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Flipkart to invest in furniture, groceries; claims to be a market leader in e-commerce

Livemint:  December 12, 2018

Bengaluru: Walmart-controlled online retailer Flipkart has transaction growth of more than 80% in some months as e-commerce is booming again in the country, and the company plans to push newer categories such as furniture and groceries over the next three years.

In an interview with Mint on Tuesday, Flipkart CEO Kalyan Krishnamurthy said that the online retailer is at least “twice the size” of its nearest competitor, implying Amazon. Amazon India chief Amit Agarwal had in a recent interview dismissed those claims, saying that Amazon did not have time to focus on “unsubstantiated claims.”

Krishnamurthy also indicated that Flipkart may either partner with a video content firm or build out its own content offering, as part of Flipkart’s broader loyalty programme, which was launched a few months ago.

“It’s a very unique loyalty programme and the uniqueness of the loyalty programme hasn’t fully played out yet….If the Indian customer wants content as part of that, then we will offer content to the Indian customer as part of the loyalty programme. We are working on it and we will get to a situation where we will offer some sort of a content experience for customers. It could be through partnerships or we could build it on our own,” said Krishnamurthy

Mint had reported on September 17 that Flipkart has held talks to buy a stake in Hotstar, Star India’s video streaming service, as part of a broader strategy to bet big on video content and attract more Internet consumers and shoppers.

Krishnamurthy said that Flipkart plans to invest heavily in growing newer categories such as furniture and groceries. Flipkart may invest in or partner with offline retailers in groceries and furniture to become a leader in these categories.

“Furniture is a small market, so I won’t take pride in saying that we’re number one there. There are only 3-4 players. What is unique about the furniture business is that it’s heavily built on private labels. Everything will expand there. The reach of the furniture supply chain is way lesser than that of eKart in general. So, that has to go up. The cost structure will improve, the experience will improve, so all of that will improve,” said Krishnamurthy.

“Grocery is by far one of the most difficult businesses we have launched. In Bangalore, we’ve seen a huge amount of customer adoption and a lot of learnings. So, right now we’re in four cities. Today the grocery business is primarily about the monthly basket approach. If I look at that market versus the on-demand market, it’s about 80% in favour of the monthly basket purchase in India. Does that mean we will not get into the on-demand business? Once again, that’s another business where globally more people have failed than succeeded. So, we’re very cautious of that and when we do it, we want to do it the right way...In the long-term, we might not have an online-only approach (in groceries) -- we will partner with the ecosystem...any kind of tie-up or partnership is possible,” added Krishnamurthy.

A majority of India’s $18 billion e-commerce market comprises sales of mobile phones, fashion and televisions, in that order. But the overall retail market is structured differently with groceries and fashion the two largest categories. If e-commerce has to continue growing at high rates over the next few years Flipkart and Amazon will have to significantly scale up sales of groceries and fashion.

Last month, Flipkart co-founder Binny Bansal had resigned, following an internal investigation into an allegation of “personal misconduct.” The subsequent probe into the incident cleared Bansal of any wrongdoing, but revealed “lapses of judgement” on his part, especially with his handling of the matter.

On Tuesday, Krishnamurthy and Walmart declined to comment further on the probe into Bansal and Walmart’s communication surrounding Bansal’s departure from Flipkart.

Krishnamurthy also declined to comment on whether a new leadership will be appointed at Myntra to replace the current management led by Ananth Narayanan, but said that some Flipkart executives will be “selectively” given roles at Myntra and vice versa.

“We might move people across our group companies, we might do that selectively based on skills and needs of the business,” said Krishnamurthy.

Mint reported on Monday that Myntra’s chief executive officer (CEO) Ananth Narayanan has resigned from his role with his position set to be abolished, and Flipkart executive Amar Nagaram has been tasked with heading Myntra.

Separately on Tuesday, Flipkart’s Singapore-listed entity infused roughly Rs. 2190 crore ($304 million) into its Indian subsidiary, according to a regulatory filing sourced from Paper.VC.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.