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Wednesday, September 11, 2013

Flipkart’s Strategy On Amazon Entry Into India - Case Analysis

E-commerce business is growing at very fast pace in India , as it is expected that India will become 3rd largest nation of internet users by 2014, so E-commerce business is expected to grow to Rs 7000 Crores by 2015 as compare to Rs 2500 Crore  in 2013.There are many online players as flipkart.com, myntra.com, fabmart, indiaplaza.com and many others , doing very good online business. Google study reveals that 51% of traffic for its online shopping festival is from tier 2 and tier 3 cities, it reveals that people in India from small cities are also showing their interest towards online shopping, which is a positive sign for e-commerce industry.

Flipkart one among the leaders in e-commerce business in India is growing at very fast pace , on the other side, it is also facing competition from ebay and jungle.com (an indirect entry of Amazon.com in India). So flipkart has to gear up with strategies to take on its competitor and specially amazon.com.

Analysis:
E-commerce business is gaining ground in India. Especially tier- 2 and tier-3 cities people are taking much interest in online shopping as they don’t have very easy access to top brands, so online shopping is an easy platform to shop big brands.

Flipkart, one among the top leader in e-commerce business started its operation in 2007 with selling online books and by 2013 sold merchandise across 12 product categories.

In India people still afraid of doing online shopping, because they afraid of online transactions. They don’t want to disclose their credit or debit cards details. Flipkart analyzed this scenario very prudently and introduce cash on delivery, means you can put your order online,you don’t need to pay online at the same time, you can pay money when you get product received at your home. Others reason behind the flipkart success are timely delivery and quality. Flipkart has also introduce 30 days cash back guarantee, means if you are not satisfied with product, or feels some issue with product you can return the product and whole amount paid will be given back to customer.

If we talk about some statistical data of flipkart, it had a turnover of 11.6 crores in 2009-10, which increased to 50 crores in 2010-11. A huge increase occurred in 2011-12, it had 500 crores revenue in this year, 10 times of previous year. Flipkart had 4800 employees in 2012 and served 50,000 orders a day. Its daily sales were about 2.5 crores.
Flipkart is planning to add more categories like fashion apparel and music CD store.

Online hardwork and online offers fetched success for Flipkart. This online success has been complemented by offline hard work. One of the areas for hard work is the supply chain.  Supply chain management is the active management of supply chain activities to maximize customer value and achieve sustainable competitive advantage. Flipkart used supply chain management to develop and run supply chains in the most effective & efficient ways possible. Flipkart had leased warehouses, so it could meet 80% of order directly from warehouse, which makes deliveries faster.
Flipkart and other online shopping websites offer free home delivery, though it is very good strategy, it can attract more customers, but on the other hand it becomes hurdle for e-commerce business. Inspite of huge increase in revenue, Gross margin loss is major issues faced by flipkart. Gross loss is increasing due to delivery cost incurred.

So it is very important for flipkart to raise money for growth, but it also seems to be very hard as investors are not much interested in investing money as they see no future growth in this sector.

One of the reason behind increase in sales and revenue is that flipkart is applying strategies very intelligently. In one of the major strategic move Flipkart acquired letsbuy.com. It becomes killer combination as letsbuy.com firm was expertise in selling consumer electronics and computers,  and flipkart known for superior technology and supply chain management .

They also introduced digital content market with the unveiling of its digital music store ‘Flyte’.

Flipkart also spent huge amount on advertising and they choose IPL (Indian premier League) for the launch of their adcampaign and they came up with new taglines “Shopping ka naya address “
Flipkart is facing a tough competition from other e-commerce companies like Ebay and jungle.com (indirect entry of amazon.com). Amazon is leading online retailer in US and it has also become big online retailer in other foreign countries.

In 2013, Amazon has made direct entry in India, as amazon.in, but still it is redirecting to other online stores for shopping and people can use it for comparing price on different stores.

SWOT analysis of Flipkart
Strength:
·         Cash on delivery(COD) and 30 days cash back guarantee scheme
·         Free to home delivery
·         Good in supply chain management
·         Own warehouses, so delivery is quite fast

Weakness:
·         Cost of acquiring customer  is very high ($15-$18)
·         Delivery cost is incurred by company only
·         Gross loss is increasing

Opportunity:
·         Growth in e-retail sector
·         Tier-2 and Tier-3 cities people are showing more interest in online shopping
·         Mobile applications development for online shopping portal
·         More securities for online transactions provided

Threat:
·         Government policies
·         Increasing competition from international and national players

·         Investors are not showing interest in investing money


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