Flipkart's competitors tweak inventory-based model

Flipkart, the poster boy of India’s e-commerce story, might have grown rapidly because of its inorganic growth route and inventory-based business model, but there are many early entrants that have either avoided that route or tweaked it substantially for better efficiencies.

Take the case of Snapdeal, which started as a coupon retail site designed on the model of the US-based Groupon. Four years later, the company is a full-fledged e-commerce site, catering to categories like lifestyle, mobiles, electronics, perfumes, books, footwear and others.

Snapdeal works like a market place, similar to that of eBay. Brands can use the Snapdeal platform to showcase their products. When it comes to delivery, it has opted for a “fulfillment centre” rather than a warehouse. The centre is used only in case of a retailer not wanting to fulfill a transaction (delivery). If a retailer does not want to take the onus of shipping they can send the package to the fulfillment centre of Snapdeal, and the latter ships it out.

Due to its diversification into a market place concept seven months ago, Snapdeal has 4,000 brands listed on its website. Unlike Flipkart, it has chosen to depend on third-party courier firms for delivery. “One of the effects of the boom in e-commerce has been a spurt in regional courier companies. They are cheap and still maintain good services. This competition has also brought down the courier charges of large players by as much as 60 per cent,” said Kunal Behl, Founder and CEO of Snapdeal.

Behl clarifies he did not want to build a business which depended on creating a large inventory. According to industry estimates, the apparel space has unsold inventories worth Rs 30-40 crore and in the case of electronics, it is around Rs 70-60 crore.

Fashion and You, which also created an internal logistic team for prompt delivery, tweaked its supply chain by having a good mix of third-party courier firms. “We do have 300-350 employees as part of our in-house supply chain. But they cater to the top 10 cities only, which generates 60 per cent of orders. The rest is serviced by the third party firms,” said Pearl Uppal, co-founder of Fashion and You.

For Uppal, the other significant focus was increasing business from repeat customers. “Today, 70 per cent of our revenues come from repeat customers, for which we focused on our loyalty programmes. A regular customer on our portal on an average makes six transaction in a year,” says Uppal. This has also brought down the rejection rates in the cash on delivery (CoD) segment. At Fashion and You, if a customer rejects a product, he will not get the CoD option next time, depending on the reason for rejection. Also, CoD customers need to pay for shipping. Uppal claims the rejection rates on CoD is eight per cent.

Along with Flipkart, the other e-commerce player that started copying the Amazon business model was Ahmedabad-based Infibeam. Like Flipkart, Infibeam had ventured into other categories, but this year it went a step closer to the Amazon model, as it opened its IT and supply infrastructure to different retailers (both large and small), under the name of ‘Build a Bazaar’ initiative.

“This gives retailers access to our infrastructure, which includes IT support, and access to our supply chain. We have 36 courier companies integrated into our platform. We have signed up 13,000 retailers and expect this to take up to 100,000 by the end of this year,” said Vishal Mehta, CEO and Founder Infibeam. The platform allows the retailer to sell their own products and also sell Infibeam’s product. In case Infibeam’s product are sold through another retailer’s online store on this platform, then Infibeam pays one to 1.5 per cent seller commission. If the retailers products are sold on any of the Infibeam portals, then the retailer gives a commission of one to five per cent to Infibeam.

Mukesh Bansal, Founder and CEO, Myntra.com, also follows a mix of in-house team and couriers for its delivery. The company owns 50 per cent of logistics for delivery catering to to the top 16 cities. The balance is managed by Blue Dart and Quantum Co.

“In terms of cost, it is much cheaper than managing everything internally,” he said.