CHAPTER-3: INDUSTRY PROFILE

INTRODUCTION
It is hard to imagine that one small company can completely transform the way we shop.
But that's exactly what Flipkart has done. In 2007, E-commerce was still considered a
distinct segment business and most Indians did their shopping offline. The Internet was
seizing the globe and Steve Jobs had just launched the world’s first iPhone which was
getting ready to disrupt the complete 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 E-commerce. While there have been
only 50 million internet users in India at that time, they knew that with smartphones
coming into the image, it was only a matter of time when more Indians will be connected to
the net. They wanted to exploit this chance to make an internet shopping platform that may
take India’s shopping experience to the next level.

Fast forward to today, India has over 570 million internet users, and also the number of
individuals shopping online has increased significantly. What started as a two-man mission
to make India’s most trusted online shopping platform has transpired into Flipkart, which is
India’s leading E-commerce platform offering a list of 80 million products across 80
categories to quite 100 million customers.

How did the founders of Flipkart meet?

Before we start, you ought to know that if Sachin and Binny had been better students, there
was an honest chance that Flipkart would haven't happened. Thankfully for us, they
weren't.

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 that they didn't complete their projects on time. it was while performing on their projects
within the same lab that the 2 met for the primary time. On a side note, it had been
probably the most effective summer for Binny, although he didn’t realize it at the time, but
not only did he meet his future business partner Sachin but also his life partner Trisha at the
identical lab.

However, Sachin and Binny only became friends. After their graduation, they moved to
Bangalore for their jobs together with a pair of other guys from their college. At the time,
Sachin was functioning at a corporation 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 tired of their jobs at Amazon and began fidgeting with ideas. Being
fascinated with E-commerce, they decided to start a shopping website where you can
compare products. They planned to make an internet site that will help users to check the
prices of products across different websites and help them get the most effective value for
his or her money.

As they started viewing different E-commerce websites, they soon realized that online
website experience was really bad. They knew that they might never purchase from those
poorly designed websites and that they didn’t expect others to try to do that either.

While they'd to shelf their idea for a comparison-shopping website, they started thinking if
they may build a much better website and provide a better shopping experience to their
customers. The duo was confident that being technology enthusiasts, they might pair.

Without wasting any time, the two quit Amazon, pooled together 4 lakh rupees,
and commenced Flipkart in September of 2007. they'd decided to sell books on their
platform because it was easy to list, ship, and find vendors as compared to other categories
like electronics or fashion which might cost them lots of cash.

The journey of Flipkart begins

As they started searching for vendors to list books on their platform, they soon revealed
that it had not been as easy as that they had thought. People still failed to understand the
internet and doing business online wasn't something extremely popular, so most vendors
were highly sceptical and didn’t trust their business model.

However, the duo remained persistent and managed to convince some vendors to require
an opportunity on them. With vendors convinced, they launched their website in October of
2007.

By the end of October, that 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 trying to find the book all across
Bangalore, the duo managed to urge hold of the book and successfully delivered their first
order.

With that order, Flipkart was officially in business., There were barely any good E-commerce
websites in India, and therefore the founders wanted to put their customers first and also
wanted to use technology to provide them with a stronger shopping experience.
Their efforts to deliver their first order showed their commitment towards their customers
and it'd serve them well within the future. Being a two-man startup, they took care of
everything from developing their website to delivering books. they'd managed to deliver 20
shipments in 2007 itself.

Within six months the startup was operationally profitable and in 2008, that they had
moved into a 2BHK apartment in Kormangala, which might function as their office for the
approaching years. Slowly, their business began to boom and by the end of 2009, Flipkart
had managed to sell books worth ₹4 crores.

Flipkart was successful with book lovers and investors were getting down to mark. In 2009,
Flipkart got its first capital investment of $1 million from Accel Partners, a renowned
investment firm. By the top of 2009, the startup already had over 150 employees and three
offices across India.

