Flipkart is India’s largest online retail firm and has been the poster child of the Indian consumer internet industry in the past decade. I have chosen this company as an example of effectiveness, because they have consistently delivered and scaled on what they have promised: “delivering more smiles per hour”. Started in late 2007, it ships 8 million units per month (as of February 2015).
It’s business model has evolved over the years. In the initial days the focus was on making customers in India cognizant of ecommerce as a reliable channel. With time the focus shifted on becoming an online megastore which is very highly preferred by shoppers. Lately, the focus has been on profitability while maintaining customer delight.
Similarly, the operations have also evolved to achieve the goals of the organization. Whether it be stocking almost everything in the inventory initially, starting cash on delivery to increase credibility, having its own logistics network, having in-house technologies for a lot of back-end and front-end functions, having 30 day replacement policy, shifting to a marketplace model in the recent years and heavily focusing on the mobile channel are the ways Flipkart’s technology and operations decisions have kept pace with changing organizational goals.
LET US ANALYZE MORE CLOSELY
INITIAL DAYS: GAINING CUSTOMER TRUST
In 2007, online retail’s contribution to India’s retailing industry was practically zero. Flipkart’s idea in those days was to establish the reliability of its platform. To achieve the same, Flipkart started out with just books because they were easier to handle logistically and since they cost only $8-10, customers were more willing to try this out. However, customers were not so conversant with online payments then. Thus, Flipkart took a decision of starting cash on delivery. This operational innovation proved to be pivotal in gaining greater customer trust.
THE TRANSITION: SETTING UP FOR SCALE
With the growing scale, the logistic partners of Flipkart were not able to deliver. To address the same, Flipkart established its own delivery network with last mile delivery capability. This operational ownership was crucial for scaling and maintaining trust. The business goal of becoming an online megastore required Flipkart to diversify into other categories and provide a hassle free shopping experience . This required greater supply chain technological capability. Flipkart developed its own ERP for greater control, transparency and customization. This allowed Flipkart to be more responsive to changing business needs. For a hassle free customer experience, initiatives such as a no questions asked 30 day replacement policy, same day delivery and scheduled time slot deliveries were institutionalized. To ensure a faster processing time in its fulfillment and logistic centers, automated assembly lines have been put for a lot of key processes. This has also allowed to improve operational efficiency along with improved customer delight.
WHAT’S HAPPENING NOW: FOCUSING ON REACH AND PROFITABILITY
For a greater geographical reach, Flipkart has expanded the number of warehouses in rural India. In addition, as a business strategy, Flipkart is acquiring companies to strengthen its operational muscle. It recently acquired a minority stake in MapmyIndia to strengthen its delivery network by using their map data and location technologies.
Flipkart has heavily invested in optimizing and delivering a hassle free shopping experience on mobile. Keeping in mind the slow data connectivity in rural areas Flipkart launched Flipkart Lite, a progressive web app for the mobile site – the first of its kind in the world. Over the last couple of years, the focus has also shifted on becoming profitable. For the same, Flipkart has moved towards a market place model wherein its huge inventory costs have dropped significantly.
This constant alignment has allowed Flipkart to maintain a significant lead over its rivals such as Amazon and Snapdeal . This has also ensured that the industry as a whole innovates resulting in the customer being the ultimate beneficiary.
THE ROAD AHEAD
I believe that the operational and business strategies have an alignment since inception helping it to achieve a superior performance. This alignment will be crucial in achieving Flipkart’s goal of a 10x volume growth by 2017-18 from 2016-17. Having started in 2007, Flipkart is currently valued at over $15 bn. This has been achieved by shifting business goals to achieve the vision of customer delight always, developing operational capabilities to achieve the same and using technology as an enabler for scale and for integrating the myriad of functions which need to interplay to bring a smile on the face of the person who matters the most – the customer.