Businessmodel of Flipkart

Customer Segments

Flipkart has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:

Suppliers: Manufacturers and retailers that make their merchandise available on the website.

Consumers: Individuals who visit the website and purchase available items.

Value Proposition

Flipkart offers five primary value propositions: accessibility, convenience, price, risk reduction, and brand/status.

The company increases accessibility by making it possible for merchants who do not have a website to sell their products through its channel. This is particularly essential for many small retailers.

The company creates convenience for consumers by offering a wide variety of items (over 30 million products) in numerous categories (70+) from multiple vendors (over 85,000) in a centralized channel. It also provides flexibility by enabling buyers to pay using a variety of methods, including credit cards, debit cards, gift cards, and cash on delivery. For merchants, Flipkart offers convenience by guaranteeing payments (deposited directly) within 5-7 business days of processing an order.

The company offers consumers a lower price than they would receive from physical outlets because it has lower operating expenses. It does not have to worry about many overhead costs, allowing it to pass savings onto customers. It also implements frequent promotions such as “Deals of the Day.”

The company reduces risk by providing the “Flipkart Advantage.” This is a label given to certain merchants that confirms that their products have been checked for quality by Flipkart. The items are also supported by a 30-day replacement guarantee and a same-day delivery option. For vendors, it offers the Seller Protection Program, which protects firms from losses due to failed payments.

The company has established a strong brand due to its success, and bills itself as India’s leading online retailer. It has 75 million registered customers who make 10 million visits to its website daily. Further, it makes 8 million shipments a month to more than 1,000 cities.

Channels

Flipkart’s main channel is its website, through which it acquires both merchants and buyers. The company also promotes its offerings through its mobile app.

Customer Relationships

Flipkart’s customer relationship is primarily of a self-service, automated nature for consumers. Customers utilize the website while having limited interaction with employees. The site has a “Help & FAQs” section with detailed answers to common questions. With merchants, Flipkart’s relationship is more of a personal assistance nature. The company offers a 24/7 customer service phone line for vendors. It also provides training that covers topics such as merchandising and order fulfillment.

Key Activities

Flipkart’s business model entails maintaining a robust platform between two parties:  merchants and consumers. The platform includes its website and mobile app.

Key Partners

Flipkart maintains relationships with “eCommerce Service Providers”, third-party firms that offer the following services to suppliers:

Cataloging – The firms ensure sellers‘ product descriptions are clear and have pleasing photos.

Logistics – The firms offer order fulfilment through more than 120 pick-up hubs while using over 10,000 delivery employees.

Capital – Flipkart’s Growth Capital program features a network of partners who provide financial assistance to suppliers for their business needs. The funds are offered at competitive rates with a quick turnaround time.

Flipkart also maintains an affiliate program through which it tasks members with promoting the site on their platforms (websites, mobile apps, etc.). Traffic that results in purchases leads to a commission for the partners. Program members receive affiliate tools such as banners, widgets, and APIs for their sites. They also have access to real-time reports on customer referral traffic.

Key Resources

Flipkart’s main resource is its technology personnel who maintain and upgrade its website. Another important human resource is its service personnel who provide support to customers, as well as a 24/7 presence for sellers. There are important physical assets in the form of its state-of-the-art fulfillment centers, where products are stored. Lastly, as a start-up it has relied heavily on funding from investors, raising $3.15 billion from 16 companies as of July 2015.

Cost Structure

Flipkart has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is likely transaction expenses, a fixed cost, as it has many different types of fees. Other major drivers are in the areas of customer support and administration, both fixed costs.

Revenue Streams

Flipkart has three revenue streams:

Transaction Fees – The company charges a “marketplace fee” for all successfully completed orders. This fee includes the following sub-fees:

• Shipping Fee – Based on shipping location and product weight
• Fixed Closing Fee – A small transaction fee for closed orders
• Selling Commission – Represents a percentage of the sales price (varies by category and subcategory) Sellers are charged a service tax that totals 14.5% of the marketplace fee.

Subscription Fees – The company operates “Flipkart First”, a promotional subscription program that costs Rs. 500 per year. Members receive the following benefits, among others:

• No minimum purchase price
• Free shipping on orders
• Discounted same-day delivery
• 24/7 customer service
• Exclusive product offers Advertising Fees – The company charges fees to third-parties that want to advertise their offerings through its website and in its mobile app.