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BW Businessworld

'Huge Potential In Online Book Retailing'

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In 2007, Sachin Bansal and Binny Bansal, both IIT grads and in their late twenties, started Flipkart with a seed capital of Rs 4 lakh. Having worked with Amazon previously, both have followed the Amazon and eBay model of selling books online. Flipkart which has revenues of Rs 25 crore now, plans to take the business beyond selling just books. BW's Suneera Tandon met  Flipkart CEO Sachin Bansal to ask where will Flipkart go from here. Excerpts.

What is the potential of your business model ie of retailing books online?
Online book retailing is a volume-based business. Since the profit margin is as low as 10 per cent, volumes matter more. In the digital space only 1 per cent of the entire book retail business worth Rs 10,000 crore is carried out, we identify potential of Web as huge. Set-up costs are not very high, but services and logistics take about 10-15 per cent of the revenues. We broke even within 6 months of having started the business and are earning a gross profit of 10-15 per cent, thereafter.

While 2008 revenues for the company were Rs 2.5 crore, 2009 saw a quantum leap to Rs 20-25 crore.
In November 2009, we raised venture capital funding from Accel Partners. Rs 20 crore of this amount will be allocated towards strengthening back-end and technological operations. Advertising accounts for 5 per cent of the portals' revenue.

What are the challenges you faced as a start-up in the e-commerce business?
Getting people to trust the online payment mode was quite a challenge initially. Also building trust in suppliers as a start-up took us some time. Once the popularity of the portal grew, transactions increased.

What is the customer base and title capacity of Flipkart?
We started with 50,000 titles in our catalogue and have expanded to half a million as of now. So far 250,000 customers have purchased books from Flipkart. Our business is only restricted to the Indian territory right now.

With other bigger players such as Infibeam, Rediffbooks, Indiatimes, how do you keep afloat in the market and battle competition vis-vis pricing of books?
We offer free-shipping on all purchases. Although our pricing is at a premium, we are working on more volumes. The higher the sales, the lower the prices. Timely delivery is our key focus and keeps us ahead of competitors. Prices of books range between Rs 95 and Rs 20,000.

How does your back end work — from putting books online to delivering? What are the logistics involved?
We have about 100 people working in the back end, which comprises ordering, stocking operations, packaging, shipping, vendor management, etc. We work with 300 book distributors in 5 cities from whom we procure books as well as 4 International publishers. There is a 50:50 ratio between the books stocked by our office and those procured from vendors directly. We function from 3 offices presently in Bangalore, Mumbai and Delhi. Apart from which we have a strong technical team that looks at catalogue management, stock checks, web-updates, etc.

Are you looking at expanding the product base offered by your portal?
As of now, we are only focusing on retailing books, we still feel there is a lot of potential in expanding the business of books on the Web. We are looking at expanding to more local publishers, regional books as well as more international publication houses. However, in the next two years we plan to add music CDs, low-cost mobile phones, movie DVDs etc., to our portal.

What category of books generate the maximum sales for the portal?
Fiction and non-fiction account for 50 per cent of the total sales.  Apart from which medical, technical, management books too result in high sales.

What kind of marketing and advertising initiatives are carried out by Flipkart?
As of now, the marketing budget is minimal; we are only focused on digital marketing. Use of social forums and blogs works well for us. We also offer pre previews of books, signed copies to our customers. Soon our website, which is presently very simple, will be revamped to a more interactive one, allowing for discussion forums, book reviews, polls, etc.

How do you plan to allocate the funds for future expansion?
Opening more warehouses is on the agenda, along with expanding the existing Bangalore office. We also plan to expand our supplier base from 300 to 1,000 and  increase our total title strength to 4 million. We expect to touch Rs 100 crore in revenues by 2011.

suneera dot tandon at abp dot in