India's first unicorn, now owned by brick-and-mortar retail giant Walmart since 2018, will be forever etched in India’s entrepreneurial history for envisaging and sowing the seeds of a vibrant e-commerce ecosystem. The founders, Sachin Bansal and Binny Bansal, are not in the saddle any more, but their conviction and doggedness saw Flipkart survive and thrive through the challenges that came its way. With a turnover of ₹34,610 crore in FY20, Flipkart is now India’s largest online retailer and continues to give American giant Amazon a run for its money. While the jury is still out on who will win the retail war, Flipkart, for now, seems to have the edge.
There was no eureka moment in the journey of Flipkart. Though the business of selling books online back in 2007 seemed to be the best idea ever, it was not the original idea to begin with! We were initially looking to build a site that rates e-commerce platforms, and that’s when we realised that customers were not happy with any of the sites. That sort of became the idea—build a site where Indians would love to shop! The key decision we took was to stick to one category—book — for two-three years. The choice of focusing on doing one thing well helped us a lot. It allowed us to create the best end-to-end customer experience—right from how you search, how you buy, how it gets delivered and customer service.
Being software developers, Sachin and I were able to develop a pretty good website. But getting book distributors and vendors to partner with us was a major challenge. Of the 50-odd distributors then in Bengaluru, we managed to get meetings with only half of them! The common refrain was: “Why are you leaving a great job at Amazon?” It was a huge struggle. Eventually, we created a huge selection of over 50,000 books—10 times that of any bookstore. But we had no idea of how to go about getting customers, and that was a bit of a struggle in the initial four-five months. We tried various things—partnerships with blogs; standing outside book fairs and giving visitors bookmarks with our brand name. Finally, we ended up discovering search engine optimisation (SEO) on Google and were greatly helped by fellow Delhi IITians, who had formed a site called Chakpak. They had figured out how to get traffic on their website. We sort of learnt from them. It took us a couple of months to implement it and then we started getting a steady stream of traffic and customers.
Make Or Break Moment Since we were bootstrapped and couldn’t spend on marketing, getting the SEO right was a defining moment. With SEO we were getting customers for free—our cost of marketing was zero! Next was getting on board the right talent: Sujeet Kumar, now the co-founder of udaan, and Mekin Maheshwari, who was our CTO and now runs Udhyam Learning Foundation. Launching electronics was the third most important event. Though we struggled again for six-eight months—building the brand, launching cash on delivery (CoD)—the 30-day no-question-asked return guarantee became the norm. CoD turned out to be a big innovation since it opened up a larger customer base for us than before. Acquiring Myntra was the next milestone as it made fashion the next big category. The acquisition of PhonePe was another defining moment.
The Business Model
One of the learnings was that if you are growing fast, then every 18 months one has to rebuild since the problem statement changes. Look at all aspects holistically—for instance, strategy, team, and processes—and see which ones can continue and what needs to change. After the success of our online books business, we ventured into electronics, but soon realised that people wanted to pay only after receiving the product, unlike in books where people did not mind paying ₹300-400. We revisited our strategy and later succeeded with CoD. In 2012, we had ventured into multiple categories, but that didn’t work. That’s when we chose to pick fashion as a category. We had no plans of acquiring Myntra, and instead our strategy was to first do it on our own and see how it works. But after a year and a half, we chose to acquire Myntra and kept it separate as we wanted to leverage each other’s strengths and capitalise on them separately.
I remember the first time we launched a flash sale for MotoG phones, our site crashed. But then the team figured it out and built a better solution and we were able to scale it. In 2012, when we redesigned our supply chain system, we had a lot of issues. We had to spend almost two-three quarters fixing a lot of stuff at the backend. So, I think, it was a super challenging situation as till then nobody had solved these problems in India from a technology standpoint, and the only way to learn was through trial and error.
Since we were one of the earliest start-ups, we didn’t even know we had to define a culture. Once we reached more than a couple of thousand people, that’s when we realised we need to put all these things in place so that the organisation engine is scalable. We ended up building a team of very smart and motivated people who just wanted to solve big problems. In short, if you were entrepreneurial, you would grow. A prime example of that is Ankit Nagori, founder of Curefit and Cure Foods. He joined us as assistant manager in 2009 and within four years became the chief business officer. Many others such as Vaibhav Gupta, co-founder of udaan, for example, joined us as product lead and started heading finance. PhonePe founders played various roles in Flipkart as well and were pretty successful. The entrepreneurial spirit became the defining culture at Flipkart.
From a handful of VCs then, the market today is a lot bigger and there is a lot more money. The general understanding of e-commerce with VCs then was that it was a very capital-intensive business. Their concerns were: 1) even if I do this round, who would do the next? 2) It’s a difficult business to fund and 3) You are two 25-year-old guys with no experience in supply chain operations to do this at scale. It was not surprising given that till then nobody had seen young entrepreneurs build companies in India. Luckily for us, Subrata Mitra and Prashanth Prakash of Accel took the risk. Mostly investors and entrepreneur interests are aligned when things are going well. The misalignment happens when an investor has a short-time horizon. Luckily for us, we were growing like crazy, doubling every four-five months. So, there was basically no time to talk or listen. We were busy managing growth, and investors were happy.
Marketing & Sales Lessons
While we were a digital company, we did not do too much digital marketing. Instead, we chose TV as we wanted to position Flipkart as a platform where everyone could shop. It was a much more effective marketing tool for us than doing digital ads on Facebook or Google. Today, the mix is different, but some of it still holds true. If you are getting into the next bit of your consumer start-up journey, investing in the brand and getting traffic by that means [TV] could be a lot more effective than doing a lot of incremental digital spend. That’s one lesson which definitely stood out for us.
When Did You Think You Had Arrived?
I don’t know what that means—we were always looking ahead. Even if I ever felt that we had arrived, the feeling would last five minutes because you had to go climb the next big peak!
Riding Through Toughest times
There are two instances—one in 2012, and the other in mid-2015. By 2011, we had done very well in electronics and were very confident—maybe over confident. We launched five-six new categories in 2012, but also ended up creating a lot of chaos. We were missing our targets, but didn’t know why. Raising money was also getting tougher as our numbers were not looking great. We decided to focus on one new category, which was fashion. Around the same time Naspers got on-board and things started to take off.
In the middle of 2015, we focused on getting a lot more sellers on the platform very quickly, and a lot of new people came into the team. It was a new strategy and a new team—the combination did not work. By then Amazon had also started investing heavily. We had serious competition for the first time. That was another tough period.
Today Flipkart is part of a traditional retailing company, but Walmart is more like an investor. The Flipkart culture, the Flipkart team, and the Flipkart way of doing things is still the same. Flipkart can be the leader not just in e-commerce but across different categories. But the key is to keep that entrepreneurial spirit alive.