Walmart-owned Flipkart will continue to focus on pure-play ecommerce instead of ecosystem building with bundled services despite rising competition from new entrants like Reliance Jio and existing rival Amazon, a top executive told ET.
Flipkart Group chief executive Kalyan Krishnamurthy said the Bengaluru-based company will deploy most of its investments and resources into winning commerce with a focus on value consumers and the lower end of the market, a fast-growing segment in the Indian online retail industry.
The etailer’s stand to not immediately double down on categories like grocery and video comes amid reports of technology majors like Google and Amazon eyeing deals with Indian telecom companies to take on the Reliance Jio-Facebook juggernaut.
Read the full interview: Customers have turned more value-conscious: Flipkart group CEO Kalyan Krishnamurthy
“We will primarily be a commerce player … commerce is one place where we want to disproportionately invest. While we have video, gaming and several such propositions, all of those are through partnerships. The DNA of the company is partnerships and this is how we will be going forward,” Krishnamurthy said.
Over the past year, Flipkart has revamped its app to include video streaming, games and feeds, showcasing the company’s underlying strategy to capture a wider set of users who spend time watching content online. While the web retailer had explored acquisitions in the video streaming segment, those talks fell through, and it went on to collaborate with the likes of Eros Now, Voot, TVF, and Viu.
Krishnamurthy said around 50-60% of new users who come into the consumer Internet funnel every year in India make their first transaction through a video platform. “While we wanted to have video for the customer, we did not want to build this ourselves and therefore we struck partnerships,” he added.
The company’s investments will go into scaling its value proposition of affordable ecommerce and push its 2GUD platform which offers new and refurbished products across categories, looking to disrupt the classified players. “The country is becoming more value-conscious. Earlier the concept of value was associated primarily with the middle-income segment but now it is expanding to the upper-middle-income groups who are adopting value-led selections,” he said.
Ecommerce companies have seen volume demand recover by as much as 70-80% in the first two weeks after they resumed sales of the so-called non-essential items, compared with pre-Covid-19 months. While most of the demand is pent-up orders, say industry executives and analysts tracking the segment, new users are coming online to buy products beyond grocery and consumables, Krishnamurthy said.
“The way consumers thought about essentials has changed in a very big way (post Covid-19) and the product mix has moved towards home and kitchen appliances, select electronics and loungewear as more people stay home,” he said.
Staying with strategy
Other than videos, grocery is another category Flipkart has opted to not aggressively chase if it is not sustainable. The etailer’s grocery service is present across five cities currently under the Supermart brand.
“We are not in that opportunistic game of doubling down on anything. As for grocery, if we believe there is a strong value proposition, we will continue expanding our footprint but in a very sustainable way. We will not change our long-term growth strategy or category mix focus after the Covid-19 outbreak,” he said.
In line with its food and grocery strategy, Flipkart had last year applied for licence for food retailing where 100% foreign direct investment is permitted for food produced or manufactured in India. Recently the application was rejected by the Department for Promotion of Industry and Internal Trade (DPIIT) and Krishnamurthy said the company would address the issues raised by the authorities.
“Technology and innovation can bring in huge benefits to the Indian agricultural industry. There is a huge push from the government and therefore we wanted to participate in this. Some technical queries have come in response to our application, we will review them and go back to authorities with whatever questions they have asked,” he said.
On the question of how kiranas and trader lobbies have been pitted against big ecommerce players like Flipkart and Amazon and if that resulted in the restriction of ecommerce to function during the two months of the countrywide lockdown, Krishnamurthy said the grocery retail part of their business was extremely small and it was unfortunate that such a narrative was being drawn up.
“The country has roughly 60-65 million SMEs, and 20-23 million of these are in the trade sector. Out of that around 10 million plus is what we call as the kirana ecosystem, comprising mostly dry grocery and fruits and vegetables. Grocery on Flipkart’s marketplace is less than 0.1% of that number, calling that as competition or displacing any SME is completely unfounded,” he said.
Krishnamurthy added that the rest of the 10 million trader SMEs were retailers of home products, fashion, lifestyle, footwear and a lot of them sell on the Flipkart ecosystem.
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