Bengaluru: Flipkart’s logistics arm ekart is planning to expand its push into hyperlocal deliveries, including food, aggressively cut costs and tie up with offline retailers and small neighbourhood stores as part of a revamp of its courier business, a senior company executive said.
In an interview on Wednesday, ekart head Saikiran Krishnamurthy said the company would “relaunch the courier business" and tie up with offline retailers for drop-offs and pick-ups. Flipkart so far has alliances with Blue Dart, ECom Express and other operators of courier services.
“Our courier model has so far been an online pickup-centric model—which means you go to our website, you order a courier and someone comes to your home and picks it up... But the courier is a mature industry. The belly of the courier market is not in online pickup, but in offline drop-off. Let’s say, if we operated at Rs150 for online pick-up, our offline pickup will operate at Rs70," said Krishnamurthy.
“We want to pivot the proposition to the belly of the market and offer a much more affordable but highly reliable service—which is our core anyway. Now we want to extend our core capabilities to our courier business. That’s the core of the relaunch," Krishnamurthy said.
ALSO READ: Indian unicorns such as Flipkart, Snapdeal and Ola have spawned 700 start-ups
Flipkart’s ekart arm is responsible for order fulfilment, post-delivery and seller services. It is a key business for Flipkart, employing more than 20,000 workers who deliver smartphones, clothes, shoes, TVs and other products to customers.
Ekart started delivering orders for other online retailers and third-party merchants last year and started handling logistics for Alibaba-backed Paytm.
Ekart is controlled by an entity called Instakart Services Pvt. Ltd. Flipkart had bought back its logistics business from WS Retail Services Pvt. Ltd via Instakart in 2015. WS Retail earlier controlled ekart, apart from being the largest seller on Flipkart’s platform.
Krishnamurthy said the company would also shore up its capabilities in the area of hyperlocal deliveries in the near term, including food deliveries.
“Point-to-point hyperlocal...in the long term, we see that as a very relevant capability, as you get more and more retail developing in cities and more and more availability. So, our supply chain has to evolve to do much more point-to-point (deliveries). It is a belief in that evolution that is making us build the hyperlocal capability and food is a here and now used case with which to push ourselves and get it right," said Krishnamurthy.
Last year in January, Flipkart restructured the company’s core retail and marketplace business and moved many senior executives into new roles. It named Krishnamurthy as head of ekart in March. His elevation was a part of Flipkart’s broader strategy to break down barriers between its commerce arm and ekart, which were being run as independent businesses until early last year.
ALSO READ: Flipkart pares losses, boosts revenue at its largest unit
Since Krishnamurthy took over ekart and former Tiger Global executive Kalyan Krishnamurthy returned to the company to head the e-commerce business, the two have been working closely to drive cost efficiencies as part of a broader move by the company to keep monthly burn rates in control.
Ekart’s Krishnamurthy said the company would continue to look for more ways to bring down costs, mainly through further use of existing company resources, investments in technology and automation.
Functions such as supply chain and logistics are typically the two most resource-intensive areas in the e-commerce business and over the years companies such as Flipkart and Amazon have been trying to find newer ways of reducing costs for each delivery.
“Significantly reducing our supply chain costs is the first focus area to make us stronger. Driving higher utilization has helped us reduce our cost by over Rs20 per shipment... Going forward, this focus on total cost will be critical to the strength of our business," Saikiran Krishnamurthy said in an email to employees earlier this week.