Sachin Bansal on Flipkart’s latest funding, opening up its marketplace & more
India’s largest consumer e-commerce firm Flipkart has just raised the stakes in the Indian e-commerce jungle, sealing its fifth round of institutional funding deal worth $200 million (Rs 1,200 crore) from its existing investors—Tiger Global, Accel Partners and South African technology group Naspers (read more here). This takes the funding the company has received so far to over $380 million; it comes just after a year the firm raised a Series D round, reportedly worth $150 million. Bulk of Series D came from Naspers, which picked around 10 per cent stake for $100 million last year. In an exclusive chat with VCCircle, Sachin Bansal, co-founder and CEO, Flipkart, talks about fundraising, why the company has been reducing its categories, and more.
Where will you invest the funds you have raised?
There has been a lot of skepticism around the e-commerce sector in India as well as around Flipkart. The funding is a validation that large investments can be attracted by Indian internet companies. The investment will be used for building our technology platform, increasing supply chain and acquiring talent.
We have largely been a supply chain company for the last four years but now we need to take it to the next level. Also, while there are very smart people in India, there is no ready-made e-commerce talent available in the country, and hence we will invest in hiring the right kind of people.
The funding has happened in Singapore-incorporated holding company Flipkart Pvt Ltd or the key Indian firm Flipkart India Pvt Ltd?
We raised the funds in Flipkart Pvt Ltd.
You have mentioned that you will be hiring talent. But shouldn’t a marketplace be more self sustaining in terms of required resources?
We want to control as much of the marketplace as we can, starting from getting the customer, taking an order, to fulfilment and logistics. In that perspective, it is still going to be people intensive. As we grow all of this, we will continue to require additional talent across the board at Flipkart for the next few years.
The entry of a new investor is seen as a positive move while investment from existing investors is seen as a measure for sustainability rather than growth. What is your opinion?
All our investors are large investors. If they had the money and were not investing, then we would have looked at getting new investors on board and I would be worried about the scenario. Also, this sentiment is true when it is a small round, where investors say ‘use this and let’s see what happens in the next six months’. The size of the funds raised by us is one of the largest in the space and will enable us to fuel the next stage of growth for the company.
How is the marketplace model working for you? How many sellers do you have on board? Has the shift to marketplace model affected your margins?
We are a very controlled marketplace as of now, but we plan to become more open going forward. We have nearly 500 sellers on the platform as of now, and some of them are even facing supply chain issues since they are getting over a thousand orders a day on peak days and are not able to handle them. The target is to cross the 1,000 seller mark by the end of this year.
Also, as a company, driving margin is not a focus area for us; we can be profitable today if we want to, but it is a strategic choice not to. We want to be the market leader as the market grows; it is set to become $76 billion by 2020, and to be the market leader, we have to focus on growth now.
How is the site faring? Are there changes in the top three categories? Will you stop holding inventory going forward?
The site is getting over a million unique visitors daily and we now have close to 10 million (9.6 million to be exact) registered users. We have over 80 million visitors on the site yearly and during the peak season last month, we shipped 1.3 lakh shipments in a single day. We won’t stop holding inventory in the short term at least.
As of now, electronics remains the biggest category for us, followed by books (physical as well as digital) and apparel.
You launched a private label brand for digital accessories such as laptop bags and camera pouches, under the brand Digiflip last year. How is it faring? Can we expect a private label in the apparel segment as well?
We have seen good traction for Digiflip. It is already contributing 25-35 per cent in the categories it plays in. We are now expanding our footprint within that space and are also adding more things to the mix; for instance, we just launched a digital photo frame. In addition, we will launch our own private label brands in the apparel as well as other product segments going forward.
Critics say you have been late to incorporate a marketplace and entered the apparel segment when it became a big category for e-com…
We have to balance our supply chain capability and keep in mind the customer experience we are going to provide in those categories before entering them. We agree that for a few things (like Flyte) the timing was not that great, but for most categories, we entered at the right time and took the market away from the slow moving players in those segments.
If you take apparel category, for instance, we plan to become the number one player in the fashion segment by Diwali this year.
Is there anything you could have done differently to avoid the Flyte shutdown? Can we expect Flyte to come back?
While Flyte was an excellent service when it came to service and selection, the eco-system had certain problems that needed to be dealt with. Consumer adoption, piracy and micro-payments were pieces that were posing a problem. But the biggest thing that invalidated Flyte was the business model that we were following—that will not work in India. There may be a model out there that works, but we don’t know what that is as of now.
Our offering was probably premature. That is why we took the decision to step back and re-think our strategy. We hope to be back at a later stage.
With almost a dozen marketplaces in the e-commerce space, how competitive is it to get the right vendors on board? Considering you are also competing with veterans like eBay and Amazon now, what is the differentiator for Flipkart?
The market is definitely growing but nobody can boast of the scale and the customer base we offer to our suppliers. We also take care of the entire backend process for them, leaving them free to concentrate on their core business of selling. Our differentiator, of course, has always been the customer experience. That is the reason we have very strict guidelines for sellers who are listed on Flipkart. Controlling the last-mile deliveries also helps us maintain the quality of our service.
Flipkart has been cutting down a number of electronics categories. Why?
Our philosophy has been that if we can’t do a category well from a customer experience point of view, we either fix it or get out of it (Flyte is an example). In terms of large items (TVs, refrigerators, etc), we launched them around a year ago and six months down the road we realised that the size of supply chain investments required to do those items well is pretty high. Hence we stopped selling them on the site, but it’s not like we won’t start again. We are working on it at the backend, and will launch them again sometime in the future.
How are e-books faring? Can you share some numbers?
The e-book category for us is still in the early stages as of now. We currently only have an Android reader app for our e-books, but going forward we are planning to launch a web reader, along with iPhone and iPad apps targeted at the iOS platform.
Are you on the target of hitting annual gross merchandise value of $1 billion by 2015?
Definitely, we are on target to reach annual GMV of $1 billion by 2015. In fact, we have already crossed the halfway mark as of now.
Naspers, which invested in Flipkart, has also invested in Tradus…
In India, a lot of companies have common investors. This is a common phenomenon and there are set guidelines that define the way investors work with these companies. We don’t see it as a cause of concern.
Tiger Global’s Kalyan Krishnamurthy was appointed Flipkart’s interim CFO in May this year. Have you found a full-time CFO?
We are yet to appoint a full-time CFO.
(Edited by Joby Puthuparampil Johnson)