Flipkart, the e-commerce boom, the other view

The valuation is maddening, crazy, 4,000 4,500 crores for an e-commerce startup which would get 10% net at best is even crazier. Yes, it is crazy but it’s also fearless at the same time.

You know what is exciting? Creation of a category, creation of demand. The fact that my dad calls me from a dusty little town of Dhanbad, after hearing about Flipkart. Adding to his belief that he is ready to shop online all by himself.

Nitty-gritty of the valuation is for fund managers, analysts, think-tanks and people who are not associated with the company or the deal, to take pot-shot at. I think they are plain wrong if they look at Flipkart with a single eye.

It’s easy to create a web-store online. Give me 10 minutes and I’ll get you started. But, it may take you a week to a month to collect payments online. Shipping & logistics is a much bigger challenge than accepting payments in India. If you are a mom-pop operator you can pack, ship, drop on your own. Think about shipping 5 books every minute. No courier company in India is efficient to track delivery and return with guarantees.

Amazon.com was a technology play and they moved faster than people were adopting newer browsers and advancements to the web technology. Infact, the first version of Amazon did not use cookies!  Amazon got the shipping, logistics and payments infrastructure out-of-the-box, sans the web integration part — without worrying about theft, delivery guarantees and failed service-agreements.

People expect that a company in India, of Amazon scale, including it’s loyalty, personalization, great price and customer service can be built in thin air and without lots of money.

220px-Soapbubbles-SteveEF

If history is any fortune teller, all bubbles/booms created long term markets and large categories. The Gold Rush created California; the semiconductor, networking and internet bubble in succession (re)created silicon valley multiple times. India’s OTA created air-travel for the masses. The Y2K bubble created Indian IT. And so on.

Hence, this is business as usual, which will lead to creation of large markets, giving people access to many items for the first time and killing inefficient distribution methods of yester-years. It’s a space to watch, participate. The forces of nature use elasticity to keep the bubble in check. IMO, the choice is easy and you can’t run around with pins. When there are bubbles, be like a kid or have the bubble gun.

Disclaimer: I don’t work at Flipkart nor have any direct stock holding nor the founders/management team have picked up my beer tab in the past.

Image lazily lifted from Wikipedia.

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  • Balaji

    I agree with Indus. While people have no issues with Amazon & eBay having $93b & $43b in marketcap respectively, we seem to be fretting that an Indian tech company has pierced the $1b ceiling. If US market that grows less than 2% and with a population of 300m can support $100b ecommerce companies, why can’t Indian market that grows at 10% with a 1.2 billion population support a market leader with a $1b marketcap? 

    Yes, I know the differences in the markets and all, but as Indians get richer, connected and tech-savvier we will be buying only more – not less. And more than a 1.1 billion Indians have not used ecommerce – and that is a huge untapped market in the decades to come. 

    Just like Amazon and Walmart, Flipkart has invested enormously on IT infrastructure and a lot of nay-sayers seem to value that too lightly. They have to understand how Walmart won while its competitors Kmart and Sears have gone to dust. IT infrastructure is the most crucial element in retailing.

    Also, it is not correct to say that there is no loyalty or brand value. You wouldn’t swipe your card at any random online store. Trust and customer support matters in retail.

    • Yeah. It’s our mental barrier to success, which all desi junta have. Valley succeeds bcoz the naysayers are out-numbered by impossible doers.

  • Kamal

    Here is a simpler way to look at this. Flipkart has been given this enormous opportunity to remake the retail world in India. Is it going to be easy? No way.. Is it possible? I think yes! If they succeed in what they are trying to do, the issue of valuation will take care of itself, simply because there is a huge addressable market.

  • Flipcart is one of the best shopping carts or online shops we have..I was really happy with their services.

  • Flipkart i really love their services and the offers. It is cool

  • Yes flipkart is the fastest growing Ecommerce company in India with lots feature and product range.

  • I agree it is not a difficult task to creat a web store but you need to be aware of all the applications required to give a good view of the products and keep the site updated evey now and then.

  • Gifts2gifts

     Application & Features etc not not this much important

    More important is how much discount you offer & how you advertise your product  gift vouchers now this business is more

  • Gifts2gifts

    All eCommerce site Running on this basis only now days this give Result After 1 to 2 year when they check their P & L balance sheet