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Building India’s Amazon: Flipkart CEO Sachin Bansal (Part 4)

Posted on Thursday, Oct 7th 2010

Sramana: Let’s fast forward to March 2009. How have the relationship with the distributors and the operational mechanics of your business changed?

Sachin Bansal: We actually opened another distribution center in Dehli. To our surprise, almost every distributor in India knew about us, so it was not hard to make a new relationship in Dehli. We had multiple suppliers in Bangalore and had just finalized some arrangements with international suppliers. We were a well-known company throughout India and were regarded by many as the best online bookstore in India. Today we work with more than 500 suppliers and have operations in five cities, with distribution centers in Bangalore, Delhi, Bombay, and Calcutta.

Sramana: It sounds like you were a well-known brand throughout India and had become part of the book distributors’ [network] as a high-volume retailer.

Sachin Bansal: We were definitely a well-known brand, and we were receiving the best terms the distributors could offer us. Today we receive better terms than almost every other bookseller in India.

Sramana: How does that industry work, and how were you able to improve your terms?

Sachin Bansal: We started with 35% margins on the manufacturer’s recommended price (MRP) in 2007. Today, we are able to get anywhere from 40% to 60% margins based on discounts from suppliers. We started by paying for all items with cash in advance. Today, we enjoy a credit line of three to six months.

Sramana: In March 2009 you had about $560,000. How did the numbers come up in March 2010?

Sachin Bansal: In March 2010 we did about $6.76 million.

Sramana: How do you compare with the major bookstore chains in India?

Sachin Bansal: Our numbers today are comparable to theirs. We sell more than $1.128 million worth of books a month. We are all in the same ballpark in terms of volume. I don’t know the major bookstore numbers exactly, but our common distributors tell us that we are a bigger buyer than they are.

Sramana: Tell me more about your international strategy. You are the only retailer in India that carries the international versions of my books.

Sachin Bansal: We found that dealing with international suppliers was much easier than dealing with Indian suppliers. International suppliers are much more organized, they are larger, all of their systems are automated, and they use a lot of technology in their operations. They are extremely predictable. We signed our first international deal with Ingram Books in 2008. Today we work with three U.S. suppliers and two suppliers in the UK.

Sramana: What were your terms like with international suppliers?

Sachin Bansal: That has also improved a lot. We started with a three-day credit line, and now we have the best credit lines they offer. I cannot disclose the discounts we receive from them, but our discount terms have improved over time.

This segment is part 4 in the series : Building India's Amazon: Flipkart CEO Sachin Bansal
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