Bengaluru: The re-appointment of Kalyan Krishnamurthy as business head at Flipkart is the company’s latest attempt to revive sales growth as chief executive officer Binny Bansal is running short of time to turn around India’s largest e-commerce company, which has been ceding ground to rival Amazon India.
Krishnamurthy, an executive at Flipkart’s largest investor Tiger Global Management, joined Flipkart this week as head of category design—one of Binny Bansal’s most significant moves since he took over as CEO in January. This is Krishnamurthy’s second stint at the company; he had earlier worked at Flipkart as interim chief financial officer and then as head of categories before leaving abruptly in November 2014.
In his current role, Krishnamurthy faces an uphill challenge: To quickly improve Flipkart’s flagging sales growth and stem market share losses to Amazon.
His comeback at Flipkart is also seen by some as an insurance measure taken by Tiger Global, which has sunk roughly $1 billion into the company.
Tiger Global first moved Krishnamurthy to Flipkart in May 2013 as interim CFO. At that time, Flipkart’s finances were in a mess; the company’s then finance chief Karandeep Singh had resigned after its losses ballooned and sales growth fell short of investor expectations. This time round, too, Flipkart has failed to meet its sales targets and its losses are estimated to have jumped.
In his previous stint, Krishnamurthy, first as interim CFO, improved Flipkart’s so-called unit economics by pruning costs. After that, as head of categories, he helped devise the company’s sales events strategy which catapulted Flipkart’s revenues to more than an annualised $1 billion in early 2014.
That year, Flipkart started holding sale events continually through the year, offering daily deals, deep discounts on a wide range of products and aggressively advertising these events in newspapers and on TV. Krishnamurthy was also one of the key architects of Flipkart’s first Big Billion Day, a Diwali sale which has now become an annual event.
It is now up to Krishnamurthy to improve Flipkart’s product assortment and offer attractive prices on a daily basis.
“Kalyan’s charter will be to get growth back. Right now, that is the biggest priority for Flipkart. He knows the business inside out and has a great rapport with Binny. But the trouble is that he doesn’t have a lot of time to improve things. Amazon is breathing down Flipkart’s neck. And unlike the last time Kalyan was here, Flipkart is a much bigger organization and slower to adapt. Besides, most of the old-timers with whom Kalyan had worked with earlier have now left. So, this time, it’s going to be much tougher than last time,” a person familiar with Krishnamurthy’s appointment said.
The appointment comes after a rough start to the year for Flipkart. Since Binny took over as CEO, three of Flipkart’s senior-most executives, commerce platform head Mukesh Bansal, chief business officer Ankit Nagori and product head Punit Soni, have left. Flipkart’s valuation has been marked down by four of its investors and the company is struggling to raise funds at its preferred valuation.
The main causes for these difficulties are market share losses to Amazon and a ballooning cost structure. Amazon has used its financial muscle and technology expertise to expand rapidly in India so much so that analysts have warned that Flipkart is in danger of being overtaken by Amazon unless it significantly improves its performance. Amazon has invested $2 billion over the past two years and earlier this month, it said it will pump in another $3 billion as it goes for the kill.
To turn around Flipkart, Binny Bansal is cutting staffing and other costs on the one hand, and on the other hand, he is trying to revive sales growth by improving its product assortment, offering low prices and fast product delivery. Until now, however, his efforts haven’t translated into a significant improvement in results.
Krishnamurthy’s departure in November 2014 after the Big Billion Day sale was partly driven by the rise of Mukesh Bansal at Flipkart. His re-entry into Flipkart coincides with Bansal’s exit.
This is now becoming the norm at Flipkart: Reverting to type in its turnaround efforts.