HOW FLIPKART'S SACHIN AND BINNY BANSAL REVOLUTIONISED E-COMMERCE IN INDIA
In 2007, two twenty something IIT, Delhi graduates quit their cushy jobs at Amazon to turn entrepreneurs. The duo, Sachin Bansal and Binny Bansal, weathered fierce parental opposition to start up on their own, first attempting to build an online shopping comparison engine, before turning their attention to ecommerce and Flipkart.
When India's e-commerce story was unfolding in 2007, customer experience was poor. E-commerce was just beginning to bloom with travel sites such as IRCTC and makemytrip gaining traction.. We were not the first into e-commerce ; E-bay (first as Bazee) was around since 2000. But, we were the first company that focused on customer service as a core theme.. When we started out, people didn't even expect their orders to reach them.
The struggle for logistics started when we went into electronics. We had to build our own logistics network to deliver an increasingly wide range of products, because the existing infrastructure couldn't cope. We wanted to be in a lot of diverse categories and add a lot of value added services -- cash on delivery, returns management, try-and-buy in fashion -- and existing logistics could not cope with these demands. Technology helped us build this logistics network and grow from 20 cities to a 1000 and even helped with things like route planning for delivery boys.
We can make small changes to our interface, to colours and to our product range and test them with users. Consumer goods companies can't try new products or new variants on the fly and make changes on-the-go based on customer feedback. On the internet you can experiment every hour. We try new things every couple of hours and results come in instantaneously.
For the first three years, we were known as an online books vendor. We wanted to provide the best customer experience, management bandwidth and capital and infrastructure to expand our business. We only sold 100 books in 2007 and on December 31, 2007 we even had a zero order day. By end of 2008, we had crossed over a thousand a day and in 2009, we started getting noticed in the book business.
Our customer service experience dropped sharply. When you're buying a relatively low-value item like a book, you can deliver it to a neighbour or the watchman in your building. Not so for costly electronics. Returns had to be supported. This was a big re-engineering exercise and a year's worth of work on technology, supply chain, logistics and marketing. We started a 24/7 customer support unit then.
When we were a small company selling books, both of us could afford to be involved with day-today execution. We were the customer support when we started. You must be able to move from execution to strategy quickly. Initially, we never had a forecast of the business for over two of three months at any given point in time. In 2008 we were talking to lots of investors and we had our fair share of rejects, since we were late in an overcrowded market. As we have grown bigger , we have been able to see further.
When Tiger Global invested in Flipkart, investors woke up to the potential in this sector. Tiger was much more entrepreneur friendly than most other VCs. It bought a long-term thought process to the table, rather than accounting for every dollar spent.
Right now 90% of our customers think of e-commerce as a secondary source, where they can go if they don't find something offline. There are 10% who think of ecommerce as a primary channel and that is changing much faster than what we thought.
We were ready for a switch to a market place model in 2012, but we had to change our entire platform for this shift. We thought it would take four months but it took nine months. For start-ups it is important to be ready with your entire platform and not rush into a business model shift.
If customers aren't voting for something , it's the best way to know your business isn't working. This is how we shut down Flyte, our digital music store. The market was not there. The challenge for Flyte was to create the market. Our thought then was if we're able to convince people to buy rather than pirate it's a big opportunity.
Asking about profitability is premature: Profitability is very important as an end goal, but not an immediate one. If you look at Twitter it was zero revenue all costs three years ago. This year it is going to be profitable. In the internet business, things change very fast. Flipkart has the potential to be the leader in the market and profitability will come when we have that leadership position. Today we want to grow 100-200 % year-on-year , so profitability can wait. When the sector matures and grows 30-40 % annually, then we can turn a profit.
5 Points to Ponder
5. Use customer service excellence to win new business
4. Build depth of business, rather than chase multiple shallow opportunities
3. Be willing to let go of your start-and delegate management
2. Be clinical about killing off your stuttering initiatives
1. Don't be afraid to change and tinker online. The internet's for experiments