If you are considering becoming a 1M/1M premium member and would like to join our mailing list to receive ongoing information, please sign up here.

Subscribe to our Feed

Flipkart Needs To Emphasize Private Label Strategy

Posted on Thursday, Nov 9th 2017

According to RedSeer, Indian e-tailers generated record sales of $3.2 billion during the recent festival sale season, 45% higher than the $2.2 billion in last year’s festival season. It was fuelled by an estimated expense of $370-$400 million compared to $200-$250 million last year, as well as better Internet penetration. Although Amazon is rapidly closing the gap, Flipkart continues to lead the market and is now looking to expand vertically through more acquisitions. 

Flipkart’s Financials

Flipkart had revenue of $2.3 billion in fiscal 2016, up over 50%. Losses shot up 75% to $780 million.

During the recent festival season, Flipkart’s GMV is estimated to be INR 4,300-5,000 crore ($663-771 million), up from INR 2,300 crore ($354 million) last year while Amazon’s GMV is estimated to be INR 2,500-2,700 crore ($385-$417 million), up from INR 1,800 crore ($280 million) last year.

For the Big Billion Day sale, a five-day sale held around Dusshera and Diwali festivals, Flipkart extended its services to over 250 new towns and villages in India. As a result, it claims a 1000% increase in orders from remote locations like Kashmir, Arunachal Pradesh and Mizoram. About 60% of its customers are from metros and tier-1 cities and 40% from tier-2,3, and 4 towns and villages.

For Amazon India, about 86% of its new customers come from small towns. This year, it invested $62.7 million in its Indian logistics arm Amazon Transportation Service (ATS) and about $20 million in its digital payments arm Amazon Pay India.

Amazon India posted revenue of INR 2,275 crore ($341 million) and losses of INR 3,571 crore ($530 million) in fiscal 2016.

As per a report prior to the festival sale, Flipkart, including Myntra, had a GMV market share of 38.5% in 2016-17, down from 40% in 2014-15, while the market share of Amazon India surged to 29% from 12%. Following the festival, market share estimates suggest Flipkart has 40%-42% and Amazon 30%-32%.

In April this year, Flipkart raised $1.4 billion in funding from Tencent, eBay, and Microsoft. The round valued Flipkart at $11.6 billion, down from its earlier high of $15.2 billion. Prior to this round, Flipkart had raised $3.15 billion in funding from investors including Tiger Global Management, DST Global, Qatar Investment Authority, T. Rowe Price, Steadview Capital, Greenoaks Capital Management, Baillie Gifford, Sofina, Singapore GIC, Morgan Stanley, Accel Partners, Naspers, Iconiq Capital, Dragoneer Investment Group, and Vulcan Capital.

Following the funding, Flipkart has plans to invest about $460 million in its logistics unit Ekart and $500 million in its payments unit PhonePe.

Flipkart is also looking to find itself a profitable engine. It is reported to be in talks to buy a stake in online ticketing platform BookMyShow, which is one of India’s very few capital-efficient and profitable internet companies. For fiscal 2016, it reported a profit of INR 3.1 crore ($0.5 million) on revenue of INR 248 crore ($38 million). BookMyShow, which also sells tickets for plays and sporting events is trying to fight off increasing competition from Paytm in movie ticketing, and in July, it bought restaurant search platform Burrp. However, these are very small numbers, and they won’t make any dent in Flipkart’s overall lack of profitability.

Flipkart’s Private Label Strategy

In December last year, Flipkart launched a private label business under an umbrella brand called Flipkart SmartBuy, as part of a push to improve margins. Flipkart SmartBuy was initially supposed to span 25-30 categories in electronics, electronic accessories and home plastics but Flipkart has launched 35 new categories under Smartbuy and plans to extend it to 72 categories in the next few months.

It has also launched a brand called MarQ for large appliances. The vision of the brand is to create cutting-edge technology and high-quality products at very affordable prices. MarQ prices would be 15%-20% less than other leading brands.

Flipkart now claims to have 70% market share in the online smartphones market and 60%-65% market share in the large appliances category which includes TVs, refrigerators, and washing machines. It is not looking to launch any private labels in the smartphone category, which accounts for over 60% of its sales.

A major boost for its private label strategy comes from its fashion arm Myntra. Prior to the festival sale, Myntra’s private label business has turned operationally profitable. Myntra has 13 private labels that account for 23% of its overall business. It expects the private label business to account for 35%-40% and lead to double-digit operating profit margin within two years. Myntra had revenue of $115 million in FY17 and expects revenue of $300 milion in FY18. This is a promising strategy for the company.

Flipkart’s Acquisitions

Since it was founded in 2007 by former Amazon employees Binny Bansal and Sachin Bansal, Flipkart has bought or invested in over 20 companies. In 2014, it acquired fashion portal Myntra for an estimated $300 million and it has backed it up with the acquisition of Jabong for $70 million in July 2016. Last month, it acquired mobile and IT repair services company F1 Info Solutions for an undisclosed sum. While these were sensible acquisitions, this year in May it acquired the loss-making Indian arm of eBay for $200 million. eBay got rid of eBay India and invested $500 million in Flipkart. Flipkart also came quite close to buying rival Snapdeal for about $1 billion, but the talks fell through because Snapdeal managed to raise funds by selling its payments arm Freecharge for $60 million. It’s good that this acquisition did not go through. It never made sense to me.


Overall, I reiterate my recommendation that Flipkart needs a solid, differentiated private label product strategy, and the efforts from its Myntra business are promising. I would like to see more such endeavors.

Hacker News
() Comments

Featured Videos


[…] Flipkart Needs To Emphasize Private Label Strategy […]

November 10, 2017 | Friday, November 10, 2017 at 7:28 AM PT