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'100 Per Cent Of The Big Innovations In The Country Have Come From Us’
In an exclusive interview with BW Businessworld, Kalyan Krishnamurthy talks about Flipkart’s strengths, growth, future plans, and much more
Photo Credit : Bivash Banerjee
In January this year, Flipkart co-founders Sachin Bansal and Binny Bansal roped in their best bet Kalyan Krishnamurthy as the CEO of the e-commerce company. Krishnamurthy has been associated with Flipkart for some time now, prior to which, he was the Managing Director of Tiger Global. Three months later, in April, Flipkart surprised the market by raising $1.4 billion from Tencent, eBay, and Microsoft, post which the company is valued at $11.6 billion. As part of the investment terms, Flipkart also acquired eBay India. Krishnamurthy has a tough task ahead of him as Flipkart tries to win the fierce battle against rival Amazon with its local strengths. In an exclusive interview with BW Businessworld, Krishnamurthy talks about Flipkart’s strengths, growth, future plans, and much more.
How will the latest investment help you in your growth and what is the kind of growth you expect? And how do you plan to utilise the new funding in terms of investing in newer technologies etc?
I will actually split these two questions into growth and investments. We have been growing 500x since 2010 or so entirely on the back of innovation which the local Indian customer wants. That’s in our DNA and it is irrespective of the funding we received. To give you more context, we have an existing business with existing customers and to support just that, we actually don’t need any funding as we are quite self sufficient to that extent…The new funding will be used primarily to get into a lot more new areas…there is a huge amount of runway to get new customers, get into new categories, businesses, and offer new services to the Indian customers and that’s where the investment will go.
A lot has been said and written about the battle between Flipkart and Amazon. What is that one USP that gives you an advantage over Amazon?
It’ not just one USP but a couple of things. Look at the evolution of e-commerce in India and you should map each and every innovation which has happened in the country. Example, we were the first ones to become a go-to-market player for overseas brands to launch in India. The number of retail and operational innovation we have had in the last few years are several. So, a very deep understanding of the Indian customer is the first USP we have. Second, is innovating for the local customer using a local platform which gives us huge agility. The time frame in which we actually conceptualize a product or a solution till it actually goes to the customer is fairly short.
Flipkart is sometimes referred to as the ‘Amazon of India’ but in many instances, Amazon is seen doing similar things as you?
I don't want to talk about specific competition...maybe people have been inspired by what we do…100 per cent of the big innovations in the country have come from us and they have later become industry practices...take for example, the Big Billion Day we came up with in 2014...even in taking the view that the future of the country is in small-scale devices from a transaction point of view, it was a view taken by us and then the industry followed...there are many such examples such as having a local supply chain operations, 24/7 support, returns as a concept, progressive web apps, etc...so, you can decide for yourself...
Can you share some metrics in terms of reduction in cash burn, GMV, and sales in the past few months?
I won’t give you specific numbers but I can say that we are growing very well in the 50-60 per cent range…our cash burn has come down by 40 per cent last year and we believe by end of this year, it will come down by another 20 per cent. And if you look at the absolute cash burn, it’s already very manageable and it’s a very small number in the scheme of the market and our topline numbers. So, it’s not really a problem today.
Over the past 10 years, Flipkart has seen a number of significant M&As. Were there any hits and misses among them? Also, are you building any synergies among the various companies you have acquired?
I think a good part of M&As in the world fail for several reasons…we have done several M&As and actually quite a lot of them for our age. We are only 10 years old. Overall, I am very happy with the way things have gone. Look at businesses like Myntra, Jabong, PhonePe, Jeeves…if you look at PhonePe, it is barely few months old and the kind of traction it has seen is enormous…so all are at scale, materially sized, and capability-driven acquisitions.
With regard to building synergies, we will be smart and opportunistic about this. It has to make sense for our customers, employees and all stakeholders. So, it’s going to be selective. I will give you an example of Myntra where the culture of the teams was a bit different. So, from the point of view of merging the teams, we have kept it different. The customer segments we operate in are also quite different despite an overlap. However, on the backend, between Myntra and Flipkart, there is a huge amount of collaboration. So, we build certain synergies selectively.
Over the years, Flipkart has also forayed into different business lines such as grocery which hasn’t been successful. How do you learn from such experiences and do you plan to further expand into other businesses?
We have primarily been into e-commerce and infrastructure related to e-commerce, examples of which are logistics and payments. Grocery, as an example, is not an easy category. The number of companies around the world that have been successful in this segment are few…we did experiment with it and it didn’t go as per plan but there were huge learnings from it…and that’s another good thing about Flipkart where we have a culture of experimentation and innovation; we get into something, if it does not work out, it’s perfectly fine…and it doesn’t mean we won’t do it again…we will actually go back into grocery, put our best foot forward, and see where it goes.
Which categories will drive Flipkart’s next wave of growth?
In today’s world, mobile phones is a very big category, heavily penetrated…other electronic devices including laptops, tablets, and cameras are also heavily penetrated…branded fashion is also one of the major categories of today…then there are categories of tomorrow…what we are actually doing is making sure we are growing the categories of today very well and seeding the capabilities for tomorrow’s categories so that we have a good portfolio and in the next few years, today’s categories will actually lead the growth and at the same time, we are also prepared for the future.
The sustainability of the investments is in question. Some say funds are drying up. According to you, for how long will fresh funds continue to come in and is the timeline for profitability getting shorter?
I think what we have done well since the beginning is we have chosen our investors very well and I obviously credit the founders, the board, and my predecessors for it. We don’t have investors who have a kind of philosophy where because they have put money in a company, in three weeks, they come back and ask for returns. We have a very mature group of investors. Also, it’s not about the investment funnel drying up. If you have a good story, if you are actually adding a lot of value for the Indian customer, you will be able to raise money. Even now, there was a perception in the market that investments had dried up, but we were able to raise such a big amount based on our capabilities and philosophy.
Last but obvious question, are you planning to acquire Snapdeal?
Sorry, I am not able to comment on that.