Every idea is a seed. It has got potential to transform into a big tree of success. Whenever an entrepreneur starts working on an idea, first and foremost question which he faces is how his idea will perform? Would he be able to stand in the category of few “Bansals of India” or would be consumed by big startups in the phase of evolution.
Aim of every startup coming at the horizon can be summarized in two broad categories:
- Startup will evolve into big success and will lead its segment. Like – Filpkart, Amazon, Apple, Google etc.
- Startup will develop into an expert in particular segment/practice/technology and will be later acquired by bigger startups as part of their business model.
Every founder thinks big. As per them, their idea could be the next big hit in market. But phases of evolution and time shape the future of every startup.
Here is FS Lab’s analysis about Flipkart Acquisition trend, which highlights how Flipkart has carefully planned its success story on the map of Indian E-Retail market.
Let us take a short dive in the fairytale rise of Flipkart-
Consider the evolution of Flipkart from “Online Book Sellers” to a $15 billion E retailer company. Founders of Flipkart were initially trying to make a price comparison platform but as not many e commerce websites were present at that time, they decided to make one E-commerce company. Flipkart began its service in India in 2007. It all started with book named “Leaving Microsoft to change the World”. Initial investment of $8000 for making website and customer interface domain was all they invested. Within 3 years they were able to attract large customer base which was previously content with buying books from stores.
Book plus Electronics item sale was next target. Funding and careful planning supported by better customer service was mantra for smooth changeover of Flipkart-The book seller to Flipkart-The E retailer. In mean time to switch over its initial image to E retailer, Flipkart acquired number of companies. These acquisitions were carefully chosen and all of them coincide clearly with “what next Flipkart is planning to sell”.
Flipkart Acquisition – Pattern
1. We Read : 2011 (Flipkart sold books; had 800 Employees. Potential Target – Getting socially connected to its customers and get traffic from social media) A social book discovery engine and enabled users to recommend and discover books, search for authors, rate and review books as well as share and network with other book lovers. It was registered widget on Facebook, Hi5, Myspace, Yahoo and Orkut. It boasted a registered reader base of 3 million and had listed 60 million books. Most troublesome feature pre Flipkart acquisition was that it directed customers to Amazon.com.
Through acquisition of We read, Flipkart were able to connect to its customers socially. It ensured presence of Flipkart on every social media platform. And of course a lot of traffic to Flipkart website which was previously diverted to somewhere else.
2.Mime360: 2011 (Flipkart sold books, handsets, consumer electronics & movies; had 1500 Employees. Potential Target –Online Music Store)
An online digital media exchange platform that connected content owners such as artists and musicians with content publishers. It resolved common issues such as piracy, varied pricing and revenue collection for the users and had a revenue share and licensing based business model. Flipkart wanted to build out its B2C story. It was already selling music CDs and DVDs on the site and now they wanted to open a business vertical to distribute music & games online.
In October 2011, Flipkart launched an online paid music download store – Flyte, with an aim to control legal music download and hence generate revenue by selling paid music download. Later this venture failed as it was not able to compete with free music download industry.
Mime360 had around 11-12 people, and the technology team eventually shifted to Bangalore, while the business team remained in Mumbai. Sameer Nigam, CEO of Mime360, joined as head to lead Flipkart’s digital distribution business.
3.Chakpak : 2011 (Flipkart sold books, handsets, consumer electronics & movies; had 1500 Employees. Potential Target – Online digital store for movies)
Chakpak was a content portal around films, covering Bollywood, Tamil and Telugu films, with movie timing, movie information, film reviews, a stars directory, video clips, wallpapers and film news. Flipkart acquired only content from Chakpak. This move was in line with the acquisition of Mime360. Probably Flipkart had a vision to include paid film download in its “Flyte” digital store.
Critics saw this move of Flipkart to be in line with the acquisition of IMDb by Amazon, to benefit from its dedicated ad inventory for driving online sales of movies, music and merchandise.
Among its founders, Gaurav Singh kushwaha went ahead with new ventures while Nitin Rajpoot joined Flipkart. Chakpak.com (website) was later acquired by Trivone digital services.
4.Letsbuy : 2012 (Flipkart sold books, handsets, consumer electronics & movies; had 2500 Employees. Potential target – to be undisputed king of online electronics sale market)
LetsBuy was launched in July 2009, and primarily focused on retailing consumer electronics; communications and computer goods, later expanded its product portfolio to include toys, sports, healthcare, watches and stationary. At the time of acquisition Letsbuy.com was making around 150 Cr annually as compared to 500 Cr of Flipkart. These two were the leading online electronics seller and the segment was actually struggling for customer loyalty.
