Last week I was speaking to my mother in India and she was telling me how she now orders stuff from flipkart.com. I was very surprised as my mother is not very internet savvy, and in the small town of India that I come from, buying things online is rarely heard. In fact until a few years back, even in the bigger cities, people would not order things online. Reason for this: In India (barring a few big cities), where credit card and internet penetration is very low, purchasing is still predominantly cash driven. People prefer to buy products only after looking at it and ensuring it is the right make and quality.
So, what did Flipkart do different to gain such acceptance in even the small towns? After all it is an e-commerce website, very similar to Amazon.com. It is in no way the first entrant into the Indian e-commerce market and sells the same products as other ‘e-tailers’. But while other e-commerce websites never really caught on with people, Flipkart understood peoples’ buying behavior and made an additional payment option available to its consumers – Cash on Delivery. Consumers don’t have to pay when they order a product online, but can pay in cash at the time of delivery.
The Cash on Delivery strategy is what differentiated Flipkart from the crowd and helped it gain credibility and popularity among the crowds. Note that Cash on Delivery (COD) is not the only payment option on Flipkart. You can choose to pay by credit/ debit card as well. But the COD strategy helped the company differentiate itself from the red ocean of e-commerce and allowed it to create its blue ocean (In reference to HBR article Blue Ocean Strategy by Kim & Mauborgne). By using its own delivery guys, Flipkart ensures products are delivered as soon as possible, costs are driven down and customer satisfaction is ensured.
Image Source: http://www.nytimes.com/2011/09/15/business/with-no-amazon-as-a-rival-flipkart-moves-fast-in-india.html?_r=0
Flipkart.com understood its customers and focused on providing the best customer service. It differentiated itself from its competitors based on the service it provided and then as people started liking it, the network effects helped spread its popularity. If we try to categorize the company’s strategy based on the HBR article Types of Strategy – Which Fits your Business?, we can clearly say that Flipkart.com’s strategy was to differentiate itself from competitors based on its service. But then we also need to consider the network-effect strategy helped them too. Word of mouth was one of the main marketing channels for this company and helped it become India’s largest online retailer.
Even though big names like Amazon have now entered India’s e-commerce market, they have not seen the success the Flipkart.com has. Moreover it does not look like Flipkart.com would have a serious threat at-least in the near future. I think their strategy has given them an edge and it would be hard to break that. Particularly because internet penetration is increasing tremendously but peoples’ buying preferences remain the same. And with the name that Flipkart has established for itself, I can see only growth for them.
But what do you think? Do you think their current strategy would be sufficient to sustain their No. 1 position in future?