Flipkart: The Probable Second Largest E-commerce Market in the Entire World

 By Sonali Munda

In my second series of blog, I would be talking about one of the most popular unicorns and the nation's largest business "Flipkart".

About the Company:

Flipkart was founded in 2007. The founders of which were Sachin Bansal and Binny Bansal. Its headquarters are situated in Bangalore, India and it was incorporated in Singapore as a private limited company. At the beginning, the company used to focus on selling books online. Later it expanded to electronic products, fashion or apparel, home appliances, groceries and others providing everything at quite affordable prices. 

Founder(s) share in the company:

Binny Bansal holds 1.84% shares currently after selling a part of his stake to Tencent.

Investors and their Investments:

Flipkart has 30 investors. It has got $12.9 billion funding over 26 rounds till date, among which SoftBank Vision Fund and Tencent are the most recent ones. Other investors include Axis Bank that provided 10 billion rupees in September 18, 2017, eBay in October 25, 2017 , and Flipkart itself of $200.8 million in Jan 16, 2019. Then an unknown investor on September 4, 2019 provided a funding of $14.5 million. Flipkart, again, self funded itself on September 10, 2019 of 16.2 billion rupees. On December 3, 2019 an amount of $28.4 million was raised by an unknown investor. On July 14, 2020, an American multinational retail corporation, Walmart funded $1.2 billion to Flipkart. Tencent, an amount of $62.8 million on September 16, 2020. Canada Pension Plan Investment Board, GIC, SoftBank Vision Fund and Walmart all together raised $3.6 billion in July 2021. Tencent again funded Flipkart an amount of $264 million on June 13 this year. Flipkart also attracted American multinational companies like Tiger Global Management and one of the super unicorns of the world “Microsoft”, an American multinational tech. corporation to invest in it. 

Current Market Value:

The current valuation of Flipkart stands to be $37.6 billion after one of its latest funding rounds in July 2021. Flipkart, recently, seeked a valuation of $70 billion for the U.S. listing by aiming to go public in the U.S.  

Competitors:

Flipkart has made a dominant position in the e-commerce sector even before the pandemic. So technically, Flipkart did not require an external help to grow, rather it has made its position on its own without having to wait for the opportunity. However as said in my previous series every successful startup have some competitors to compete with and so, following are the primary competitors of Flipkart:

• Amazon

• Snapdeal

• Croma

• Tatacliq

• 91mobiles

• IndiaMART

• mysmartprice

• Ubuy

• Alibaba Group Holding Limited 

• eBay

• Etsy

• Paytm

• Myntra too because despite being a part of Flipkart, it is considered to be a neck and neck company, giving a tough competition to its parent company.

History of achieving the unicorn status: 

Flipkart was founded in 2007 by Sachin Bansal and Binny Bansal as mentioned before in this blog. They had the same mindset and idea as to create a similar e-commerce company like Amazon in India after working at Amazon. Initially, Flipkart was an online bookseller company. This eventually led them to success due to its first mover advantage as there were less competitors back then for it. Also, the rising internet economy of India was a plus. Just after a year, it opened its first office in Bangalore. The startup received a rapid demand from users all across the nation by this point of time. Flipkart was gradually transforming into India’s greatest e-commerce business of the future. By 2009, it received its very first funding which amounted to around a million dollars. Its growth was blowing up the market and sustaining quite well. At this point it had over 150 employees and several office setups across the nation. The startup grew so much that it is now available to over 600 cities in India. Its hope for even more growth also led to acquiring companies like Chakpak and Mime360 to bring digital content to the Indian shoppers’ fingertips. By 2013, the startup’s funding had raised over $550 million which made it the "most-talked-about" business in South Asia. Some even called it "the fuel for the future of growth engines". Then in 2016, its founders bagged the title of  “The Asians of The Year” by Singapore’s Strait Times. These profound achievements attracted the most prominent investors including SoftBank, Tencent, Microsoft and eBay. But the greatest of all was about to come when in 2018, Walmart a U.S. based retail giant invested an amount of over $16 billion into the company, making itself the single-largest stakeholder with over 77%. This also led Flipkart to the gateway of the unicorn club. Further, this recognition was used to get customers from America as well. But unfortunately, Sachin Bansal and Binny Bansal had left the company and it is now owned by America’s retail giant, Walmart with 82.1% stakes.

