50 million internet users in India at the time, they knew that with smartphones coming into the picture, it was only a matter of time when more Indians will be connected to the internet. They wanted to take this opportunity to create an online shopping platform that would take India’s shopping experience to the next level.
Fast forward to today, India has more than 570 million internet users and the number of people shopping online has increased significantly. What started as a two-man mission to create India’s most trusted online shopping platform has transpired into Flipkart, which is India’s leading ecommerce platform offering a catalogue of more than 80 million products across 80 categories to more than 100 million customers.
In this article, we will examine the story of Flipkart and how Sachin and Binny were able to build India’s ecommerce industry from scratch.
How did they meet?
Before we start, you should know that if Sachin and Binny had been better students, there was a good chance that Flipkart would have never happened. Thankfully for us, they were not.
Back in 2005, Sachin and Binny were pursuing their B.Tech from IIT Delhi. While most students had gone home during the summer break, Sachin and Binny were stuck in college as they had failed to complete their projects on time. It was while working on their projects in the same lab that the two met for the first time. On a side note, it was probably the best summer for Binny, although he didn’t know it at the time, but not only did he meet his future business partner Sachin but also his life partner Trisha at the same lab.
However, Sachin and Binny only became friends after they had moved to Bangalore for their jobs along with a couple of other guys from their college. At the time, Sachin was working at a company called Techspan and Binny was working with Sarnoff. Sachin had started working with Amazon in 2006 and Binny followed him in Amazon later in 2007.
Origins of Flipkart
Soon the two got bored with their jobs at Amazon and started playing with ideas. Being fascinated with ecommerce, they decided to start a comparison-shopping website. Their plan was to create a website that would help users to compare prices of products across different websites and help them get the best value for their money.
As they started looking at different ecommerce websites, they soon realized that all the websites were really bad. They knew that they would never purchase from those poorly designed websites and they didn’t expect others to do that either.
While they had to shelf their idea for a comparison-shopping website, they started thinking if they could build a better ecommerce website and provide a better shopping experience to their customers. The duo was confident that being technology enthusiasts they could do it.
Without wasting any time, the two quit Amazon, pooled together 4 lakh rupees and started Flipkart in September of 2007. They had decided to sell books on their platform as it was easy to list, ship and find vendors as compared to other categories like electronics or fashion which would cost them a lot of money.
The journey begins
As they started looking for vendors to list books on their platform, they soon found out that it was not going to be as easy as they had thought. People still did not understand the internet and doing business on the internet was not something that was very popular, so most vendors were highly sceptical and didn’t trust their business model.
However, the duo remained persistent and managed to convince a few vendors to take a chance on them. With vendors convinced, they launched their website in October of 2007.
By the end of October, they had received their first order from a young techie named VVK Chandra who lived in Mahbubnagar in Telangana (previously the state of Andhra Pradesh). Their excitement from their first order soon made them anxious as their vendors told them that the book was unavailable. After feverishly searching for the book all across Bangalore, the duo managed to get hold of the book and successfully delivered their first order.
With that order, Flipkart was officially in business. At this time, there were barely any good ecommerce websites in India and the founders were set on putting their customers first and wanted to use technology to provide them with a better shopping experience.
Their efforts to deliver their first order showed their commitment towards their customers and it would serve them well in the future. Being a two-man startup, they took care of everything from developing their website to delivering books. They had managed to deliver 20 shipments in 2007 itself.
Within six months the startup was operationally profitable and in 2008, they had moved into a 2BHK apartment in Kormangala, which would serve as their office for the coming years. Slowly, their business started to boom and by the end of the financial year of 2009, Flipkart had managed to sell books worth 40 million rupees.
Flipkart was a hit with book lovers and investors were starting to take notice. In 2009, Flipkart got its first venture capital investment of $1 million from Accel . By the end of 2009, the startup already had more than 150 employees and 3 offices across India.
