Thursday, May 30, 2013

Flipkart's strategic positioning and the threat it faces!!

In India when you think of eCommerce you think of not Amazon, not E-Bay but you think of Flipkart. Flipkart is an Indian startup founded in 2007 and currently valued at approximately $800 million.This financial year, they expect to show investors Rs 2,500 crore in revenues, a 400 percent growth over last year’s numbers. They sell 17,500 items each day—or 6.5 million items annually.

A number of reasons are responsible for Flipkart's growth in the Indian market. Being the pioneer of eCommerce in India, it faced a number of problems and in turn came up with solutions to these problems. It has been successful in understanding the Indian consumers mentality and has taken appropriate steps to establish itself.

Flipkart launched its operations as an online bookstore, pretty much on the lines of Amazon. (Incidentally, the founders of Flipkart are Amazon's ex-employees.) Usually books are not very highly priced,it doesn't matter if they are delayed a bit and comparatively easier to handle and thus lesser complaints from consumers. The Indian consumer, new to e-commerce was less concerned about buying these articles. Moreover, Flipkart offered considerable discounts as compared to physical stores attracting the customers.Having an in house inventory, it made books available quickly. Hence it achieved a variety based positioning in the Indian market and became the trusted name in e-commerce. 

Using this as leverage, it further expanded into electronics articles, mobiles, laptops and their accessories. This brought out the need to penetrate the markets further.The Indian consumer is still apprehensive about online transactions and use of credit cards. To overcome this issue, they launched cash on delivery  (CoD) system and also a 30 day no questions asked return policy.Though this considerably increased sales, it led to other problems. The cash returns became slow and it was at mercy of the courier companies. 

The solution : Flipkart Logistics was born to take care of the entire logistics for Flipkart and also with a vision to expand further into a logistics provider. Providing so many features, they appealed to the needs of young and old consumers who were willing to shop quickly, easily and were guaranteed excellent delivery times an service by the most trustworthy name in e-commerce in India.This need based positioning cater to the needs of a large Indian population. Thus, Flipkart achieved strategic positions in the market which was not possible for other firms to imitate. 

With these strategic decisions,  Flipkart obtained a very strong position in the Indian E-business.One can say its the Amazon of Indian e-commerce. However,  extensive operations and need to increase market penetration and sales has put pressure on its profit margins. The prices offered by some other e-bookstores are considerably less as compared to that of Flipkart but, they cant reduce the price further.However, these small firms cannot compete with Flipkart in terms of CoD, logistics, service etc and it has no threats from them. 

Enter Amazon : India has over 100 million internet users, the third highest in the world out of which only 30% use eCommerce !! With such a huge untapped market, Amazon is looking to enter India with the launch of Junglee. Amazon is known as a highly strategically minded company with much focus on growth. To compete with Flipkart, it will have to change/alter its models in some respects to suit the Indian market.
Instead of third party vendors for courier services, it will have to either emulate Flipkart or come up with an out-of-the-box delivery solution. Also, it will have to provide CoD for the fear for missing a huge population who still deals in cash.
However, Amazon has with it years of experience, excellent infrastructure  and huge funds. With branding and advertising, it can easily establish itself as a major player in India.Currently without any advertising Amazon attracts more traffic from India than Flipkart(,,
Also, raging a price war with Flipkart, Amazon can force it into trouble as it faces the pressure to become profitable by 2015. Even if Amazon ignores the CoD market and manages to capture the online/ card based customers, it will definitely put Flipkart in serious trouble.
Though smaller players have not been able to imitate Flipkart, giving it an advantage of strategic positioning, Amazon, due to its sheer size and capital can emulate Flipkart's actions and turn the tables on them.
A major factor probably protecting Flipkart is the Indian government's policy regarding foreign direct investments in retail.If the policy changes and gates are opened to foreign investors, it will surely be a blow to Flipkart.  In order to survive this, Flipkart needs to create unique positions for itself which cannot be copied.

Read more: vs Flipkart -

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