After gunning for a $15-billion valuation, Flipkart\'s on a tear to reach its next landmark $10 billion in total worth of goods sold.
After gunning for a $15-billion valuation, Flipkart's on a tear to reach its next landmark $10 billion in total worth of goods sold.
India's most valuable online marketplace is adding highmargin categories such as furniture, homes and travel booking and sharpening its strategy in response to rivals Amazon, Snapdeal and Paytm gaining bulk rapidly.
Flipkart expects this to boost its annual gross merchandise value, or GMV, to $10-12 billion (Rs 64,000-76,000 crore) in 9 months to a year. That's a slight bump-up from its present GMV forecast of $8 billion for the year to March 2016, and more than double the $4 billion it achieved in 2014-15, a pace eclipsing the growth of several top online and brick-and-mortar rivals.
"This will be a big milestone for us," Mukesh Bansal, head of commerce at Flipkart, said in an interview. Flipkart reached $1 billion in annual GMV in 2013-14. The Tiger Globalbacked firm was seeking to raise funds at a valuation of about $15 billion, up from $11 billion reached in December.
The Bengaluru-based company is preparing to start selling homes, travel deals and groceries by the end of this year, three people aware of its plans said, declining to be identified. Furniture, which Flipkart began selling a few months ago, is already an industry-leading category, according to the company.
Bansal did not confirm the plans but said, "We want to be a one-stop shop for every need." Flipkart is confident of doubling its GMV run rate - annual projection based on current GMV - even if sales growth slowed in certain months, said Bansal, also the chief executive of the company's fashion subsidiary Myntra.
Gross merchandise value, a key ecommerce industry metric, measures a firm's growth based on the maximum price of goods and services sold on its platform and not by actual revenue, which could be much lower.
"We felt at the start of the year that 100% growth at this scale is quite substantial. This quarter we will be on track for almost 35% growth as compared to the previous quarter (January-March), which was slightly more than the October-December quarter at 4-5% because of the Big Billion Day (sale) in October," Bansal said.
The growth of Indian online retail has been dependent on discounting, but companies are now looking to lower spending on discounts and promotions while staying competitive.
"I sense a period now where even though e-tailers will not be focusing on profits; there will be more focus on margins as compared to GMV," said Niren Shah, managing director at Norwest Venture Partners that has backed online retailers including Fashionandyou and Pepperfry.
"Profitability is a big focus area for us," Bansal said. "We want to do it in a way by having more efficiency, lower wastage, reducing cost of logistics and better negotiations with our partners so we still maintain a good value proposition for the consumers."
Indian online retailers suffer 35% gross losses on each unit of GMV sold, according to a recent Goldman Sachs report. "With this discounting strategy, we note that these three e-tailers (Flipkart, Snapdeal and Amazon India) now account for nearly 80% market share in the e-tail space, led by Flipkart at 45%," it said.
India's online retail industry is expected to grow at 47% compounded annual growth rate to $47 billion over the next five years, according to Goldman Sachs. Dropping focus on discounts and marketing will not be easy, with well-funded entities such as mobile recharge and bill payments startup Paytm too venturing into ecommerce.
Paytm, which began online retailing recently with a $575-million investment from Alibaba-affiliate Ant Financial Services, has said its GMV crossed $1.5 billion earlier this month and it is targeting $3-4 billion in the year to March 2016.
Snapdeal's GMV recently crossed a run rate of $3.5 billion. Future Group, among the country's largest and most established retailers, is targeting a total revenue of Rs 22,500 crore for fiscal 2016, which according to the company translates to a gross merchandise value of about Rs 50,000 crore.
As per a report in Et retail
Live: People Reading Now