By Sarthak Agrawal
Founded in 2007, Flipkart is one of the two biggest e-commerce retailers in India. It has done an impressive job in giving a global giant like Amazon head to head and toe to toe. Since then, it has grown to have approximately a $20 billion valuation and generate $3 billion in revenue. It had become a household name, and everyone was talking about it. The comfort of shopping from our homes. Just a few clicks and the product would be delivered to your doorstep. The prices and quality of the products were of good standard, and local vendors were having a tough time competing with Flipkart’s business model and resources.
Young college graduates wanted to secure a job there while investors wanted to equity in the company. Flipkart was hiring experienced professionals from global giants like Google and McKinsey to lead their cause. Everything seemed to be going their way. There was no real challenge until the onset of Amazon in India.
How Flipkart took down its ‘first’ Goliath
Amazon was a giant that had years of experience on foreign lands and billions of dollars at its disposal, and that posed a serious threat to Flipkart’s dominance in India.
Things changed a bit when Flipkart appointed Kalyan Krishnamurthy as the new CEO of the company. Kalyan Krishnamurthy was the managing director of Tiger Global, which is the largest investor in Flipkart. Tiger Global holds a 35 percent stake in the company. By appointing Mr Kalyan as the new CEO of the company, they would indirectly be controlling the way the company works from the inside out.
Mr Kalyan in the initial stages of his term as CEO of the company forced many C level executives out of the company. He wanted to create a team which comprised of young individuals whom he could nurture to work on his guidelines. This would effectively run the company without any questions asked and achieve Mr Kalyan’s vision smoothly.
Walmart- The next mountain to climb
However, the real challenge came much later. Presenting Flipkart’s biggest challenge of them all: Walmart Inc., the largest retailer in the world, now aiming for a share in the Indian e-commerce business. It found an effective entry option in Flipkart. Walmart wants to buy a minority stake, about 20 percent, in Flipkart and values the company at $20 Billion. Softbank, one of the key investors in Flipkart, objects to Walmart buying stake in Flipkart. While Walmart wants a complete buyout, Softbank is not ready to cash in on its investment, as it sees itself as a long-term investor. Hence, Walmart is only left with an option of 20 percent. There are other investors too, such as Alphabet, who is interested in investing in the company. If the deal is successful, then Flipkart gets $4 billion in cash, which will be a healthy sum to compete with Amazon. The problem, however, is that there are doubts about whether Flipkart will be able to steer in the positive direction and grow in the coming years. Due to the absence of senior leadership in the company, Walmart fears that its investment might not pay off and Flipkart might end up losing to Amazon.
These fears have a good standing too. Due to the lack of effective leadership, at this stage, even a single wrong move can ruin the company’s chances of dominating the Indian market. With Mr Kalyan’s insistence on recruiting from inside the company for the vacant positions, there is a growing nervousness among the current and potential investors of the company. There is a sense of assurance provided by experienced leadership that is absent in Flipkart’s strategy to fill the vacancies with their home-grown officials. Being a company of 33,000 employees and a senior leadership comprising of only dozens of people, Walmart’s nervousness is not misplaced.
The road ahead for Flipkart
Amazon, on the other hand, is preparing a $5 billion cheque to cash in on the Indian market. Having already lost in China to local players like Alibaba, Amazon does not want to lose to Flipkart in the second largest market globally.
If the deal with Flipkart goes through, Walmart will have three proven names in Binny and Sachin Bansal and Kalyan Krishnamurthy in the industry, followed by 33,000 employees. There is an absence of the middle layer in the company. There also exists instability in the company’s leadership. With Sachin and Binny almost pushed out of the company, they are trying to assert their control again. No matter from what angle one looks at it, problems do exist.
Mr Kalyan has succeeded in stabilising the company to a certain extent and has maintained his company’s leadership over Amazon. He has also cut costs by letting go of senior leadership. However, his strategy might not work in the long run. There is a need for them to find competent and trustworthy leaders to satisfy their current and potential investors.
It should be Mr Kalyan’s top priority to install a reliable and experienced leadership at the helm of the company, create a growth strategy to beat Amazon in the long run and to attract investment from major players as they need assets if they have to fight Amazon on a level playing field.
Additionally, Flipkart is seen one of the most attractive investments in the e-commerce sector globally as they have been able to successfully beat Amazon for the number one spot even though Amazon has spent a lot more than them.
Featured Image Source: Public Domain Pictures
Stay updated with all the insights.
Navigate news, 1 email day.
Subscribe to Qrius