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Flipkart: Challenging Journey from Phenomenal Valuations to Customer Excellence*

CASE STUDY, MARKETING MANAGEMENT
ET Cases - GSMC, 14 Pages

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Flipkart: Challenging Journey from Phenomenal Valuations to Customer Excellence

 

“It’s not an end of the bout for sure but definitely Round one in this billion dollar battle goes to Amazon and Snapdeal. It feels a bit like boxing bout in which one boxer accidently knocked himself down.”

– Kartik Hosanagar, Professor of Internet Commerce, The Wharton School commenting after Flipkart achieved $1 billion sales in ten hours and still large number of customers were disappointed due to technical glitches and failed transactions during Flipkart’s mega sale on October 6th 2014.1

 

E-Commerce in India: On Super Highway

When Chinese mobile maker Xiaomi, launched its Mi3 phone on e-commerce platform, 95,000 mobile handsets got sold in no time through Flipkart.com site. This  one instance reflects the strength, reach and power of e-commerce in India. Such phenomenal sale events also ring a warning bell for brick and mortar retailers in  the country. Without presence on e-commerce platform, any big retailer or manufacturer may see their strategies fail miserably in near future. India operation head of  Xiaomi quoted that they would not prefer going through traditional retailing mode in India as the costs of operations are much higher compared to e-commerce mode. With more than 250 million internet users and 900 million mobile connections in the country, even the traditional retailers in India like Madura Garments (from Aditya  Birla group) and Big Bazaar of Future Group (Kishore Biyani Group) are also lining up for selling their merchandise online. E-commerce trade in India which is  approximately 1% of $500 billion retail sector currently is expected to double by 2016 as per leading rating agency Crisil...............

 



1 http://articles.economictimes.indiatimes.com/2014-10-09/news/54827462_1_snapdeal-and-amazon-flipkart-s-big-billion (accessed date: October 12th 2014)

 

 

Teaching Note Preview

Flipkart: Challenging Journey from Phenomenal Valuations to Customer Excellence

 

Synopsis

Indian consumers are sitting on the threshold of something unique-digital revolution. Especially with renewed vigor with which the new Government of India has started giving thrust to digitization, online information and records, it has placed the internet as the key to its governance model. The government’s approach has energized companies like Google, Twitter, Facebook, Amazon, eBay and Flipkart to convert the huge potential of online marketing in India into reality. It is worth commenting that India’s current e-commerce (total online transactions) are in the range of $12 billion which is around one-twentieth part of the volumes reached in the US and China. This figure includes transactions related to air or railway tickets and hotel bookings. While devising long-term strategy, one must not look at graph showing growth and try to extrapolate, as the future trajectory will be hugely different from the current one.

Total retailing business in India is estimated to $500 billion (INR 30,000 billion) out of which organized retail represents approximately 6-7%. Even if online  retailers are able to grab 1/3rd part of it, it will be a huge online market. Flipkart’s co-founders Sachin Bansal and Binny Bansal believe that in future most young internet users will operate through smartphones and will be making extensive use of online shopping. The soaring valuations and $1 billion investment in  Flipkart creating lot of buzz in the market but the company needs to strengthen its marketplace platform, business models, logistics, payments, inventory  handling, pricing models and efforts should be to make overall a pleasant experience for both buyers and sellers. Moreover after $1billion investment in  Flipkart, the very day announcement by Amazon about $2 billion investment in their business in India means that competition is heating up. The mega sale  announced by Flipkart on 6th October 2014 and its after effects in terms of disillusioned customers filling up social media space gives learning to Bansals that  success depends on execution apart from vision and capital. Indian consumers expect transparency, consistency and customer-centric approach from  e-retailers rather than mere price wars.

Research Methodology

The case has been written purely on the basis of secondary data including news articles, journals, and analysts report easily available on internet. The author has not been related in any way to the organization owner(s)/employees before writing this case study.

Case Positioning and Setting

The case study is aimed for use of Post Graduate/Management students for better understanding of various concepts of management curriculum. It gives an insight on the aspects of rapid growth in e-commerce, marketing challenges, developing and sustaining customer centricity and concepts like entrepreneurship, leadership & strategic intent.

Pedagogical Objectives

The case can be used for studying/understanding:

  • The way e-commerce is changing rules of the game in retailing in India. : India is, considered by many experts, sitting on threshold of digital revolution. The  renewed impetus from current government at the center, broadband highways, thrust to social media, e-governance and above all the young Indians are ready to use cyberspace more and more, is tilting the balance in favor of e-commerce more than brick and mortar retailing....................
  • Highlight the need for a balanced approach in terms of expansion /growth and customer focus approach in marketing. : Although more than 20%, GDP of the globe is contributed by emerging markets, amazingly, only 3% of the global capital has been invested there. This augurs well that there will be reasonable
    and valid reasons that capital investments will flow in in the emerging economies in near future ...............
  • • ...........................................

 

Assignment Questions

  • I. Do you think e-commerce or online shopping holds a substantial promise in India in terms of growth, expansion and reach?
  • II. Flipkart has attracted huge investments from global investors and has its valuation skyrocketing. Do you think it can be justified?
  • III. ..................................

 


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Abstract

Flipkart’s soaring valuation is the success story of entrepreneurship and resilient spirit of Indians. Flipkart acquired Myntra.com and within a span of two months its valuation jumped to more than double. The company attracted an investment of $1 billion from the global investors unheard of earlier. This additional investment will help in upgrading the operations at par with global companies and concurrently focusing on greater customer acquisition. E-commerce in India holds huge promises in future. Starting with selling books online in 2007, Flipkart diversified into full range of products acquiring many smaller companies on the way. Growing internet and broadband penetration in the country helped the cause of Indian e-commerce industry though it is less 15% of 1.3 billion people. The healthy growth of GDP in the period 2001-2014, greater amount of disposable income, migration towards urban areas and younger India’s affinity towards technology are also contributing towards spiraling growth of e-commerce. But the growing question is can Flipkart hold the fort in face competition like Jabong.com, Snapdeal.com, Junglee.com, Ebay.in and especially the Amazon.com. Apart from stiff competition, Flipkart has yet to reflect profitability. Warehousing concerns, reverse logistics, delivery issues, missing products, delays in cash submission by logistics partners, employee turnover are some serious challenges besides retaining customers. Flipkart is well-placed in terms of brand recall, product portfolio and cash in hand. Only serious issue can be managerial capability and how quickly it scales up to face the bigger players like Amazon. The current Indian online marketing scenario is like the rising tides, raising all the boats including Flipkart in the beginning but only those players, who focus on customer excellence in the long term, will stay and sail ahead.



Pedagogical Objectives

  • To understand the way e-commerce is changing rules of the game in retailing in India
  • To highlight the need for a balanced approach in terms of expansion/growth and customer focus approach in marketing
  • To understand the importance of adaptability, quick thinking and learning from mistakes in marketing
  • To understand, how important is integrated approach in marketing in terms of merchandise, pricing, logistics, payments, delivery, consistent consumer experience, trust and long term orientation

Case Positioning and Setting
The case study is aimed for use of Post Graduate/Management students for better understanding of various concepts of management curriculum. It gives an insight on the aspects of rapid growth in e-commerce, marketing challenges, developing and sustaining customer centricity and concepts like entrepreneurship, leadership and strategic intent

* GSMC 2014, IIM Raipur

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- Teaching Note (**ONLY for Academicians)
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