In such a brief span of your time, Sachin and Binny had managed to grow their company at
an incredible pace and that they had also developed their personalities as entrepreneurs.
Sachin was good at dreaming big and was the person behind ideas and vision of Flipkart,
while Binny, a shy individual was called the operations guys. They had found in one another
an excellent partner who complemented each other’s skills. Whatever Sachin dreamed,
Binny made it a reality.

India’s E-commerce was still a distinct segment business and an oversized population was
still hesitant to buy 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 changing drastically, once

Tiger Global came on board as their new partnership with its first investment of US$10
million in 2010.

Now that Flipkart had already become a platform of choice for book lovers in India, the
startup was able to take its next step. With new partners and more investment, Flipkart was
able to dive into the electronics category. So they started selling mobiles in 2010.

But months went along and while book sales continued to grow, mobile sales remained
stagnant. it was clear that customers were willing to pay small amounts of cash like 500
rupees online but they weren't quite able to pay large sums of cash like Rs 10,000 or 15,000
for mobiles without first touching and feeling their products, something which they had
readily available in brick-and-mortar shoes.

Flipkart still had gathered enough fame to build that quantity of trust among its customers.
This problem forced the founders to think differently. and that they were ready to come up
with a superb idea of introducing Cash on Delivery. Flipkart was among one among the
primary E-commerce startups to introduce cash on delivery option for its customers.

The founders were hell-bent on building trust among Indian consumers and that they
doubled down on their 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 E-commerce website in India but it had
been extraordinary back in 2010 or 2011. Customers loved these options as they offered
them flexibility in paying and buying products on their terms. due to Sachin and Binny,
Indians who were scared of shopping online were now warming up to the present novel
idea of online shopping and getting the products delivered right at their doorsteps.

Now a bit like offline shopping, that they had the choice of either just returning the
merchandise if they didn’t prefer it or get a whole refund. This was a game-changer and
Flipkart’s sales began to grow even quicker then they'd ever grown. From merely ₹4 crores
in revenues within the twelve months of 2009, Flipkart expanded its revenues to ₹75 crores
by the top of the fiscal year of 2011, growth of 18.75 times more than the previous
occasion.

Soon there was no stopping Flipkart, they'd cracked the code to Indian consumers and
broke the hegemony of brick-and-mortar stores. They continued expanding across
categories and money came pouring in from investors. By 2012, Flipkart had already
become a unicorn, the second in India after InMobi.

The term “Unicorn” only became popular after it was coined in 2013 by Aileen Lee, who is
the founding father of Cowboy Ventures. Flipkart became a corporation that other startups
would hunt within the coming years, while Sachin and Binny became the face of India’s
growing startup ecosystem.

Company’s Progression
Walmart Inc. must ratchet up pressure against rival Amazon.com Inc. to maintain its lead position
in India's e-commerce market as both retail behemoths rapidly expand online operations in the
South Asian nation, analysts say.

In 2018, Walmart bought a $16 billion majority stake in Flipkart Online Services Pvt. Ltd. giving it a
foothold in the country's e-commerce market, which is set to grow to $200 billion by 2026. That
figure is up from $48.5 billion as of 2018, according to the International Trade Administration.

But Amazon has become more of a threat, with the company investing an estimated $10 billion in
commitments to India since launching its e-commerce site there in 2013, said R.J. Hottovy,
Morningstar Inc.'s consumer equity strategist, in an interview.

Amazon is expected to continue investing heavily in the country, dedicating at least $1 billion
annually to initiatives that include building out its growing Prime membership program, he said.

"Amazon has a blank-check approach to India right now, betting that its infrastructure and content
investments will drive Prime membership growth and, eventually, increased member
engagement," he said.
Flipkart is the largest online retailer in India, with a 31.9% market share in 2018, followed by
Amazon at 31.2%, according to Forrester. After adding the market share of its fashion specialty
sites Myntra and Jabong, Flipkart controls a 38.3% market share.

Walmart and Amazon did not respond to inquiries for this story.

International growth plans

The retailers' focus on India signals how important the country is to their international growth
plans even as global sales have slowed. Walmart said it generated $120.82 billion in international
sales for the company's fiscal year ending Jan. 31, 2019, down from $123.41 billion for the fiscal
year ending Jan. 31, 2016.