This acquisition gave Flipkart an edge in electronics market. It in a way consolidated the E retail market and redefined the size of Flipkart. It also prepared Flipkart for a duel with Amazon which had just entered into India market.
The acquisition was a combination of cash and equity. Founders of Letsbuy, along with their 350-plus team, continued to function independently with the added advantage of being able to access Flipkart’s superior technology platform and supply chain capabilities
With This move Flipkart clearly had had consolidated its position in two verticals – Books and consumer goods, while in third – Digital store, its performance was OK-ish.
5.Myntra : 2014 (Flipkart sold books, handsets, consumer electronics & movies, apparel; had 20000 Employees. Potential target – to be leaders in online apparel market)
Leader of fashion and lifestyle – Myntra was the next grab for Flipkart. With looming threat from Amazon and eminent entry of Walmart led to consolidation of apparel industry as well. At the time of acquisition, Myntra was values at $204 Million and combined with flipkart it was holding 40-50% of online apparel industry market share.
This acquisition came as a blessing to both E retailers. In year 2013 both had booked a net loss close to $350-400 million. Consolidating the business will help them as now both will be able to share the supply chain and operations. This move again prepared Flipkart for forthcoming duel with Amazon, E-bay and Walmart.
Myntra co-founder and chief executive Mukesh Bansal got the role of head of fashion business of both Myntra and Flipkart. Despite this acquisition, as per terms agreed by Flipkart & Myntra, both still sold apparels independently.
6.Adiquity : 2015 (Flipkart sold books, handsets, consumer electronics & movies, apparel; had 33000 Employees. Potential target – Online marketing space)
Adiquity started in year 2006 as a search engine named Guruji.com. By 2015 company has changed into a mobile ad network that allows app developers and mobile publishers to earn revenue through their mobile inventory. It also facilitates ad agencies, ad networks and other industry buyers to acquire global quality mobile traffic.
Adiquity’s technology will help Flipkart provide online marketing services to the sellers on its site, an online marketplace, helping them improve their chances of reaching a wider and more relevant audience, including that are served up with searches and social networking posts. With Adiquity, Flipkart can help its vendors by taking the burden of effective online marketing off of their shoulders, for a fee. It would also ensure the vendors are tied to Flipkart’s ecosystem more firmly at a time of intense competition.
This Move is in line with the search of more inorganic route of revenue generation. Adiquity CEO – Anurag Dod joined Flipkart initially but resigned 6 months thereafter.
7.Appiterate : 2015 (Flipkart sold books, handsets, consumer electronics & movies, apparel; had 33000 Employees. Potential target – precise marketing through mobile app)
Appiterate was basically an A/B testing tool for mobiles. A/B testing is a methodology to test out two variants and experiment to find out which version works better with the audience. Appiterate in the past has helped e-commerce companies in targeting their customers in more specific manner by using big data, push notifications and in-app messages. Appiterate was delivering more than 100 million personalized notifications each month through its platform for leading e-commerce companies
Appiterate’s mobile marketing automation platform will be integrated into Flipkart’s mobile app and will be used to drive up revenue through precise targeting of users based on their activity on the app and website.
This acquisition was in line with Flipkart’s “Mobile first” approach.
Apart from these acquisitions Flipkart in 2014 has bought a sizable share in NgPay to strengthen its mobile payment platform. Appiterate CEO – Tanuj Mendiratta joined Flipkart initially but resigned 4 months thereafter.
What will be the next potential acquisition by Flipkart!
Flipkart has now established into the biggest Indian E retail seller. To consolidate its position at the top it must be broadening its horizon from time to time. FS Labs has listed down few prospective areas where Flipkart could make next acquisition-
- Grocery Delivery.
- Better last mile delivery.
- Better warehousing / Inventory management solution.
- Mobile wallet service provider.
- Spectacle and lens makers.
- Customer Relationship Management Platforms.
There are more areas which will be added to E retail market and will pose a new challenge in front of giants of the market. Till then happy reading.
Stay tuned for more analysis.
Read here about the betterment of existing setup of “Flipkart”. (An analysis by FS Labs dated 26th July 2015).
Read here about the betterment of existing setup of “Myntra”. (An analysis by FS Labs dated 6th October 2015).