E-commerce company Flipkart is likely to launch an online marketplace, to compete directly with the likes of eBay and Snapdeal in the country. Experts pointed out the company may be trying to be more like the largest ecommerce player in the world, Amazon, which too operates like a marketplace and not just a seller. The Flipkart founders, Sachin Bansal and Binny Bansal, were both at Amazon before this venture. And the buzz that Amazon and Flipkart may one day merge never died down, but the Bansals had earlier ruled out any buyout.
With FDI barred in ecommerce, it’s a breather for a player like Flipkart in some ways, said Rachna Nath, executive director, PricewaterhouseCoopers. Nath was referring to competition from Amazon getting delayed in the India market. Last year, Amazon announced its India foray, but indirectly through a product and price comparison site, junglee.com.
In the multi-brand retail policy announced by the government last month, FDI is prohibited in ecommerce . While no FDI is permitted in online B2C (business to consumer or frontend retail), there’s no restriction in online B2B (business to business) or even backend. The government may be looking at strengthening the FDI clearance rules for backend in online companies as many players are opting for complex structuring to route FDI. For brick and mortar stores, up to 51 per cent FDI has been allowed in multi-brand.
Flipkart did not respond to a questionnaire sent by Business Standard on the matter. But the company, Flipkart Online Services Pvt Ltd, has recently registered two new companies—Flipkart Marketplace Pvt Ltd and Flipkart Payment Gateway Services Pvt Ltd . These companies may be for the purpose of starting an online marketplace, experts said.
Online marketplace refers to an ecommerce site where product and inventory information is provided by multiple third parties. It’s being increasingly seen as a channel for increased sales. In an online marketplace, consumer transactions are processed by the marketplace operator and then delivered and fulfilled by the participating retailers.
Marketplace is a great variation to e-commerce, that can exploit the power of the brand through an inventory-light model, according to Mohit Bahl, partner, transaction services, KPMG. “Flipkart has built a strong brand which drives customer pull and marketplace will allow them to widen the products it can sell,” Bahl added.
Nath of PwC pointed out that through acquisition of companies, Flipkart has been moving towards a one-stop shop concept. “This is more like giving more options to the consumers, quite like Amazon,” she said.
Arvind Singhal, chairman, Technopak Advisors, a leading retail consultancy, however, argued that ecommerce sites are trying to do too many things without thinking of any differentiation. “It’s not just about Flipkart, but a whole lot of them,” Singhal said. “The players who offer little differentiation may harm each other through greater competition in the same space, and may also harm themselves in the process,” he explained.
Another industry insider however said that with the marketplace, Flipkart will be able to offer greater range of products on the site without having the headache of stocking them.
Flipkart has been facing rough weather of late due to operational losses on books that accounted for 65 per cent of its sales volume and 40 per cent of revenue. The company has been constantly widening its product range in the recent months to bounce back. It stocks around 11.5 million book titles on average.
The lead investors of Flipkart include Accel Partners and Tiger Global.
Flipkart has been bullish on its revenue figures and also the target of $1 billion (about Rs 5,500 crore) in sales by 2015. From Rs 11.6 crore in 2009-10, its revenue jumped to about Rs 50 crore in 2010-11. The company closed 2011-12 with a revenue of over Rs 500 crore. It has a registered user base of over two million customers and ships out 30,000 items a day, clocking daily sales of an estimated Rs 2.5 crore.