The company's largest international markets in its most recent fiscal year were Mexico and Central
America, which accounted for $31.79 billion in sales, followed by the United Kingdom, where the
company generated $30.55 billion. Walmart's sales in China, the world's largest e-commerce
market, were $10.7 billion.
Amazon's international sales have also slowed in recent years, but the company continues to
pursue global markets including the lucrative Middle East and key markets such as Germany.

India represents a growth opportunity for both companies thanks to growing internet and
smartphone usage. Even so, the majority of shopping in India is still done in person, making it
essential for retailers to have both online and offline operations.

To encourage digital shopping, the companies compete online during the Indian holiday season
each fall, with Flipkart holding its "Big Billion Days" online sale, which ran from Sept. 29 to Oct. 4.
Amazon hosted its "Great Indian Festival" during the same period. The sales events compare with
Singles Day in China and Black Friday in the U.S.

In September, Walmart upped its grocery game by announcing plans to expand grocery delivery to
1,400 U.S. stores this fall. This is the latest of several changes Walmart has made since Amazon
bought Whole Foods Market Inc. in 2017 to expand its own physical footprint. Amazon is
reportedly planning to roll out a string of new grocery stores across the U.S. Walmart has more
than 5,000 store locations in the U.S., including Sam's Club stores.

Swot Analysis
If there was a list of top Indian online companies, then Flipkart will surely be on top. There
are very few Indian companies worth more then 2 billion dollars and Flipkart as on date is
worth more then 11 billion dollars. The company was started in 2007 by the brothers Sachin
and Binny bansal who took it to staggering heights.

Weakness of swot analysis

 1. India’s Largest E-commerce Retailer: Flipkart is the India’s largest E-commerce
company & had sold GMV (gross merchandising value) of $1 billion till now.
2. Experienced founders: The Founders of Flipkart, Sachin & Binny bansal are Ex-
Amazon employees. Having prior experience in the E-commerce industry
helped the founders to work strategically and differentiate their business in a
highly competitive market.
3. Acquisition: With its series of acquisitions like Letsbuy.co,, chakpak.com,
weread.com, Mine360 & the recent one Myntra in 2014 has helped the
company to expand in the E-commerce space & used the capabilities and
existing resources of acquired companies.
4. High Brand recall: Flipkart has established itself as a renowned E-commerce
company in India through TV ads, online branding and through its presence on
social media. Brand activities like the “Big billion day” have really increased
the brand recall of the company.
5. Own Payment gateway & Logistic arm: Having its own Logistics arm E-kart &
payment gateway Payzippy has helped the company to control its Expenses.
Thereby passing the benefits to the end customers.
6. Exclusive & broad range of products: From having Exclusive rights to launch
some products like MotoG MotoX, Xiaomi Mi3 as well as personal designers
segments in garments category, has helped the company to differentiate and
localize its offerings.

Weaknesses in the SWOT analysis of Flipkart

1. Limited Distribution channel reach: Although its logistics arm has kept cost’s
low, the reach has been affected which is a weakness for Flipkart. Due to use
of outsourcing, Global giants like Amazon & eBay can deliver
the product anywhere in the country. However, Flipkart is still struggling in this
field.
2. Cost of Acquisition: Due to stiff competition in the market & low customer
retention, the cost of Acquisition is high because Flipkart acquires a lot of
customers through online advertising. As per Flipkart data, the company
spends R.s 400/- on acquiring a new customer on an average.
3. Power in the hand of buyers: Since this industry is flooded with many players,
buyers have a lot of options to choose. Switching costs are also less for
customers since they can easily switch a service from one online retail
company to another. Same products will be displayed in several online retail
websites. Product differentiation is almost absent and the fight then begins on
the basis of price only.

