Flipkart bets on exclusive deals with smartphone makers to boost sales
Flipkart is betting that its recent exclusive deals with Motorola, Xiaomi and LeEco would help double sales growth in the smartphone category in FY18
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Bengaluru: India’s largest e-commerce firm Flipkart is betting that its recent exclusive deals with smartphone makers such as Motorola, Lenovo, Xiaomi and LeEco, would help it double sales growth in the smartphone category in the next fiscal.
Chief executive Kalyan Krishnamurthy is pushing his top executives to win more such deals as Flipkart fights to preserve its lead in Indian e-commerce.
Smartphones account for more than half of Flipkart’s sales. The category was key to the company’s revival last year as it battled competition from Amazon.
“Once Kalyan returned, we’ve again started focusing on exclusives. The focus on exclusives was always there, it’s just that the aggression has increased now,” said Ayyappan R., a director at Flipkart.
In the past nine months, since Krishnamurthy returned to Flipkart, the online retailer has inked crucial partnerships with top brands such as Samsung and Apple, which launched its flagship iPhone 7 in the country with Flipkart last year. Recently, Flipkart has also tied up with other top smartphone makers such as Oppo.
ALSO READ | How Flipkart got back in the game
These partnerships, along with attractive financing and product exchange schemes, have led to a sharp improvement in monthly sales at Flipkart over the past four months, said company executives who requested anonymity.
Some analysts, including Harminder Sahni of Wazir Advisors, however, say Flipkart’s reliance on smartphone sales is risky.
First, smartphones offer low margins to online retailers. Then, Amazon could simply offer better terms to smartphone brands and get them to switch to its platform. Indeed, brands such as Xiaomi are increasingly selling on both platforms, alternating between them in order to extract the best terms and avoid over-reliance on one.
Nevertheless, Flipkart is pushing hard to protect its lead in smartphone sales.
Earlier this month, Mint reported that Flipkart expected gross sales to increase by 50-60% in the next financial year. For smartphones, which generate over half of the company’s current annual sales, growth expectations are even higher. Flipkart wants to grow close to 100% in the flagship segment in 2016-17, Ayyappan said.
“Our partnerships are very strong with the top online brands. You will see multiple exclusives being launched on Flipkart over the next few months... Over the next two quarters, we will build on the selection, ensure that there are price-competitive products and brands in every single price segment, combined with the capabilities of (product exchange) and consumer brands, and our new capability around assured buyback,” he added.
In Indian e-commerce, Flipkart is seen as the leader that paved the way for smartphones to become the biggest growth driver for online retailers as it wooed customers in 2013-14 with high-quality smartphone models from top manufacturers such as Xiaomi and Motorola at low prices.
These brands, which were exclusive to Flipkart, then shifted loyalties to Amazon, giving it the platform to mount an assault on Flipkart’s lead last year.
After regaining its leadership in smartphone sales in October, Flipkart is looking to extend its lead in the category.
With the smartphone industry showing signs of saturation, Flipkart is turning its attention towards higher-priced phones to improve margins and keep up its domination in the category.
“The industry has flattened out—around 80-85% of customers are repeat buyers. Which means consumers want to upgrade to higher-value smartphones, and that’s why we’ve seen our ASPs (average selling prices) also moving up,” said Ayyappan.