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Interesting to see how Flipkart and Amazon go about overcoming these challenges. One example, from story posted by skbohra123 :

"Logistics: On the logistics side, Amazon India had launched a pilot program to test in-store pick-up service in Delhi and Mumbai in association with BPCL’s In & Out stores. Shoppers were provided the option to select In & Out as the pick-up of point of their Amazon purchases during the checkout process.

This pilot was later extended to Bangalore in the following month, wherein it allowed customers to pick-up their Amazon purchases from local kirana shops."

The Great S.K.Bohra from GSoC 2009?

I have no idea :)

I find people's (especially Indian's) puzzled reaction to news about flipkart's funding puzzling. Flipkart has altered the online buying habits of urban Indians significantly. I would be surprised to meet an urban Indian today who has not heard about flipkart. By urban I mean the tier 2-3 cities as well. So is it just the fact that the current revenue numbers do not add up that makes it puzzling to some (most??) ? If I was an investor, I'd bet on flipkart, solely based on watching the change in spending habits of the urban Indians over the last 5 years. Instead on narrowly focusing on the online business if you take a broad look at the way things are changing the tier 2/3 cities in India you'll understand the investor optimism. You mentioned:

  > Unlike USA, India has not yet figured out how to build proper usable roads,
  > the cities are not planned and India does not have a proper addressing
  > system. Government regulations have further made life difficult for courier
  > companies. All this has resulted into cities and towns where traveling over
  > few kms is very expensive and time consuming as a result small shops
  > catering to need of local communities have sprung up like mushrooms.

...but like almost any other success story in India, flipkart has become a recognizable brand despite this !! ...isn't that reason enough to undestand why the investors feel like this is going to be worth it ?

-- "If I was an investor, I'd bet on flipkart, solely based on watching the change in spending habits of the urban Indians over the last 5 years. Instead on narrowly focusing on the online business if you take a broad look at the way things are changing the tier 2/3 cities in India you'll understand the investor optimism" --

That is the reason why you are not an investor.

My brain is racing with assumptions right now, but I'll just come out and ask, what's a tier 2/3 city?

The U Michigan management academic, C. K. Prahalad (with an Indian science administrator, Mashelkar) had written an article about innovating for the Indian economy in the Harvard Business Review. The summary of their article is that Indian companies tend to figure out a way of innovating around these constraints [1]. They present a few case studies, notably in the mobile telephony and pharma sectors. The companies face pretty much the same problems that you talk about: poor infrastructure, etc. Certainly these can be insurmountable challenges. However, if the market exists, there is incentive to figuring out ways around this. The paper is worth reading to understand how Indian companies innovate.

Regarding non-standard addressing systems, etc. Anecdote: in my experience, courier systems are a little different in India than it is in the US. As I remember from my time there (lived there till 2007), the courier system is de-centralized. Local companies with a reasonably good knowledge of the neighborhood, etc. do the 'last-mile' delivery. The rest is usually managed by nationwide companies, including DHL, etc.

[1] C. K. Prahalad, R. A. Mashelkar, "Innovation's Holy Grail," Harvard Business Review, Jul 2010. http://repository.ias.ac.in/63026/1/25_aut.pdf

This is unquestionably true. Indians succeed by innovating around an oppressive and obscenely slow and dysfunctional government.

However the question I raised was whether Flipkart has come up with a financially profitable and scalable innovation. They might have; because clearly I do not have access to the kind of information that the investors must have had but looking at the public domain it appears that flipkart does not have that innovation. Their CEO is also admitting it in public:

"We have 22 million registered users, and almost similar number of customers. The way we look at it, when this figure reaches 100 million, we'll be in a position to think of profitability. When we have delivered products to one in three homes in India, we'll get to that point." - S Bansal

India follows the "Sheep Herd" mentality. The whole country's economy is based on people getting into "Profitable" domains mostly following the success of a pioneer in the field. The most recent example of this ideology is the "Business Process Outsourcing" industry. New BPO units are propping up here and there at a dime a dozen leading to a quality deterioration in the final deliverable. This process will continue till a saturation level is reached and then they will wait till another "Killer" domain picks up momentum. Till then India will be in a so called "Calm Period" where nothing great and major takes place.

I think the valuation would be justified if they can leverage their IP and platform and are able to scale globally. Maybe the investors have seen how good and scalable their internal operations are.

You are right, India is a small market right now, but if they can build a low-cost model armed with a global supply chain, they can compete with Amazon in other markets too.

There is nothing unique about Flipkart's IP or business model that it will beat well established players worldwide. Is there any example of any Indian or other third world company expanding into US e-commerce or tech sector ?

inmobi is an example of Indian tech company expanding globally. This is not an e-commerce but certainly comes under tech sector

Zoho is a great example i can think of an Indian startup (they were founded in India and primarily work out of Chennai even though they are headquartered in the US) which is making inroads into the CRM market worldwide; which is especially impressive considering that they are 100% bootstrapped and have rebuffed multiple attempts at acquistion including from Salesforce.com. They are also unconventional in that they don't look at degrees and even hire kids straight from high school. This despite the fact that the founder and CEO did his grad in IIT and got his PhD. from Princeton.

Here is a great article about him : http://www.forbes.com/2008/02/22/mitra-zoho-india-tech-inter...

Mind giving us proof that Flipkart makes losses every year. I just find it too hard to believe considering the fact that prices on flipkart are most times higher than any other online retail chain.

Read their interviews in the newspaper they have accepted that they are not profitable.