In such a short span of time, Sachin and Binny had managed to grow their company at a tremendous pace and they had also developed their own personalities as entrepreneurs. Sachin was good at dreaming big and was the man behind ideas and vision of Flipkart, while Binny, a shy individual was known as the operations guys. They had found in each other a great partner who complemented each other’s skills. Whatever Sachin dreamed, Binny made it a reality.
India’s e-commerce was still a niche business and a large population was still hesitant to shop online. However, Flipkart had built a brand of trust among its loyal customers and continued to instil confidence by providing 24×7 customer support and their growth continued. But things were going to change drastically, once Tiger Global came on board as their new partner with its first investment of $10 million in 2010.
Now that Flipkart had already become a platform of choice for book lovers in India, the startup was ready to take its next step. With new partners and more investment, Flipkart was ready to dive into the electronics category. So they started selling mobiles in 2010.
But months went by and while book sales continued to grow, mobile sales remained stagnant. It was clear that customers were willing to pay small amounts of money like Rs 500 rupees online but they were not quite ready to pay large sums of money like Rs 10,000 or 15,000 for mobiles without first touching and feeling their products.
Flipkart still had a long way to go to build that amount of trust among its customers. This problem forced the founders to think differently. And they were able to come up with a brilliant idea of introducing Cash on Delivery. Flipkart was among one of the first ecommerce startups to introduce cash on delivery option for its customers.
The founders were hell-bent on building trust among Indian consumers and they doubled down on that dream by introducing no questions asked return policy and followed it up by a replacement policy. They were willing to sacrifice growth for customer satisfaction.
Today, these three features are offered by every ecommerce website in India but it was unheard of back in 2010 or 2011. Customers loved these options as they offered them flexibility in paying and buying products on their own terms. Thanks to Sachin and Binny, Indians who were afraid of shopping online were now warming up to this novel idea of online shopping and getting the products delivered right at their doorsteps.
Now just like offline shopping, they had the option of either just returning the product if they didn’t like it or get a complete refund. This was a game-changer and Flipkart’s sales started to grow even more rapidly then they had ever grown. From merely, 40 million rupees in revenues in the financial year of 2009, Flipkart expanded its revenues to 750 million rupees by the end of the financial year of 2011. Almost a 20X growth.
Soon there was no stopping Flipkart, they had cracked the code to Indian consumers. They continued expanding across categories and money came pouring in from investors. By 2012, Flipkart had already become a unicorn. It was probably the second unicorn in India after InMobi.
In fact, the term unicorn only became popular after it was coined in 2013 by Aileen Lee, who is the founder of Cowboy Ventures. Flipkart became a company that other startups would look up to in the coming years, while Sachin and Binny became the face of India’s growing startup ecosystem.
Competing with Amazon
Flipkart was the undisputed leader of ecommerce space in India. The company was a big reason for enabling millions of customers to shop online. However, things were about to change as Amazon entered India in 2013. Apart from Amazon, Flipkart was also going to face some competition from another Indian ecommerce startup Snapdeal . While Snapdeal was still small compared to Flipkart, Amazon was going to be a force to reckon with.
This did not deter Sachin and Binny, as they knew their customers intimately and had built a brand of trust which was supported by their technology platform that had been built over years of customer feedback. Their confidence was shared by their investors who helped Flipkart raise nearly $2 billion in 2014 alone. One of their oldest investors Tiger Global and Accel continued to put their faith in the company.
Armed with a $2 billion war chest, Flipkart acquired Myntra in 2014 to expand into fashion ecommerce. Later in 2016, Flipkart acquired another fashion ecommerce startup Jabong to scale rapidly in online fashion commerce. This proved to be a smart move by the founders as they realized they were better off acquiring two of the leading fashion ecommerce platforms rather than building one on their own, which would have cost them time and money.
With Amazon competing for the market in India, Flipkart didn’t have the luxury of time that it had during the early days. Thanks to that acquisition, Flipkart is now a leader in fashion ecommerce space with more than 60% of market share.
