Jul 01, 2016 10:27 AM
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*India's largest e-commerce marketplace Flipkart says it is renewing its focus on execution and is on the path to profitability. A little over four months after co-founder Binny Bansal took over as chief executive, he said that the focus on growing GMV(Gross Merchandise Value) was out and customer satisfaction was in.
"I think everything is going to be profitable. I think eKart and Myntra both will probably hit profitability first rather than payments, and Flipkart, Myntra and eKart should be profitable next year. Flipkart needs a lot more scale. It is the right strategy to get to scale first, " said Bansal in an interview to The Economic Times on Tuesday.
With global rival Amazon breathing down its throat and pressure from investors who've begun marking down its value, the company says it has made Net Promoter Scores(an index to gauge customer loyalty) as the most important metric for all teams.
"Everyone at Flipkart now has net promoter score(NPS) and customer satisfaction as their most important metrics. NPS breaks down into what product selection is available, how fast it is available, whether it is available all the time, and at what price. And of course, the other big focus is on execution. You need execution rigour to make sure that every day, we are providing the best customer experience, " Bansal told Mint newspaper in a interview.
Flipkart had emerged as a top player in the Indian e-commerce industry on its strength of superior customer service and response. As it encountered competition from global rival Amazon, it looked to grow faster and lost on the customer satisfaction edge, which it now plans to revive.
However, he downplayed the chances of Amazon overtaking Flipkart in terms of market share. “Overall, we have an enough-and-more lead. Given our plans of(improving) customer experience and growth, I don’t see a challenge in maintaining our market leadership, ” he said.
But he conceded that the company will have to work hard towards it, telling The Economic Times: “I think the only way to do that is we need to deliver this value proposition, innovate and solve local problems with local technology solutions. The more we make quality products affordable and available, that's the only way to maintain our leadership. I am certain that we will remain the largest player, by far. I don't see a challenge there.”
The company is also shoring up on its logistics unit to improve pace of deliveries, one of the most important metrics for customer delight. Built from scratch by Binny Bansal, Flipkart has said it will invest$2 billion in growing its logistics arm over the next few years, as it also explores driving revenues by opening up the services to third-parties.
Binny Bansal did not respond to an interview request from Business Standard.
Flipkart is undoing a lot of damage it did last year when it transitioned to a marketplace and onboarded thousands of sellers, by now consolidating sales to a few sellers in key categories. A February report by Morgan Stanley(investor in Flipkart) said that the company continued to dominate the Indian market with 45 per cent share of GMV in 2015, and while Amazon's share stood at just 12 per cent, it did show the fast paced growth of the latter in the past one and a half year.
Currently India's e-commerce market is host to a three way fight between Flipkart; Snapdeal which is backed by Chinese retailer Alibaba and US online retail giant Amazon. Gauging that India's e-commerce story would go the Chinese way where a local player would come out on top, global investors such as Tiger Global, Sequoia, Naspers and Sequoia sunk billions of dollars into Flipkart.
Now, there is an increased realisation that Amazon, with its open cheque policy to dominate India, could indeed win the market, forcing four private equity investors to mark down the value of Flipkart over the past four months. Flipkart has faced four consecutive markdowns by global venture capital funds, which has resulted in its valuations falling from$15.2 billion to$9.5 billion in the past few months, pushing it back to the 2014 level. Its closest competitor Snapdeal is valued at$6.5 billion.
Bansal, though, downplays the impact of lower valuations. “Markdowns are mostly a theoretical exercise by small investors, " he told The Economic Times. "From our perspective, valuation is when we raise money. When we raise money, our value will be clear in the market. Till we don't raise money, it is in the eye of the beholder. Somebody will be marking it up or marking it down.”
"We have enough money for now. We keep talking to investors. I think the good thing about Flipkart is we keep raising when the time is good and we don't need(money) when the time is bad. We have enough time, " he said.*
