One recent topic that has been part of nearly every business and tech news has been the acquisition of Flipkart by Walmart. As a poster boy of the Indian technology industry and one of the most successful players in the eCommerce domain, Flipkart has been followed by a range of people, from investors to entrepreneurs and technology geeks.
What better story to follow than that of two middle-class background engineering graduates who were working with Amazongo-ahead to build one of the biggest eCommerce sites in India and who fought tooth and nail for every territory that they had gained as a result of having a first mover advantage.
Competing with Amazon has never been an easy task, and we just have to look at the fall of traditional retailers like Best Buy and Toys r Us to see the challenge that Amazon represents, but maintaining and growing market share is an entirely different ask that Flipkart was able to do.
This acquisition of Flipkart by Walmart represents some interesting takeaways for startups-
a) Build for scale-
At an initial level of a startup, it’s easy to cut corners and venture into many things without scaling things up in certain areas. This can be both in the technology infrastructure areas or the products/services that a corporation offers.
Look at how Flipkart scaled from the day 1 of there launch. They had a revenue of Rs 25 Crore in 2009-10 a huge growth keeping in mind the nascent stage of eCommerce industry
b) Design and develop a world-class infrastructure-
flipkart founders had no little competition in the eCommerce domain when they launched and they could have just brought online a couple of hundreds of books during the initial period of launch but they did not do that. Flipkart had close to 100,000 titles when they launched.
c) Be a category leader-
Be it the Big Billion Day or the Mobile deals that Flipkart offered it ensured that even with immense competition, Flipkart was the go-to brand for consumers during this period and in this category.
d) Be Nimble, don’t avoid failure but learn from it-
Flipkart experimented with things like mobile only for its Myntra brand, it was a major failure but if we look at it today, Myntra and Jabong remain category leaders when it comes to apparel’s and the valuation that Flipkart got from Walmart is also because of the significant brand loyalty that these two entities enjoyed within their customer base.
e) Its okay to burn cash but ensure that your growth rate keeps its momentum-
Flipkart had raised $7.3 Billion prior to its acquisition by Walmart and a large amount of this money was spent in ensuring that its user base remained loyal, in fact at one point Flipkart was loosing close to Rs 845 per transaction to keep its operations up and running. Amazon has played this game for a long time and only with the recent growth in its AWS revenue is it looking at profits but in this dominance game this cash burn was necessary especially with the high growth potential that Indian market has
f) Leverage the power of collaboration-
To wrap things up, Flipkart acquisition by Walmart is a perfect example of collaboration. Nowhere else in the world, leaving aside Japan and China has a competitor to Amazon succeeded in retaining market share. China had a very nuanced market structure because of regulatory and language barriers in case of Japan has a local entity been able to face the onslaught of Amazon because of cultural and technology aspects.
Flipkart will be known for flexing its muscle and taking on the eCommerce behemoth like Amazon. Walmart with its acquisition of Flipkart now has access to two of the biggest challengers to Amazon Jet.com and Flipkart. With these two entities in its bag, Walmart can truly claim to understand the nuances of eCommerce something that it has been struggling to do even with its investment in Walmart Labs.