For Sachin Bansal (30) and Binny Bansal (29), co-founders of Flipkart.com, becoming entrepreneurs was never top priority during their student days at IIT Delhi. It all started in early 2007?while they were working at Amazon.com in Bangalore?when they felt that they weren?t learning anything new at the job. Backed by a funding of $31 million from leading global investors, the online retailer is today a household name in the e-commerce space. The former batchmates tell Darlington Jose Hector and Debojyoti Ghosh that they expect to clock revenue of around R2,500 crore by March 2013 and initiate their international foray in the next few years.
You guys seem to be upsetting every conventional thought-process in the e-retailing space in India. It would have been very hard for you to find venture capital backing …
We never wanted to be entrepreneurs, not even in college. We started thinking about it in early 2007, when we were working together at Amazon in Bangalore. While working, we realised that we were not learning anything in our job. We were not challenged enough. We wanted to learn a lot of things, but a job will always have certain limitations and restrictions on what one can and cannot do. We wanted to give it (entrepreneurship) a try and see how it went. When we started, we never thought that we have to be a billion dollar company. It was just that we wanted to do something different, meaningful and in the consumer internet space. We were very interested in the internet space. When we started, it was only the internet companies in the travel space that were doing something worthwhile and good. Others were not that successful.
How did you convinced the VC community? After all, e-commerce was not doing that well in India till you came along.
We never approached the VC community first. We were clear that they would not fund us. Before approaching them, we needed to show a certain amount of traction, value and customer base. We wanted to build a strong business before approaching investors. When we raised our first round of funding, we were already one of the leading e-commerce players in the country.
What do you think clicked for you?
When we started out in 2007, there was disbelief in the market and in the minds of VCs. People thought it was a dead investment. E-commerce had not worked before and there was no chance of it working again. That was the notion then among people. But we were sure that e-commerce was not done in the right way and that was the starting point of our business. We wanted to do it in the right way by adopting the right technology and a service mindset that you need for e-commerce.
How do you convince a customer to buy online and not from stores. What is your argument?
We have a very impressive online collection. When you visit a store, you are not sure whether it will have the gadget you are looking for. Our collection is huge compared to any electronics or mobile store. Selection is a large area where we add a lot of value. You don?t have to think, everything that is manufactured will be there on our website. Another area where we add value is convenience. You get the products delivered at your doorstep in a matter of few days or sometimes 24 hours. We also have a 30-day replacement policy, which no other offline store offers. Currently, we don?t have a refund policy as most of the manufacturers are not very supportive of a money-back policy. But we want to introduce this facility in the future.
Was ?cash-on-delivery? the key differentiator for you?
We were not the first ones to do cash-on-delivery. It was there when we started. The key differentiator was how we did it. We looked at problems that customers were facing on the model. We attacked those problems and decided how we could do better. If you are using the cash-on-delivery model, there are a lot of things that you need to look into. Like customers have to be present at the time of delivery, you have to know when the person is coming, you need to have the right cash or change. In most of the cases, people use to land up randomly without informing the customer and would ask for tips, which was creating problems. Most of the other e-commerce players did not have the right mindset for business. They didn?t have the right customer focus that is required. Other than the cash-on-delivery model, you need to have the right attitude. Our main differentiator was customer focus. We gave a lot of effort in understanding customer needs. We started our own delivery model a year ago.
What went wrong with the other e-commerce players in the country? What were the loopholes and drawbacks?
All the players had a very short term view on the business. To build a large e-commerce business, you need a long-term view about the customers and business. And one has to back it up with 7-8 years of hard work to build a strong brand. Nobody was doing it. Customer service, delivery time line, mix of products and availability were not up to the mark. Other people in the e-commerce space did not invest that much effort to understand customer needs.
Do you see FDI in Indian retail impacting the e-commerce space in any way?
The e-commerce market is tiny; so it will get a push as more offline retailers look for expansion online. It will help the overall e-commerce industry as more people will enter the space. It will bring more awareness. E-commerce is a very niche and young market in India and not a mass phenomenon yet.
What will make e-commerce a mass phenomenon?
Two major drivers will be online payment usage and logistics. Online payment usage in India is currently very low and not in a good shape. The banking infrastructure supporting online payment needs to be more advanced and robust. There is still a lot of failure in the online payment space. Infrastructure is not good enough. Logistics across the country have to be more advanced.
What are the new products you are looking at?
Online computer sales have picked up big time.
We are looking at everything, except for autos and groceries. We are not restricted to any particular category. In the next 12 months, you will see a lot of new categories on the website. Computers and tablets are doing very well and mobiles are growing very fast, too. Apart from that, there are certain categories of books, like those from new Indian authors. We are talking to Apple as well, as we don?t have permission to sell their products.
How do you see the Indian internet space in the next 10 years?
In the next 10 years, the Indian internet space will explode. Currently, there are about 100 million internet users, while the total advertisement spend online is about $200 million, of which Google makes about $100 million. The current ad spend is extremely low compared to other mature markets. We see this going up drastically in the coming years as a lot of traditional companies and offline retail companies spend more on online advertisements. In the next 10 years, there will be at least five large e-commerce players in the country. We see exponential growth in the online space.
Where you plan to invest now, to better your service?
We have plans to invest in newer categories, back-end supply chains and technology. We keep talking to investors all the time. We have talked to almost everybody in India. But there is no hurry. We are in talks and are negotiating with private equity players all the time. As soon as something positive comes out, we will let everybody know. In total, we have raised $31 million in three rounds of funding. We need a lot of investments to scale up our back-end. Our logistics and supply chain are the two areas that require a lot of investments. At the end of the day, we are a technology company and investment in that area is a major focus. We want to hire the best technology talent in the country.
What will be your next big move?
We are evaluating an international foray in the next few years. This fiscal, we plan to close with revenues in the region of R500-600 crore. By end-March 2013, we want to touch revenues of R2,000-2,500 crore.
