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.
Flipkart’s Strategy
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.
Threats?
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?
Sources:
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