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How Flipkart broke India's online shopping inertia

It was meant to be a portal that compared different e-commerce websites, only there weren't enough of them in the first place to be compared. Thus was born Flipkart, making sure that online shopping would never be the same again in India.
By HT Correspondent | IANS, New Delhi
UPDATED ON DEC 10, 2011 02:46 PM IST

It was meant to be a portal that compared different e-commerce websites, only there weren't enough of them in the first place to be compared. Thus was born Flipkart, making sure that online shopping would never be the same again in India.

From a two-member embryonic idea to a 4,500-member company, the Flipkart story is not just about stupendous success and mind-numbing numbers. Much more than that, it's about redefining customer experience and breaking online shopping inertia.

Started in 2007 by Sachin Bansal and Binny Bansal -- both from the Indian Institute of Technology-Delhi (IIT) and with prior experience in Amazon -- the Bangalore-based firm ships close to 30,000 items per day.

Or, in other words, 20 products per minute.

"We are clocking daily sales of Rs.2.5 crore ($ 0.5 mn). Our growth rate has been 100 percent quarter on quarter," Sachin Bansal, CEO of Flipkart, told IANS.

But the interesting part is that around 60 percent of Flipkart's orders are cash or card on delivery.

"Indian consumers are much more cautious about shopping online as compared to the West. They are reluctant to divulge credit card details. The cash on delivery service has helped a lot of traditional consumers turn to online shopping," he adds.

Also, the model has unbolted the lock to a whole new customer base which hasn't been exposed to the benefits of plastic money as yet or those with a default technological handicap.

"I've never understood how to pay by card online. The best I can do is use an ATM. I wish more websites had the cash on delivery option," says Sneha Anand, a school teacher.

Saloni Nangia, senior vice president (retail) at Technopak, attributes Flipkart's success to the "superior customer experience it offers".

"Right from browsing to delivery, you can track your order. You can pre-order an unreleased book, get good prices, even the customer service is very strong. Raise any issue, it's efficiently resolved," Nangia told IANS.

Adds Sachin Bansal: "When we started, the customer experience offered by e-commerce sites was below average. Our aim was to address this. We feel that it's this focus on customer satisfaction and ownership of the customer experience that has worked in our favour."

The superior customer service notwithstanding, Flipkart's biggest draw has probably been the huge discount it offers -- much to the envy of offline stores.

"I was waiting to lay my hands on Haruki Murakami's new book '1Q84'. But it was way too expensive at Rs.1,000. But Flipkart had a flat 30 percent discount, and I got it in Rs.700," says Madhura Vishvakarma, a Delhi University student.

Though all bookstores get up to 50-60 percent discounts from publishers, the low overheads -- one of the numerous virtues of online stores -- enables Flipkart to pass on the savings in the form of discounts.

Flipkart started with books, but now deals in 12 product categories.

The company stocks nearly 11.5 million titles, "making us the largest book retailer in India. As per data, we have 80 percent share of the online book market", Sachin Bansal says.

So will this trend spell doom for offline bookstores?

"No," believes Anuj Bahri of Bahrisons.

"There's a huge market for everyone to co-exist. Besides, Flipkart's market is totally different, young people of 20-25 age group buy books from them. Some 80 percent of their business is chic literature. The more sensible and mature readers will always go to a bookstore," Bahri told IANS.

But Nangia of the Gurgaon-based Technopak begs to differ.

"The traditional stores are to suffer. Internationally also that has been the trend."

She believes the increasing "access to internet, more iPads, smart phones, sophisticated technology that gives 3D view of products, time poor consumers, increasing costs of real estate, will all lead to a shift to digital commerce".

But with Amazon, considered a big shark in online retail space, already knocking at India's door, will that result in dwindling fortunes for Flipkart?

"No, India is a huge market, there is much more space for more e-retail stores," says Nangia.

Bahri, however, feels there is a palpable danger. "Flipkart works because of discounts. Amazaon can offer greater discounts as it can take bigger losses being a bigger company. That will change the dynamics," he said.

Already, there are players like Infibeam, Naaptol and Letsbuy in the market.

According to an Associated Chambers of Commerce and Industry of India (Assocham) survey, the online retail market in India may grow to Rs.70 billion (over $1.30 billion) by 2015 from Rs.20 billion in 2011 as internet access improves.

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