Flipkart expects to double sales of large appliances this year
Bengaluru: India’s largest online marketplace Flipkart expects sales of televisions, refrigerators and other large electrical appliances to more than double this year, driven primarily by exclusive products from brands such as Samsung and Vu and faster and more consistent product deliveries.
Flipkart also plans to relaunch its furniture category before its flagship Diwali sales event, Big Billion Days, and is betting on a new private label to boost furniture sales, vice-president Amitesh Jha said in an interview.
After seeing a revival since October, Flipkart expects gross sales to increase by 50-60% this financial year. After smartphones and fashion, it expects large appliances to contribute the largest part of the expected growth.
Flipkart is already the market leader in large appliances though arch-rival Amazon India also announced aggressive plans for the category by setting aside as many as nine warehouses for large appliances last month.
“In the next three months, we hope to see exponential or hockey-stick curve kind of growth in this business,” said Sandeep Karwa, head of large appliances at Flipkart.
“We are aiming to capture 20% market share by March 2018—right now we are at 6-7% and growing,” he said.
Until 2016, Flipkart, which started in 2007, had led the expansion of the e-commerce market in India, spending hundreds of crores of rupees on discounts, advertising and logistics. Since the beginning of 2016, it has slashed its spending on advertising.
Flipkart has identified high-value items such as mobile phones, large appliances and furniture as its most important products, while it is trying to lower the cost of delivering low-value products such as fashion and groceries.
The company has an important advantage over Amazon in large appliances: its ownership of Jeeves Consumer Services Pvt. Ltd, an after-sales services provider. Flipkart acquired a majority stake in Jeeves for an undisclosed amount in late 2014.
“We’ve expanded our network and footprint with Jeeves and eKart—we’ve opened about 3,000 new pin-codes over the last six months,” said Karwa.
“The top brands have started to do exclusive products with us that are geared towards the e-commerce audience—if we look at Samsung, Panasonic, etc. Except for one or two brands, almost every large brand has a derivative with Flipkart right now. For instance, there are 2-3 TVs from Samsung which are exclusive with Flipkart right now, similarly with Panasonic and other brands.”
“The combination of derivative products and exclusives contributes about 50-60% right now of our revenues,” he added.
By 2018, TV sales in India are expected to touch $14.7 billion from $8.3 billion in 2014, according to a January report by India Brand Equity Foundation and TechSci Research, a market research firm.
In furniture, which most people still buy from physical stores, Flipkart is betting that its new budget brand, and a better browsing and delivery experience will prompt shoppers to shift their purchases online.
“The biggest problem you see in the furniture category is efficiency and a quick supply chain—unlike other categories this is not a single-piece category. So, we’re looking at multi-part shipments and that’s a capability that is hardly there with anybody,” Jha said.
Categories such as furniture and groceries are tough to crack and the biggest challenge is building out and managing the entire supply chain, said Harminder Sahni, managing director at Wazir Advisors.
“It’s a nightmare to pull off and nobody has done it successfully so far. We saw this first with all the supermarket chains during the last decade; nobody could manage the logistics and costs involved. In e-commerce, it won’t be any different,” Sahni said.
Despite the efforts of speciality furniture retailers such as Urban Ladder and PepperFry, most people outside of a few large cities are unwilling to buy beds, sofa sets, chairs and tables from online retailers. Apart from a lack of trust, the browsing experience, relatively costly products, unsuitable product assortment and limited delivery reach are limiting the expansion of furniture sales. Over the past year, sales of furniture, which was expected to be one of the big growth levers for online retailers, have slowed down sharply.
“Because furniture is so unorganized, nobody has been able to solve the supply and demand problems at scale,” said Nandita Sinha, who heads the furniture category at Flipkart.