Flipkart online Services Analysis

Roll No.: 48

Name: Shivam Kumar Singh

PRN: 16020441109

Company: Flipkart online Services Pvt. Ltd.

Topic: Analyze the reported net profit of the company for last 5 years. How do you see the    

Company in next 5 years, given the e-commerce penetration in the country?

INTRODUCTION

             From software engineers at Amazon to being one of the biggest competitors of the same company, the journey of Sachin and Binny Bansal have been truly spectacular.  The whole Idea behind Flipkart was not new. The origin of thought to set up Flipkart came from Bad quality service provided by different e-commerce competitors. So the main opportunity was to do well in terms of Services to customer and hence the main focus for Flipkart became Customer service.

             Now Flipkart is one of the top 3 giants in Indian E-commerce space. After Amazon IN, Flipkart is the second most sought after firm for online shopping in India followed by Snapdeal. Though headquartered in Bengaluru, the company is listed in Singapore primarily because of the difference in taxation policies in the two countries. Initially starting as an online bookstore, Flipkart now operates in a complex Business structure with over 20 million products across 70 plus categories with the help of 90000+ sellers in its bag.

THE GAME OF FUNDING

With Amazon US pumping in huge sums in its Indian Branch and Alibaba & Softbank funding Snapdeal, Flipkart has had its share of dollars buy investment agencies.  After Initial Funding by Tiger Global Management and Accel, Flipkart has been moving at blistering speed, with the current valuation at $15.2B after $700M funding in July 2015.

Even after procuring huge sum of dollars from investors to tap the growing Indian online retail market, Flipkart targets to grab more investments. The E-Commerce company is about to raise up 1 Billion US dollar to fund its business and flourish among its rival Amazon and Snapdeal.

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                   Now the amusing question is why is Flipkart chasing So much money? One of the main reasons for Flipkart to raise such big sum of money is Amazon.in. Amazon is growing at a blistering pace in the Indian Subcontinent and this is that sort of Industry where grabbing a Market share has more significance than profits.

NOT SO PROFITABLE VENTURE?

                   Since Its Inception Flipkart hasn’t tasted profit. Now does that mean that they are a loss making company? And why are investors still pumping in money in these companies despite the losses?  Institutional Investors are pumping in more money into these companies of the sheer potential growth in the e-commerce world in the coming years. According to Consulting Firms, the e-commerce world is estimated to be worth 32 billion dollars by 2020 which is ten times the current worth.

If we closely analyze the Flipkart Losses graph we find that though company has incurred some serious losses over the year but at the same time they have grown significantly in terms of stature and market share.

For the year 2014-15, Flipkart has tripled its sale to INR 10,390 compared to what it was last year. Also at the same time the total fund raised by them is over 2.7 billion dollars which they have spent on various marketing campaigns (The huge advertisement Campaign during the Big Billion day), making warehouses, offering discount, and technological improvements.

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                           The interesting thing to note here is that the Chinese E-commerce giant Alibaba’s Indian wing, which has been operating in India in terms of B2B consumers for the last 2 years, has reported a profit of 1 crore on the collective sale of INR 20 crore.

THE FUTURE AHEAD

Despite the losses, Flipkart should be able to turn the things around with changes in policies and strategies.

• Tie ups with local Vendors and hence reducing the burden on its star Supplier WS Retails. It will also reduce the delivery time and money loss
• In order to increase the revenue, monetization of ads should be implemented as per customer search preference.
• The acquisition of “Adiquity” that specialize in mobile advertising technology will help them improve their advertisement platform and also analysis the consumer data and the pattern of shopping.
• Despite some glitches in Big Billion Day 2015, Flipkart has had a phenomenal response from its customers and Such events will only add to its brand value and help them grow and compete with their rivals in a much better way
• Acquiring other potential companies that could help them with Backend Operations, Logistics, Technology, trend capturing just like in the case of Myntra.
• Advancement of Ekart Logistics so that the deliveries are even more efficient and Cost saving.

THE ALIBABA MODEL

Sellers are just like hands of a human body. Flipkart is considering to follow the seller base model as that followed by the Chinese E commerce Giant Alibaba where 20% of the sellers contribute to more than 80% of sales.