After Walmart deal, Flipkart plans expansion into other categories

The e-commerce giant to break out of smartphone shell

It took a $16-billion stake sale, a change in the top management, and an entry of the largest retail giant in the world for Flipkart to alter its game plan.

Realising that just concentrating on smartphones and the assorted electronics segment would not give it repeat customers or high revenue numbers, Flipkart, after Walmart Inc.’s entry, is now planning to go for a major expansion in groceries, big appliances, furniture, and even pharmaceuticals.

In a slew of meetings after the announcement of the Walmart deal, the senior management at Flipkart has been told that the focus on just smartphones needs to shift if the company wants to increase its gross merchandise value (GMV), which currently stands at around $7.5 billion.

“The company is planning a major expansion in grocery, big appliances and furniture so that it can double its GMV to $15 billion by 2020 if not earlier. In smartphones, where its GMV stands at around $2 billion, it can take it to $4 billion at most. Fashion again can only push the numbers that much further. It needs new areas to achieve the massive targets set by Walmart,” said a source close to the firm. 

Flipkart refused to comment on the issue.

Strategy

Over the next year, Flipkart is planning to increase the number of warehouses it has. Of those a chunk will be larger format warehouses, specifically for big electrical and appliances. 

While the company has not given out the number of warehouses it has, by all accounts it stands at 21. It might take the number to 35 over a year and a half.With the push towards higher-margin products as well as Flipkart coming up with its line of air-conditioners, refrigerators, and LED televisions under its ‘Billion’ brand, the company is looking for specialised warehouses. 

Flipkart is planning to set up an integrated logistics park on the outskirts of Bengaluru. This will be the largest and one-of-its-kind facility in the country. 

The facility, for which the company is in the process of acquiring 100 acres, will have warehouses that will rival in size those set up by Amazon and Alibaba in the US and China.

The company is working on demarcated supply chains for grocery, the furniture business, and big appliances. “There would be a different supply chain for grocery because the business requires a different set of logistics. The company has started a pilot for groceries in Bengaluru and in time it would expand, so the supply chain will grow organically. For furniture and big appliances, though there is a slight overlap, the supply chains will be different,” the source added. 

The company has launched a private furniture label called Perfect Homes and is eyeing $110 million in GMV by the end of the year.

Pharma is another category Flipkart is planning to foray into over the next few months. In an interaction with the media after the deal, Flipkart Chief Executive Officer Kalyan Krishnamurthy said pharma delivery was one of the segments the company might enter because the area was at an early stage of growth in India. 

Creating a strong partner ecosystem

Flipkart sources said the firm had kept aside close to $1 billion for investment, mergers and acquisitions. The Bengaluru-based online marketplace giant is planning to renew talks of investment in various companies including Swiggy, BookMyShow, Pepperfry, an e-grocery player as well as a slew of small firms including insurance companies.

It is also planning to work closely with e-commerce firms including travel and ticketing websites, food discovery and ordering portals such as Zomato, service providers like UrbanClap, and furniture portal Urban Ladder.