Flipkart business model – How Does Flipkart Make Money?
Flipkart business model – how does Flipkart make money?
Flipkart is one of India’s biggest startup success stories. It is also one of the companies that pioneered e-commerce in India. UnlikeMeesho which adopts social e-commerce business model, Flipkart is purely a traditional e-commerce like Amazon.
The ecommerce giant already has over 200 million users and 150 million products across over 80 categories. But the CEO Kalyan Krishnamurthyhas said that the company is already looking beyond where they are and are looking at the next several hundred million.
In today’s blog post I will do a detailed analysis of the Flipkart business model and how it makes money.
Table of Contents
What is Flipkart?
Flipkart is one of the most popular and leading e-commerce companies in India using the online marketplace business model to connect sellers and buyers for seamless transactions. The Flipkart idea was first conceived in 2007 by two IIT Delhi grads and ex-Amazon employees — Sachin Bansal and Binny Bansal. Their original idea of Flipkart was an online bookstore — actually the first of its kind in India.
In 2016, Flipkart’s valuation stood at $20 billion, which led to American retail giant Walmart buying 77% stake in the company for $16 billion.
Today, Flipkart has a market share of over 31% of India’s ecommerce industry and currently has about 36,000 employees. The company is now competing in the e-commerce sector in India with competitors such as Amazon and Snapdeal.
FYI: Contrary to widespread belief, though the two co-founders of Flipkart share the same surname, it is interesting to note that they are not related.
Flipkart Business Model – How it Works
Flipkart truly redefined shopping in India and its business model is a marketplace of B2C (business to consumer model). Though Flipkart started off with a direct-to-consumer model selling books but it later pivoted to a marketplace model which connect sellers and buyers and has been expanding its catalogue ever since. Today, it sells everything from smartphones to clothes to furniture, refrigerators to FMCG goods. And of course, it still sells books.
Unlike Meesho, the average consumer or shopper on Flipkart might not care who the seller is and is only interested in his or her relationship with Flipkart. On the other hand, the sellers who often times may not have reached the customer at all can now do so thanks to Flipkart’s platform. Of course, Flipkart does all this at a cost. And that is where its commission based revenue model comes in – more on that in a minute.
Flipkart Business Model – The Value Proposition
200 million users, $70 billion valuation (with expected US listing in 2023), over $5.5 billion in revenue is a decent metric for a company that is barely 15 years. So what is it that has helped Flipkart succeed with its marketplace business model? A strong value proposition is the answer. So here are the value propositions that made Flipkart the ecommerce of choice in India.
Flipkart Assured– badge for high-quality products and faster delivery.
3. Convenience
Indians can now shop on local platforms rather than rely on Amazon and Alibaba
There is now Flipkart Wholesale meant to provide services for the grocery and fashion categories, so as to enhance India’s wholesale ecosystem.
4. Wide Selection
With over 150 million products across 80+ categories, users are able to find just about any type of product they want.
Users can search different sellers and make comparisons in terms of pricing and quality before any purchase.
Each listing (product) is listed with product specifications and details so user get to know exactly what they are buying before payment.
5. Cheap Products & Highly Trusted
Because of the volumes of sellers on Flipkart platform prices are quite competitive
Because of their policies, due diligence, and the positive feedback, Flipkart is highly trusted and recommended by customers who have used the Flipkart services before.
More revenue for sellers as a result of the trust buyers have for the platform already.
Flipkart Business Model – How it Makes Money
Just like any traditional e-commerce company, the primary way through which Flipkart business model makes money for the company is by charging commission on each product sold on its platform. But that is just one way. There are other ways through which the Flipkart business model also brings money. Here is a complete list:
Commission on Sales: Flipkart does not charge any fee to register as a seller on the platform. However, for every sale made, it collects a percentage as commission. The commission varies depending on the product category.
Convenience Charge: Flipkart charges a convenience fee to the buyers for faster delivery
Logistics: Flipkart has a logistics arm called E-Kart that facilitates the fulfillment of orders from sellers to buyers. It charges an extra fee from the sellers for that service. The shipping fee depends on the weight of the good and the location to be delivered to.
Advertisement: Flipkart also sells advertising space to companies on its website. This offers a leverage to the companies buying the advertising space as they are presented first to the millions of customers visiting the Flipkart website daily
Media Buying: Flipkart releases ads for certain brands in the popular newspapers, radios, televisions, etc, In doing so, Flipkart charges a sum from the brands that it advertises for.
Flipkart business model also allows it to sell under its private labels.
Flipkart Business Model – The Customer Segments
Flipkart has a wide range of customer segment that it serves. But the key segments include:
1.Those who prefers to buy online – These are otherwise known as Massive Urban Market
2. Discount Lovers – These are customers who rely heavily on Flipkart’s promotional offers & special pricing during the holidays. And Flipkart is really good at this. They also provide branded products at reasonable prices to attract new customers and retain old ones.
3. Book Lovers Market – Flipkart originally started selling books and till today, a sizeable share of its revenue still comes from books.
4. Customer targeted by Product – The success of Flipkart and its business model is driven mostly by the smart analytics that is evaluated for the market places. With a combination of smart analytics and social media Flipkart is able to identify what customers are interested in and therefore project those products accordingly.
5. Online Retailers –Some online retailers don’t have extensive delivery systems and rely on Flipkart via Ekart logistics and shipping services.
Flipkart Business Model – The Market Share
Flipkart has been the leading online retail operator in India. But it has been going toe-to-toe with Amazon. According to a research by Forrester by October 2020 Flipkart maintained a 31.9% market share. According to the report, Amazon India came very close in second place, with a 31.2% market share.
Flipkart and Amazon leads the online retail in India
The platform however, witnessed an almost 50% increase in new consumers after the pandemic lock down in 2020.
Wrapping it up on the Flipkart Business Model
Flipkart business model is one of the biggest success stories in India. The ‘India Amazon’ with over 200 million users is able to make money through its marketplace business model. But it also makes money through convenience charge, logistics, advertisement and media buying.