Opportunities in the SWOT analysis of Flipkart

1. Expansion of business: By targeting other emerging markets company can

increase their revenues as well as it can have Economies of scale.
2. Expanding their Product categories: This will increase their customer base &
at the same time will reduce the cost of acquisition and customer switch.
 3. Changing mentality of Indian customers: With increasing numbers of
customers getting comfortable with online shopping & increase in numbers of
Internet users in India, there is huge potential in this Industry.
4. Supply chain: By optimizing their supply chain they can compete with the
other players & can manage the loosing sales on account of not making the
product available due to delivery constraints.
5. Establishing in other developing economies: Like Amazon, Flipkart can slowly
start expanding out of India and establish operations in other countries as well
which will help improve revenues.

Threats in the SWOT analysis of Flipkart

1. Competition: Stiff competition from the global players like Amazon, eBay as
well as local player like Snapdeal, Tolexo and Shopclues who are continuously
trying to eat each other’s market share.
2. Government regulations on the issues related to FDI in multi branding retail
has been a big hurdle in the success of the E-commerce industry in India.

Challenges faced by the company

Flipkart is the largest ecommerce company of India based in Bengaluru. The organisation is
into direct competition with the Amazons Indian subsidiary and also with the domestic rival
Snapdeal. Aspect in 2017 reports Flipkart is having a market share of around 39.5
percentage in the Indian E Commerce industry. The company is dominating in the sale of
apperal of the acquiring Mantra in jabong.com. It also owns subsidiaries, phone pay, a
mobile payment service system.

The total number of employees working in the organisation is around 30,000. As per that
2017 financial report of the company, the total revenues of the company where around you
wish to list 2.9 billion. The company, however, faces challenges of increased market
competition. Changes in the trends of the Commerce changing demands of their customers
and also changes in the different product ranges offered by the organisation.

The organisation their pay needs to identify major internal and external parameters that are
impacting on the performance of the organisation. They can thereby formulate their
strategies to overcome them and thereby achieve desired or sectors of the organisation

The company is dealing into selling off a range of items through online mode. It is targeting
those people who prefer to buy products through online shopping. The major target groups
of the company include middle and upper middle income groups Who prefer Two spend
online. Also, the company has positioned itself in the market as one of the major E
Commerce stores that can counter to all the different needs of the customers.
The development of the organisation took place not only through product expansion, but
also by Focusing on developing in House brands that caught attention of several customers
in a given nation. Also, the company has developed strategic joint ventures with many of the
well known brands and is thereby providing apparels at low costs.

Flipkart launched big billion days after the successive rise in turnover tailoring. Flipkart
launches big billion day with the Intention To increase the popularity by targeting billion
sales. A day long shopping event on 6th October 2014 and promised greatest sale ever in
India. This even though help Flipkart to achieve the target led to. Public outcry and
widespread criticism across customers, competitors and partners heavily damaging its
reputation. Flipkart hosted what it claimed to be its biggest sale with discounting and offers
across 70 categories. The online marketplace has called it the big billion day and started that
it has dedicated 10,000 field staff to fulfil orders.
As part of sale, the company was offering multiple items at Greys on through people and up
to the 50% off on smart phones, laptops, rupees, 15,000 fashion and perfumes at 50% of.
Employees at 50% off, among others. It was also hosting exchange offers on televisions and
Phones.

The sale started at 8:00 AM, with some limited time, limited stock and partner offers. Many
users could not place them matters because the service were not capable enough to take
the load and was giving random errors to uses which led to frustration among customers.
Many users who placed orders received email informing them that the order stand as
cancelled. Most of the products left sold for price less than cost price in Flipkart was accused
of killing the competition. May the commentators filed complaints against Flipkart to
Commerce ministry. Claiming that selling products for less than cost price is against the
Commerce policy of India. Ministry announced that it will form new trade rules for e-retail
after this incident.
A day after its big billion days sale. E Commerce giant. Flipkart has sent a letter to its
customers apologising For Douglas Chester the website and counted as struggled to keep up
with heavy traffic. Flipkart issued a statement attributed to founders Sachin Bansal and
Binny Bansal informing that the Flipkart website has received a billion hits energy in 24 hour
sales target of 100 million dollars In GMV In just 10 hours. The statement did not talk about
problems faced by customers and the Flipkart has not responded to allegations of price
discrepancies and Arbitrary order cancellations. It only mentioned that Flipkart technology
team was dedicated towards addressing errors and providing constant support to
accommodate traffic and customer visits.
Meanwhile, Flipkart's Competidores Amazon and Snapdeal also had started offering
discounts in large number of products to counter the sale. Snapdeal published a full page
newspaper ad with a message that she clear said for others, it’s a big day for us, Today is no
different.

