Flipkart Ltd. signage displayed outside the company's headquarters in Bengaluru | Photo: Namas Bhojani | Bloomberg
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In e-commerce, products require specialized treatment, and success in one category is no guarantee of prosperity through others, as Flipkart discovered when it expanded beyond books. Mobile phones turned out to be a particularly tricky category. Flipkart’s first investor, Accel Partners, had warned the company about the problems it would face. The Accel VCs had told the Bansals, ‘Losing a phone isn’t like losing a book – you can lose a lot of money.’ But Sachin decided, ‘Screw it, we’ll do it.’ Flipkart’s mobile phones category went live in early 2010. The first order came in shortly: a customer had purchased a Samsung phone. At that time, Flipkart still followed its ‘just-in-time’ system. After a customer ordered a product, Flipkart would source it from a distributor or an offline retailer. The company did not hold its own stock yet, which was illegal as per Indian laws. And just as it had been with Flipkart’s first-ever order in October 2007, the Samsung phone could not be located anywhere. Finally, after three days of hunting, a single unit was found at a small retailer in Bangalore.

While no one knew it at the time, this inauspicious start was a sign of things to come in the mobile phones business. Phone brands scoff ed at Flipkart’s approach. Their message was the same as Accel’s warning: selling phones isn’t like selling books. ‘You can’t just stick a picture of a phone on your site and expect people to buy it,’ brands complained to Flipkart executives. Phone dealers set onerous conditions: no credit, upfront payment, low margins. For weeks, Flipkart executives pleaded for better terms but the dealers wouldn’t budge. Finally Sachin told his executives, ‘Just get it done. They will come around. I’ve seen the same thing happen with books.’ So, they gave in to the dealers who remained sceptical despite Flipkart’s acceptance of their steep terms. A large dealer of HTC phones proved to be especially frustrating. He had refused to return calls from Flipkart executives for weeks. When he finally met with them, he was contemptuous: ‘Chalo, ek phone bech kar bata do – let’s see if you sell even one phone.’ A month later, Flipkart sold about fifteen HTC phones. The next month it sold a few dozen, and soon a hundred. Th e dealer who had initially proven rather difficult was now begging Flipkart to buy more phones.

This became the pattern with Flipkart and its suppliers. Just as Sachin had said to his employees, the suppliers would ultimately come around. When Flipkart had first started to woo them, publishers, distributors and brand custodians alike had treated Flipkart with ridicule. In 2010, this was the case even in the books category, the company’s mainstay at the time.


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Indranil Dutta’s Andheri office was a set of two rooms, twelve feet by twelve feet in size. In one room, books were packaged, while in the other, a few white-collar employees worked at their computer desks. Indranil had hired a dozen people mostly to fulfil operations and sales roles. Every day he and his team went to meet distributors at their offices. Th ere, the Flipkart executives would be kept waiting, sometimes for as long as an hour. It was done deliberately, to make them feel small.

Distributors even struggled to get the company’s name right. They would say, ‘Flip-what?’ ‘Flipkart.’ ‘Flip-card?’ ‘Flip-KART.’ ‘Flip-kart? What’s a kart?’ ‘Have you seen a shopping cart? Perhaps at Big Bazaar?’

Conversations about the company’s name would often go like this. Indranil could hardly complain; his reaction had been no different. What exasperated him instead was the steadfast refusal of the books industry to see the benefits of e-commerce. Managers at publishing and distribution houses would seem set in their ways, refusing point-blank to even consider how e-commerce could transform their business. ‘Who are you and who is Flipkart?’ they would say with condescension. Indranil and his colleagues tackled this problem the old-fashioned way – by going to the top. They would reach out to a manager, then to their boss, and so on, until they could talk to the CEO. ‘Once the CEO is aligned … everyone gets aligned,’ was Indranil’s belief.

By early 2010, many large book distributors had signed up with Flipkart, and the remaining few would soon follow suit. But the company had still had no breakthroughs with publishers, local or international.

Readers in India frequently wanted books from abroad. Either these books were not available here or would only be published after a delay. Binny had identified a handful of international publishers that controlled the supply of books that readers here might like. Binny cold-called – Flipkart had got international calling installed after being unable to call Tiger Global – and emailed executives at these publishing houses. He had arranged to meet some of them at BookExpo America, the biggest annual book fair in the US, in 2010. But he couldn’t get his visa in time and sent Mekin instead. At the book fair, one major publisher agreed to supply books to Flipkart. Over the next year, several other international publishers came on board. Every time Flipkart signed up with a new publisher, the orders shot up. More customers were able to find books they were looking for, which led to higher sales, benefiting the publisher in question, and leading to more publishers wanting to work with Flipkart.

After this achievement, Flipkart began to make headway with domestic publishers, too. Just four months after he joined the company, Ankit Nagori was asked to lead the books category along with media. He had done well with launching CDs and DVDs. To his surprise, music labels were willing to work with Flipkart. It was the final phase of the era of analogue music. People were increasingly downloading pirated music and movies, but there were still enough people buying CDs and DVDs for Flipkart to feel interested in the category. Many customers bought their CDs from a handful of retailers such as Landmark, Crossword and Odyssey. Before launching the category, Ankit conducted market research – which were the most popular labels, who were the bestselling artists, and so on – by literally visiting these stores.


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When Flipkart launched the category, it simply offered the bestselling CDs at a lower price. That’s all it took for customers to switch their loyalties to Flipkart. Music products were similar to books: relatively inexpensive, standardized and easy to ship. A few years later, Flipkart’s rise would permanently damage Landmark, Crossword and Odyssey’s business.

This excerpt from Big Billion Startup: The Untold Flipkart Story by Mihir Dalal has been published with permission from Macmillan India.

 

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