Flipkart’s ability to understand the Indian market and the experience of their founders and team in creating a company from the ground had given them the advantage over Amazon which helped them to stay competitive and ahead of Amazon.
As of 2018, Flipkart remains India’s leading online retailer with a market share of 31.9% , compared to 31.2% of Amazon. After adding the sales of Myntra and Jabong, Flipkart’s total market share increases to 38.3%.
Flipkart Failures
With all of Flipkart’s success, the founders had to face a lot of challenges and suffer more than a few failures as well. It was their ability to experiment quickly and scale what worked rapidly, which helped them build Flipkart into an ecommerce giant it is today.
In 2011, Flipkart had acquired a digital content platform Mime360 and tried to expand into online music streaming with the launch of its music streaming service Flyte in 2012. Piracy was a major issue at the time and there was no dearth of new torrent websites offering free music popping up every day. With numerous online platforms available for downloading free music, Flipkart’s latest experiment was bound to fail. Flipkart had to shut down Flyte in 2013.
Before the company found success in digital payments through PhonePe , it tried to launch its own payment gateway called PayZippy in 2013. Unable to onboard merchants, its payment gateway was shut down in 2014.
Then there was Flipkart’s app-only experiment where the company blocked access to its website for mobile users and directed them to download its app. While the majority of their traffic came from mobile users, this move was still unsuccessful and Flipkart had to reinstate its website, giving users back the option of accessing both mobile website and app.
Walmart-Flipkart Acquisition
Despite all the setbacks, Flipkart founders continued to focus on what their customers wanted and that helped them to make Flipkart into one of India’s most successful startups. However, in 2018, Sachin and Binny’s decade long journey at Flipkart ended after Walmart acquired Flipkart for $16 billion and valuing the company at over $20 billion.
Sachin had served as Flipkart’s CEO until 2016 when Binny took over the reins and remained the CEO until their exit from Flipkart in 2018. While their exit was seen as controversial by many media outlets and people in the Indian Startup Ecosystem, the two have moved on to start their own ventures.
Sachin went on to start Navi Technologies to focus on India’s growing fintech space, while Binny is using his experience at Flipkart to help startup founders scale and grow their business through his latest venture called xto10x Technologies .
Now that Flipkart doesn’t need to look for outside investment, there is no doubt that the company will continue to grow tremendously and help Walmart establish a stronghold in India.
Even though the founders might have left Flipkart, let us not forget that Flipkart wouldn’t have reached where it is today without the long term vision of Sachin Bansal and operational skills of Binny Bansal who worked at making Sachin’s lofty dreams a reality.
So what is it that these founders did right that most entrepreneurs do wrong? Firstly, it is clear that Sachin and Binny always put the needs of their customers first. They knew from the get-go that Indian customers lacked trust in ecommerce websites. They built the trust of their customers by understanding their needs and giving them exactly what they wanted. They already had an engineering background, which helped them built a website that was better than their few competitors and which only improved as more feedback they got from their customers. Things were kept simple for the customers by introducing options like cash on delivery, replacement and refund policies.
Apart from focusing on their customers, they had kept Flipkart profitable before they went to look for outside investment. During the first two years, they had grown Flipkart out of the revenues they generated from their sales. They proved to their investors that this was a sustainable business, which made it easy for them to get investment. This approach is different from most entrepreneurs, who go looking for investment before they have even tested their business model. However, the story of Flipkart is different today, as the company is losing billions of rupees as it competes with Amazon by offering heavy discounts and cashbacks.
Flipkart had its own set of failures but that did not deter the founders to take a step back but they kept on experimenting until they found the winning formula. It was their persistence and bouncing back from failures that helped them discover new and innovative methods to keep building and growing Flipkart.
Today, Flipkart is a huge company with massive revenues and thousands of employees. However, Sachin and Binny are still two passionate engineers who are just looking for new problems to solve, even if their journeys have taken them on different roads after a decade of building Flipkart.
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