SWOT Analysis: 

Swot is an acronym for strengths, weaknesses, opportunities, and threats. A SWOT analysis is a study or a powerful tool that describes a company’s strengths, weaknesses, opportunities, and threats. It helps to develop business strategies for start-ups as well as established companies:

Strengths-

• First and foremost, Flipkart has an abundance of quality product options from almost every category. 

• Exclusive tie-ups with renowned brands worldwide like Lifestyle, Apple, Motorola and Xiaomi is a plus.

• As the former workers of Amazon, Sachin Bansal and Binny Bansal’s technical knowledge and expertise led to Flipkart's profound growth and prominence. Even after the entry of Amazon in the Indian market, Flipkart manages to give a cut-throat competition to Amazon.

• Flipkart’s tie-ups with Myntra, Jabong and Walmart creates a strong base to establish its position.

• Having separate brands for fashion as in Flipkart itself and Myntra, its subsidiary company and for digital payments as in  Phonepe contributes greatly to brand equity.

• Flipkart bolster their logistics, digital content creation and payment gateways through its strategic partnerships with Ekart, Chakpak, Letsbuy, Walmart etc. 

• Flipkart’s online branding, quirky social media and TV advertisements like kids acting as adults and celebrity endorsements of Virat Kohli, Ranbir Kapoor, and now currently Alia Bhatt playing the character of Flipkart’s superwoman leads to an extensive degree of brand recall. 

• Catchy taglines like “Ab Har Wish Hogi Poori” and “India ka Fashion Capital” are also a great strength of the company.

Weaknesses:

• The giant Indian retail spends an excessive amount of money on advertisements just for higher visibility across mediums. Flipkart provides heavy discounts like the “Big Billion Days”, which has become an annual trademark sale for all its consumers. However, in the long run, extensive advertisement expenses are not sustainable. 

• Flipkart lacks on the R&D aspect of technology. Whereas, Amazon has Alexa for it. 

• The company’s outreach and distribution channels are limited and are incompetent to its competitors. 

• Flipkart’s rapid acquisition spree of Mech Mocha (a social gaming company) and Scapic (an AR startup), despite great losses and heated up competition are going to take a great toll in the long-run. 

Opportunities:

• Covid has created a great opportunity to go digital for not just Flipkart users but also any other online e-commerce sites. Due to the pandemic when it was restricted to step out, no doubt, you must have ordered some milk and groceries from Flipkart for your daily necessities. 

• Due to its great recognition, Flipkart has a golden opportunity to scale its business outside the country like the neighboring countries and the South-East Asian geographies because these counties have high demand for online retail. 

• This company can look up for streamline payments as “AmazonPay” in Amazon to include new product lines. 

• It can also look to MSMEs to sell on their platforms by promoting “Vocal for Local” slogans in India. 

Threats: 

• The rise of similar e-commerce sites like Paytm, Tatacliq etc in the country and Amazon, Alibaba Group from outside the country are giving tough competition to this giant national retail. Flipkart is locked with its prime rival company, Amazon, in a battle of offering festive sales and ambitious money infusions from the profound investors. 

• It has been difficult to stand out for Flipkart due to the emergence of similar e-commerce sites like Paytm, Myntra, Nykaa, Purplle, Amazon with low switching costs and availability of similar brands. 

• Flipkart was recently investigated by Competition Commission of India (CCI) on the case related to violation of competition laws in 2020 which is making it difficult to keep running its business. The government also exercises strict rules and restrictions over monitoring FDI and funds from foreign investors into Indian firms. It becomes difficult for the business to sustain if the government keeps hindering the business.  

Future of the Company:

Flipkart is predicted to surpass the U.S. as the second largest e-commerce market in the entire world by 2034 as the Indian e-commerce market as a whole is set to quadruple to $200 billion in the next five years. Arguably, it may become the nation’s largest business by market capitalization in the future.