Speaking at a session at the #NAMA Conference, Flipkart co-founder & COO, Binny Bansal and HomeShop18 Founder & CEO Sundeep Malhotra spoke about building an e-commerce business in the country, effect of the recently announced FDI rules on their businesses and shopping trends in urban and rural areas. The session was moderated by Gautam Gandhi, of Google. Here are some notes from the session:
- Effect of FDI on their business: Binny Bansal stated that nothing much has changed on the e-commerce segment with the new FDI rules while Sundeep Malhotra noted that the new FDI rules are good for physical retail chains since they require higher investment as compared to e-commerce retail. Nikhil Pahwa of MediaNama raised a question about the legality of e-commerce businesses operating by bypassing FDI regulations, but both avoided giving a straight answer, though they mentioned that they complied with regulations.
- On Competitors: Bansal stated that the e-commerce market is very dynamic right now and that these are very early days to talk about competition in the e-commerce space. He also noted that the market will slowly evolve and different e-commerce models will start emerging in the next 6-8 years. Malhotra also stated that they are observing a lot of competition in the e-commerce space, which is good for the segment to evolve.
- On popular products on e-commerce portals: Bansal stated that books are still the most popular product on Flipkart in terms of sheer number perspective, while mobile phones and laptops have surpassed books in terms of sales perspective. Malhotra stated that home kitchen goods are the most popular goods on HomeShop18 and claimed that HomeShop18 currently sell more microwaves units than Croma and Vijay Sales put together. Interestingly, he also claimed that HomeShop18 sells more sarees than any retailer in the country.
- On the alleged fake goods sent by e-commerce stores: Bansal stated that he personally hasn’t come across any such incident on Flipkart, however these stories hurt the sector since some users believe in these stories, which makes it hard for the company to build trust among the people in the country.
- Malhotra stated that they initially found it very difficult to build a home shopping network in the country, due to ‘sauna belt’ and ‘nazar suraksh kavach’ type advertisements on television. He also added that there are very few home shopping players in the country due to this problem.
- Home Shopping v/s Teleshopping: Malhotra pointed out that home shopping networks are quite different from teleshopping programs shown on televisions, since teleshopping programs essentially run on graveyard shifts (late night shifts) on television who try to peddle liquidated stocks from merchants while home shopping platform is an alternative distribution channel for brands which run throughout the day.
He also added that they were scared of becoming a teleshopping network during the initial 6-7 months and feared that the company would be shut down any day during the initial period.
- On Logistics: Bansal stated that Flipkart currently takes a hybrid approach in shipping their products. It has invested on its own logistics platform in select cities in the country and has tied up with several logistic partners to deliver products across the country. Malhotra noted that logistics is the biggest investment in any e-commerce startup. He said that they noticed Flipkart’s success in developing its own logistics and has now invested a significant amount of money to develop its own capital.
- Bansal stated that startups should focus on building a business which can sustain on a long term basis rather building a $100 million company within 2-3 years and selling it off to other companies.
- Malhotra stated that they are currently in a unique position of managing a television based retail venture (HomeShop18) and an e-commerce retail store (HomeShop18.com). He claimed that its television business currently generates around Rs 2.5 crore – Rs 3 crore, which is twice of its revenues generated through the company’s Internet operations. Although, he pointed out that its Internet operations is only 18 months old and that the Internet platform will eventually cater to more customers across the country, due to the Internet’s reach and convenience.
- Metros v/s Non-metro regions: Bansal stated that 50% of its customers are from the top 10 metro cities while the remaining 50% of the customers come from tier-2 and tier-3 cities. In terms of selling trends, he noted that rural customers were more interested in top grossing items since these are not available physically in their regions, while urban customers are more interested in niche products. Malhotra also added that urban customers take longer time to buy products, since they carry out a due dilligence before making a purchase, while rural customers are more faster in making the purchase decision.