Flipkart’s valuation markdown
economictimes.indiatimes.com
economictimes.indiatimes.com
You are missing out on the whole forest. If you think Amazon was an innovation, solving for ‘hate to go out for shopping’ scenario, then ecommerce in India is 100X of that innovation.
It for simple reason that for vast majority of Indians (non-urban, big and small towns, villages etc.) there is simply no alternative if they want to buy a mobile or a SD card for mobile, or a particular book, or that latest Levis, sneakers, and so on… Heck even in big cities it is a struggle to find things.
The local business that you are mentioning who do home delivery is for day to day things, doesn’t extend beyond ordinary grocery items.
Now why Flipkart still has an advantage? It is simply because it had first mover's advantage. Its brand is well settled in the mind of people, particularly if you consider non urban towns and villages. Those people have simple mind, once a brand settles in their life it is very difficult for another one to replace it. Amazon et al will need to work 10X hard to replace Flipkart from their habits.
Another angle is - mobile.
At the afore mentioned places, the primary device for online shopping is mobile. Now if an app has entered into their device and they have gotten used to it (mind you these folks are not as tech savvy, smart yes but not tech savvy as they never owned a PC before), it becomes very difficult for another online retailer’s app to replace the app that they are used to.
Flipkart still has lot of advantage over Amazon, Snapdeal due to its brand recall (still today if you walk out of city area, online shopping means Flipkart to majority of Indians - almost same as what Xerox is to Photocopy).
That is their value proposition (to investors).
This sounds offensive and it is obviously not true in my first hand experience. The main issue is cost effectiveness once merchandise is not heavily discounted. One good example is telecom. There is no brand loyalty even in remote areas as people keep changing already cheap prepaid plans for something cheaper. See this: http://www.gartner.com/newsroom/id/1963915
> At US$40, the ARPU in India is among the lowest in the world and about one-third of that of China
Much less talked advantage in India is extremely cheap labor who deliver merchandise to homes, and that is available to any new competitor. Flipkart/Snapdeal etc are not much different from Indian IT industry which talked a lot about innovation. However it was(is?) mainly about 1/3rd or less cost comparable to west. But for E-comm it is going to be worse as all/most of their customers are in India.
See: Atari (Nintendo), Friendster (FB), MySpace (FB), Motorola (Apple, Samsung, Nokia), AltaVista (Google), Nintendo (PlayStation), Apple (Windows), Microsoft (iPhone, iPad, Android), Betamax (VHS), RealMedia, Ford (GM), Walkman (iPod), 3dfx (nVidia), Yahoo, AOL (open web), Hotmail, Woolworth's (Sears), Kmart/Kresge and Sears (Wal-Mart), US Steel, Blockbuster (Netflix), Kodak & Polaroid (digital), Sun Microsystems, Xerox, Borders & BN (Amazon), Blackberry & Nokia (iPhone), VisiCalc (Excel), Lotus Notes (MS Office). All examples of first/early movers that got displaced.
This is so true. Even today. Moreover there is an impression of complete lack of transparency in brick and mortar stores, since you are never sure when a shopkeeper is fleecing you.
But sadly Flipkart has pivoted away from customer satisfaction to seller satisfaction as an end goal. As a result their quality of service has gone for a toss, whereas Amazon has always been single mindedly pro-buyer.
Brand inertia will help them retain customers for some time and this also helped because Amazon's android app is just not good enough, but eventually they will crash if they keep ignoring customers.
Amazon has been making in-roads, capturing a size-able market share, but dare I say they're imitating Flipkart to an extent, and that's a testament to innovativeness with which Flipkart has worked all along.
Despite the picture the article is trying to portray, Flipkart is well and truly an established business at this point. Sure they're making losses, but retailing is a tough-nut. In order to capture a rapidly growing internet-base, Flipkart and others need to take those hits-- they need to trade growth with profit, unless their end-game is to get acquired.
It is pretty natural trajectory an e-commerce company to take, IMO. These firms doing a re-valuation of their investments does look scary, and probably they did so having looked at the financials and the potential-- but the correction in the valuation is just a blip. Retailing is hard-- customers want discounts, VCs want growth, Markets want profit... you have to choose two and ignore the rest, I guess.
India Post offered Reverse Money Order as a service aka VPP(http://chennaipost.gov.in/vpp.aspx)
The myth is not without it's merit, Flipkart is perhaps the first one which did it at massive scale and showed how it can reduce the friction when converting a website visitor to a paying customer.
Further read on COD http://www.businesstoday.in/magazine/cover-story/cash-on-del...
Also, seems like mail order for most part still had to depend upon credit cards. See https://en.wikipedia.org/wiki/Card_not_present_transaction
The point that I was highlighting is Flipkart showed the way as to how this forgotten system (COD) can be leveraged in the days of internet to acquire new customers.
The relevant question here is - If Amazon India came before Flipkart, would they have thought of putting this system in place? Maybe, Maybe not.
But one can hazard at least this much guess that looking at the kind of customer traction Flipkart was getting due to COD system, Amazon India's product managers perhaps had to write far lesser emails to Seattle for incorporating that in Amazon.in.
The idea is not novel, it's been conceived off several times in human history as suggested in this thread alone. So flipkart has no claim to special talent, or high barriers in conceiving of the idea.
Since Amazon also wants to be a market place enabler, and builder of market places themselves, it's quite likely they would see this model being played out in other parts of the world and try it out.
Yes, the number of emails required to sell the idea would be lower with an Indian paragon to point to.
http://www.businessinsider.com/this-is-the-difference-betwee...
I've narrowed down to Paytm as the first source and Amazon.in as the second source to look for products at good prices. Snapdeal comes a distant third.
We had 90 minutes for developing an application, language was of our choice, college had not bothered to set up the lab, then somehow we started, and they told we'd have 90minutes and then suddenly in 60minutes they came up and said okay we are done, now time to evaluate.
They rejected me because my code didn't compile, so nobody cares about your approach, it is like being in college where your architecture is shit, approach is shit, design is shit, we'll consider only when your code runs :D
I am happy I didn't get through. Also, for a company which looses crores of Rupees per year, it is a bad sign if they start using Mac books for development! Bootstrapping!
Myntra, which Flipkart bought, is still my go-to source for buying clothes. It helps that Myntra has really the best user experience of all the other apps. Their delivery is incredibly fast too - I ordered a shirt last night and received it today morning!
What are Flipkart's sales today? You can expect it won't be worth dramatically more than its recent peak, years from now - and that's the good outcome. It's the routine outcome of extremely high valuations; to the extent they're too high, is the extent to which they pull future returns forward.
Are journalists really this myopic or just eager for clicks?
When the Shanghai Composite Index started falling over after China created a market bubble there, people said: it's up 150% in under a year, and now it's only down 20%, no need to worry. Well, now it's down 50% from that high - below where it was five years ago - and those people are no longer talking about it. It was never the initial drop that mattered, it was all about what was coming next, not what happened the day before.
Or it won't be enough and they're all screwed nonetheless. Who knows!
No, it's best to just stick to what we know.
More to your point, there are many in the cities who have credit cards and use them often because they're convenient. Carrying cash or using debit cards when more people are moving to credit cards is foolish and a way to subsidize the people using credit cards.
I have credit cards that I use wisely. Always pay fully on time (no interest), make the most of the credit period by timing purchases as much as possible, etc. I don't have to worry about carrying lots of cash and getting change (or worse, rounding things up while paying). Taking advantage of marketing related discount offers from credit card providers is also another positive. Overall, credit cards provide a lot of value for me, although the social benefit could be argued one way or the other.