Excerpts from the interview given by Flipkart CEO Kalyan Krishnamurthy to the Economic Times:-
How have the last few months impacted Flipkart’s business with the Covid-19 outbreak?
We met as a leadership team and the first thing we did was to draw up a list of all the stakeholders we were accountable to. Our employees, by far, were the most important followed by consumers, sellers, brands, and of course the government at the centre and state level as well as the local authorities. We reached out to each one of these stakeholders.
We had taken a number of steps and precautions at fulfilment centres and in the delivery network to ensure that anything that goes to the consumer is 100% safe. Sellers were concerned mostly about their own cash flows, we assured them that we will stand by them. We offered all our capabilities and infrastructure to the authorities and asked them to reach out to us in any kind of help they needed.
How has the demand been in the last couple of weeks after opening up non-essential sale and how long will the actual recovery take without considering the pent-up demand?
If I asked you about three-four-five months back, what are essentials for you, it would be heavily skewed towards grocery and consumables. But with people spending most of their time at home, they are wanting to consume food at home, so kitchen appliances are becoming essential buys.
Multiple family members in a household want to watch on different screens so the demand for televisions, tablets is going up. People are taking to home fitness so a lot of exercise gear, equipment and clothing related to fitness is in demand. Even within the lifestyle clothing and footwear categories, we have seen the definition change in a big way as loungewear, innerwear, is selling a lot. This is the biggest trend we have observed.
Secondly, we are seeing that the country is becoming more value-conscious. Earlier the concept of value was associated primarily with the middle income segment but it is now moving into the upper middle income group as they pick up the value-led selection.
How has the severe lockdown affected the ecommerce industry and can you give us a sense of how the recovery in the demand will happen?
The backbone of the Indian economy will be led by domestic demand and the resurgence in the SME ecosystem. A huge amount of incentives have been lined up by the government targeted at bringing it back.
We are not looking to gain or lose from the changes happening right now. The consumption is skewed towards the new definition of essentials. We have seen new users adopting ecommerce and value conscious tier II and II consumers buy more essentials.
How do you define value-led selection on the Flipkart platform?
The primary meaning of value-led selection driven by our seller ecosystem is the kind of selection which you get at several price points and that is Flipkart’s strength.
We cater to any kind of consumer be it from a small village, town, or Mumbai. If somebody wants to buy a saree for Rs 200, there is a very meaningful selection on Flipkart and at the same time, you can buy sarees for Rs 6000. We also offer value through partnerships with banks and financial institutions to provide high quality lending constructs to consumers. We also introduced the concept of trade and exchange programmes in India for old devices or appliances.
Are you seeing growth in Flipkart’s 2GUD value-led proposition?
It heavily caters to the slightly lower end of the market and it is doing well. There are several innovations that have gone into it including social and group discovery and buying. It is a value-led market which was traditionally served by the classified platforms. We believe that there is a big disruption that can happen in this segment as it has been broken.
What do you think about the narrative that kiranas were threatened and there were lobbies working to not let ecommerce open up?
The country has roughly 60-65 million SMEs and roughly 20-23 million of them are in the trade sector. About 10 million-plus is in what we call as the kirana ecosystem which is dry grocery, fruits and vegetables. To your point, it is a very unfortunate narrative and thankfully it’s only with a few people. The grocery retail and commerce market in India is probably $500-600 billion and grocery on Flipkart’s marketplace is less than 0.1% of that number. Now calling that as a competition or as displacing any SME is completely unfounded.
Also, the biggest chunk of the service SMEs are people engaged in transportation and Flipkart is among the top consumers of transportation. SMEs in the manufacturing industry, probably 80-90% of everything on Flipkart are products manufactured in India by this particular group of people. More than 60-70% of Flipkart and Myntra deliveries are actually through the kirana ecosystem and a huge number of them are selling on Flipkart. It is unfortunate that there is a picture being painted that there is a competing interest.
Reliance Jio, says it is integrating with kiranas, while it has shored up billions of dollars. There have been media reports about Amazon and Google being in talks with Indian telcos. Each of these ecosystem plays are developing, where does Flipkart stand in all of this?
We will primarily be a commerce company. Most of the resources and investments of the company will go towards winning commerce. We have a video, gaming, and several such propositions where we have struck partnerships. The DNA of the company is partnerships. My guess is 50-60% of new users who come into the consumer internet funnel every year in India do their first transaction on a video platform, so we wanted to have that for the customer. We partnered with several providers and players instead of building it ourselves.
Flipkart has not been at the forefront of grocery and FMCG retailing, unlike Amazon. Is that strategy going to change seeing the uptick in that business post the Covid-19 outbreak?
We have not changed our strategic plans because of what has happened in the last two months. Today Flipkart’s grocery infrastructure is in five cities and we will very gradually expand it to more cities when we have the right value proposition. We don’t do anything for competition and that’s not the way we look at business.
Isn’t it time that your dependence on electronics, smartphones comes down?
We are not in the opportunistic game of doubling down on anything. Except maybe for a couple of categories, the ecommerce penetration is still quite low in India. So just to correct you, it’s not that the penetration is at 34% in many categories and the market is going to saturate.
In grocery, there has to be a value proposition. I am not saying that we are not going to have a play. It’s a much longer-term game we are actually playing here.
While other countries did not restrict online retail, it was very different in India. Do you think you lost momentum due to the closure?
Not at all. To be very honest it was not about momentum. Different countries go through different situations and have different challenges. We trust the government of India and they acted in line with what was necessary for the citizens. India is a complex country, it’s a big country not just from the length and breadth point of view but also from people point of view. We are very happy to have supported the government in this effort.