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Leader’s Game
Flipkart’s
Sachin and Binny Bansal, on revolutionising the online market place
In 2007, two twenty something IIT, Delhi graduates quit their cushy jobs at
Amazon to turn entrepreneurs. The duo, Sachin Bansal and Binny Bansal,
weathered fierce parental opposition to start up on their own, first
attempting to build an online shopping comparison engine, before turning
their attention to ecommerce and Flipkart. In the months—and many sleepless
nights they agonised over the decision—the unrelated Bansals discovered
that they had to write and rewrite many rules of the game. Back in 2007,
e-commerce was a fledgling opportunity—it has just crossed the billion
dollar mark in India—and back then companies were struggling with poor
internet penetration, limited engineering skills and scratchy customer
experience. Beginning with book delivery and relying on creaky logistics of
India Posts and private courier companies, Flipkart has grossed some $500
million in merchandise shipped and wants to double that in, hold your
breath, just two years. Along the way, Flipkart has gone from an investor
pariah to darling, raising some $381 million in funding and today is
turning eager risk capital away. The Bansals tell CD how they drew and redrew
the rules of the game to catalyse Flipkart’s breathless growth.
We re-invented customer experience online
When India’s e-commerce story was unfolding in 2007, customer
experience was poor. E-commerce was just beginning to bloom with travel
sites such as IRCTC and makemytrip gaining traction.. We were not the first
into e-commerce; E-bay (first as Bazee) was around since 2000. But, we were
the first company that focused on customer service as a core theme.. When
we started out, people didn’t even expect their orders to reach them.
When delivery logistics were missing or poor, we built our own
The struggle for logistics started when we went into electronics. We
had to build our own logistics network to deliver an increasingly wide
range of products, because the existing infrastructure couldn’t cope. We
wanted to be in a lot of diverse categories and add a lot of value added
services -- cash on delivery, returns management, try-andbuy in fashion --
and existing logistics could not cope with these demands. Technology helped
us build this logistics network and grow from 20 cities to a 1000 and even
helped with things like route planning for delivery boys.
The internet allows you to make repeated incremental changes
We can make small changes to our interface, to colours and to our
product range and test them with users. Consumer goods companies can’t try
new products or new variants on the fly and make changes on-the-go based on
customer feedback. On the internet you can experiment every hour. We try
new things every couple of hours and results come in instantaneously.
Focus on building depth, rather than width of products
For the first three years, we were known as an online books vendor. We
wanted to provide the best customer experience, management bandwidth and
capital and infrastructure to expand our business. We only sold 100 books
in 2007 and on December 31, 2007 we even had a zero order day. By end of
2008, we had crossed over a thousand a day and in 2009, we started getting
noticed in the book business.
When we expanded beyond books, into electronics the sh#t hit the fan
Our customer service experience dropped sharply. When you’re buying a
relatively low-value item like a book, you can deliver it to a neighbour or
the watchman in your building. Not so for costly electronics. Returns had
to be supported. This was a big re-engineering exercise and a year’s worth
of work on technology, supply chain, logistics and marketing. We started a
24/7 customer support unit then.
Founders’ focus needs to shift quickly from execution to ideation
When we were a small company selling books, both of us could afford to
be involved with day-today execution. We were the customer support when we
started. You must be able to move from execution to strategy quickly.
Initially, we never had a forecast of the business for over two of three
months at any given point in time. In 2008 we were talking to lots of
investors and we had our fair share of rejects, since we were late in an
overcrowded market. As we have grown bigger, we have been able to see
further.
Its important to have an anchor investor who believes in your story
When Tiger Global invested in Flipkart, investors woke up to the
potential in this sector. Tiger was much more entrepreneur friendly than
most other VCs. It bought a long-term thought process to the table, rather
than accounting for every dollar spent.
E-commerce will be a huge soon
Right now 90% of our customers think of e-commerce as a secondary
source, where they can go if they don’t find something offline. There are
10% who think of ecommerce as a primary channel and that is changing much
faster than what we thought.
Once we’d built a huge customer base, we switched business models
We were ready for a switch to a market place model in 2012, but we had
to change our entire platform for this shift. We thought it would take four
months but it took nine months. For start-ups it is important to be ready
with your entire platform and not rush into a business model shift.
If customers aren’t voting for something, it’s the best way to know your
business isn’t working. This is how we shut down Flyte, our digital
music store. The market was not there. The challenge for Flyte was to
create the market. Our thought then was if we’re able to convince people to
buy rather than pirate it’s a big opportunity.
Asking about profitability is premature: Profitability is very
important as an end goal, but not an immediate one. If you look at Twitter
it was zero revenue all costs three years ago. This year it is going to be
profitable. In the internet business, things change very fast. Flipkart has
the potential to be the leader in the market and profitability will come
when we have that leadership position. Today we want to grow 100-200%
year-on-year, so profitability can wait. When the sector matures and grows
30-40% annually, then we can turn a profit.CD
5 P OIN T S T O P O N D E R
5 Use customer service excellence to win new business
4 Build depth of business, rather than chase multiple
shallow opportunities
3 Be willing to let go of your start-and delegate
management
2 Be clinical about killing off your stuttering
initiatives
1 Don’t be afraid to change and tinker online. The
internet's for experiments
Rahul
Sachitanand CDET131206
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