A lesson about business model agility from India’s Amazon

FlipKart is India’s Amazon. Launched in 2007, Flipkart followed the Amazon growth curve initially. The founders are former Amazon employees and oddly enough the first book they sold was “Leaving Microsoft to change the world”. Flipkart is doing just that in the Indian market. The Indian market is challenging and has a plethora of problems that Flipkart has had to confront. Flipkart have not only navigated around these problems successfully but have also grown impressively in the past 5 years.

Transplanting business models from one country to another never works. Just ask Walmart and their venture into a very similar German market.  The moral of any venture that involves market entry into a new country is that an existing successful business formula cannot fit another culture. Any new market entry requires extensive analysis. Quantitative analyses like estimating the market opportunity, growth, competitor landscape etc. are important; however what’s often misunderstood and overlooked are the qualitative aspects and the most prominent one is culture. Miss that and your venture will be another statistic in failed market expansions.

So what did Flipkart do differently? In a nutshell they understood the Indian market. They really understood the Indian market. 2 key factors overwhelmingly propelled them to astounding success – supply chain efficiency and focus on the customer.

Flipkart understood the realms of India’s problems as it relates to delivery assurance. This was the first cultural hurdle – establishing credibility with customers with 100% delivery. Creating a unique and robust supply chain was key. Flipkart has multiple warehouses located around the major cities in India. Additionally, Flipkart partnered with over 500 distributors and various courier services and mail companies including India Post. No matter where the customer was located, or how desolate the location, the product would now be delivered. Via air, train, rickshaw, a scooter or a bicycle – product delivery was now assured. Word of mouth quickly spread about their consistent speed of delivery.

Flipkart are certainly not the first e-commerce website in India. However what differentiated them was their steadfast focus on the end customer. They not only offered a personal touch via empathetic customer service – but offered a game changing method of payment – CoD – Cash on Delivery. This clearly demonstrates how in tune they were with the customer base in India. Indian customers are weary and don’t necessarily trust online shopping and the one way to circumvent that is by offering CoD which doubled as a dual trust link from both Flipkart and the end customer’s side. To entice customers in the lower parts of the pyramid, Flipkart even offered EMI payments option i.e. monthly installments. These payment methods were path breaking and over time the 2 key facets of supply chain management & focus on the customer has cemented them as the front runner.

So what’s next for Flipkart? I’m predicting IPO. Flipkart recently tied up an additional USD 300M in a round of funding from Accel Partners, Naspers and US hedge fund Tiger Global. Even though they’re not profitable (due to aggressive expansion they are sucking up cash), Flipkart is projected to hit 1 Billion USD in total transactions by 2015. With the Indian market growing everyday – I’m keeping a close eye on Bangalore based Flipkart. I foresee further expansion into the South East Asian region (Pakistan, Bangladesh, Sri Lanka et al)  by 2017 and based on their strategy of truly understanding the culture of the market – I’m betting on their business model succeeding.

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