Flipkart banks on smartphones to boost sales in 2017-18
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Bengaluru: India’s largest e-commerce firm Flipkart Ltd expects gross sales to increase by 50-60% in the next financial year, powered by its reclaimed dominance of online smartphone sales.
Apart from smartphones, which account for roughly half of all e-commerce sales in India, Flipkart will focus on increasing sales of large appliances, fashion and furniture, chief operating officer Nitin Seth said in an interview. Seth added that the company will start selling groceries later this year. He declined to give Flipkart’s sales growth expectation or sales numbers for the year ending March.
Flipkart also expects the e-commerce industry to bounce back in the coming months after a strong start to the year.
“The thing about the e-commerce industry is that it’s pretty much a function of whether Flipkart grows. That’s an important thing to understand because a lot is driven by the (two) top players. So, if we grow by 50-60%, which we are very confident of, we believe that the industry will grow at 40-50% and we definitely hope to further increase our market share lead this year,” Seth said.
In 2016, India’s e-commerce sales were nearly stagnant at $14-15 billion as Flipkart and smaller rival Snapdeal struggled in the first half of the year because of leadership changes (in the case of Flipkart) and investor pressure on both companies to cut costs.
Flipkart, however, started improving monthly sales from August and beat arch-rival Amazon India in the festive season battle in October, partly because of higher sales of smartphones such as Xiaomi, Motorola, LeEco and others.
Since then, Flipkart has consistently beaten Amazon India in signing up exclusive partnerships with smartphone brands. 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.
In 2014, Flipkart had become the first e-commerce company to generate $1 billion in gross sales, before product returns, by expanding the market through the introduction of high-quality, low-cost smartphone brands such as Xiaomi and Motorola. These brands which were exclusive to Flipkart then shifted loyalties to Amazon, giving the latter the platform to mount its title challenge last year.
Now, after regaining its leadership in smartphone sales in October, Flipkart is looking to extend its lead in the category.
“On mobile phones, the strategy is clear: we want to be the destination play. We have 60-70% market share in online currently and we will keep consolidating that so that Flipkart becomes the undisputed destination for mobile phones in the country. That will be supported and defended by a number of moats such as product exchange and various affordability constructs and services like tech visits,” he said.
After smartphones, the biggest growth contributors to growth at Flipkart, which owns fashion retailers Myntra and Jabong as well as mobile payments app PhonePe, will be large appliances such as televisions and refrigerators, fashion and furniture. In groceries, Flipkart is still trying to find a low-cost model to deliver everyday items such as detergents, soaps and other goods to customers.
“Groceries is the holy grail. It’s a $600 billion market but the question is how do you develop a proposition that is superior to the kirana (corner store) model? In groceries we’re still in experimentation and pilot mode. We will launch it some time this year,” Seth said.
Seth, an alumni of McKinsey and Fidelity, was promoted to chief operating officer in January, when Kalyan Krishnamurthy, a former managing director at Flipkart’s largest investor Tiger Global Management, replaced Binny Bansal as chief executive officer.