Growth Prospects Of The Company

Flipkart’s top executives are enthusiastic about betting the future of the company on
Artificial Intelligence (AI). ‘AI for India’, a campaign that founder Sachin Bansal had spoken
about in December, has begun in full earnest, helping the $12-billion (by valuation)
ecommerce behemoth focus on harnessing advancements in technology.

“At Flipkart, we’re extremely excited about technology. It has been the biggest driving force
behind our success,” CEO Kalyan Krishnamurthy told the company’s developers and
engineers while kicking off the fifth edition of Slash N, Flipkart’s annual tech conference, in
April. Technology has “not only driven Flipkart’s growth, it has also enabled us to disrupt the
market in a big way in the last 10 years”, he said. “We strongly believe that our next wave of
growth will come from AI-powered solutions, which will be a key enabler in boosting the
entire Indian economy.”

It’s something other companies, in India and worldwide, are betting on too. A recent report
by Microsoft, an important investor in Flipkart, projects that, by 2021, about $154 billion will
be added to India’s GDP, representing a compound annual growth rate of 1 percent, purely
by products and services created or facilitated by the application of AI and machine learning
and related digital technologies.
Flipkart led international net sales for Walmart during the three months ended January, the
US-based retailer said on Thursday. Speaking at the company’s 2021 investment community
meeting, president and CEO Doug McMillon said: “This (India) is a market where we will
step on the gas to ensure we have the appropriate level of investments in areas like the
supply chain.”

The CEO said that although the penetration of e-commerce in the country is low, it is
growing rapidly. “We are well positioned to grow as an emerging middle class spends more
money through mobile phones. In India, our momentum and potential for growth make this
a unique opportunity.”

The company’s international net sales increased by 5.5% year-on-year to $34.9 billion during
the November-January period. Net sales in constant currency grew by 6.3% y-o-y to $35.1
billion, led by Flipkart, Mexico and Canada, the company said while announcing the Q4FY21
results. Walmart’s calendar runs from February-January.

Walmart said that “strength in Mexico, Canada and Flipkart” also contributed to the firm’s
sales growth for the fiscal year 2021. Net sales increased marginally to $121.4 billion during
the year. In constant currency terms, sales rose by a little over 5% to $126.4 billion.

McMillon said the PhonePe business “continues to grow and perform very well”.
In December last year, Walmart led a chunky $700 million capital infusion in the fintech firm
at a post-money valuation of $5.5 billion. The Sameer Nigam-led company that has set a stiff
target of crossing 500 million registered users by December 2022 was hived off from Flipkart
into a separate entity.

Chief financial officer Brett Biggs said the firm expects to see a continued strong growth in
the US business in the coming years but an “even higher international growth rate as we
focus on key markets and making money in new ways”.

Walmart, which acquired Flipkart in a $16 billion deal in 2018, competes with Amazon and
latest entrant Reliance in India. With the Tata Group planning to bet big on e-commerce, the
competition is set to intensify. Currently, Flipkart and Amazon dominate the market share.

Walmart reported total record revenues of $152.1 billion in Q4FY21, registering a y-o-y rise
of over 7%. For the full year, total revenues stood at a record $559.2 billion. “We
accomplished this while accelerating our long-term strategy of transforming Walmart into a
dynamic omni-channel business. It’s now time to accelerate even more,” Biggs said.

In a statement, the company said its integrated omni-channel strategy will focus on
“enabling the company to diversify the business model by growing related businesses with
accretive margins such as marketplace, advertising, financial services and data
monetisation” and innovating to enhance a seamless, digital customer experience designed
to increase the the share of wallet.