Walmart-owned Flipkart said the imminent entry of a third player — Reliance Industries — is not a worry as it would expand the market further and benefit all stakeholders. Flipkart’s group CEO Kalyan Krishnamurthy said in an exclusive interview to ET — his first since tightened FDI rules for the sector came into effect in February — that the online retail market in India is thinly penetrated and quite a few problems would need solving to make it sizeable.
“We believe if more players operate in this space, it will further expand the market and benefit all the stakeholders, like kirana stores, small and medium-sized merchants and consumers who will gain from innovation in the sector,” he said.
Billionaire Mukesh Ambani’s Reliance Industries is expected to shake up the country’s online retail market when it launches later this year, and the group has already started pulling out own brands — across apparel, lifestyle and other categories — from online marketplaces of potential competitors including Flipkart and Amazon, ET reported earlier.
Jeff Bezos’ Amazon and Flipkart have been the two leading players in the Indian e-commerce market, which is expected to touch $200 billion in size by 2027, according to estimates by Morgan Stanley. This is the big opportunity that the retail-to-refining conglomerate is looking to tap as it plans to leverage its reach through Reliance Jio and Reliance Retail and create an omni-channel play.
Krishnamurthy said Flipkart supports any regulation that would help create stability in the sector and facilitate a growth-driven regulatory framework that benefits merchants and customers. Flipkart’s business had not seen any impact since February 1, when the e-commerce rules kicked in, he said.
The regulations bar online marketplaces from selling products through vendors where they hold equity stakes, and restrict exclusive brand tie-ups, among other changes.
While taking stock of the past year, Krishnamurthy also denied reports in a section of the media about his imminent departure from Flipkart.
“I’m absolutely not going anywhere. I’m super committed to the Flipkart-Walmart partnership. Flipkart is an opportunity to organise industries like commerce and logistics, that too in a country like India,” he said.
Speculation about Krishnamurthy’s exit came in the backdrop of Walmart CEO Doug McMillon’s visit to India last week, his first since the USbased company announced a $16-billion investment in the domestic etailer in May last year. McMillon had said during the visit that Flipkart and digital payments firm PhonePe would be fully supported to execute their growth strategy. PhonePe recently received approval from Flipkart to hive off and raise capital separately.
Flipkart, which launched the grocery segment two years ago, has not been able to scale it up aggressively.
“A huge amount of problem-solving still needs to go into commerce for grocery in India. When we believe the problem is solved, we will expand it further and at that time we will experiment with fruits and vegetables,” he said. When asked about the company’s plans around the fresh foods and vegetables market, he said if Flipkart were to make an entry into the fresh foods space it would only be a pilot project and not a full-fledged launch.
“If you look at the contribution of fresh fruits and vegetables to total groceries, it’s still not as big as some of the Western countries. The bigger focus for us is stapled, FMCG and dry groceries,” he said. In the next six months, Flipkart is set to launch groceries in three-four new cities. “We are taking it a little bit slow as we are still problem solving,” he said.
Getting Flipkart IPO-ready is also part of the company’s long-term strategy, Krishnamurthy said, without specifying a timeline. People close to the company, however, said the IPO could come through as early as the first half of 2021, and that efforts are already underway to prune cash burn, and compliance and forecasting.
“It’s the same set of talent, including the senior leaders, but the routines have become more regimented, and that’s what leads to evolution of an enterprise,” said Pavan Soni, founder, Inflexion Point Consulting.
In smaller cities, growth has been double of “what we have across the top 10 cities, which is why e-commerce companies have been pushing to tap the next 30-40 cities over the past few years,” he said.―Gadgets Now