By Anuja Mardikar
Expansion or venturing into different product or service lines is a natural transition for an established company. Home grown e-commerce company Flipkart is always on the quest for expansion. Flipkart was founded in 2007 by Sachin and Binny Bansal and started its online business by selling books and popularised the idea of buying books online in India. From acquiring a Bollywood news site in 2011 to the biggest online shopping competitor Myntra, Flipkart has made many acquisitions over the years and has ventured into different online services.
The expansion quest continues for Flipkart as the company now has set its eyes on online travel services. The e-commerce giant shall soon launch the travel vertical and offer bookings for flights, trains, buses and hotels. The launch shall be done through tie-ups with specific industry partners like MMT and Yatra. Also, the company is on the hunt for a travel product category head. There was a hint earlier that Flipkart is planning to enter the travel space when Rajesh Magow, CEO of the largest travel agency MakeMyTrip, returned to the company board after a gap of two years.
Effect on the existing business
So will the new travel vertical affect the existing product line of Flipkart? There are two possibilities: either Flipkart shall succeed in improving its sales for other product lines by providing good customer experience through its travel segment or the travel category might as well attract the maximum focus, and the sale of other product lines be allowed to lag behind. We usually observe this phenomenon happening in case of online companies. Flipkart started off with selling books online, but now, fashion clothing and mobile phones contribute the maximum to the company sales. Nevertheless, with a huge customer base, the travel segment of Flipkart is sure to grab eyeballs.
Cost-effectiveness
The launch of the new travel vertical might come with a cost to the company. Initially, Flipkart may have to incentivise the customers with discounts and cash back. Attracting customers by offering discounts and cash back in case of a new venture or a new product line is the name of the game in online selling. Also, the success of the travel category shall depend a lot on the power of back-end technology. Industry experts feel that a travel segment is better suited for a transaction intensive platform like Paytm which launched its travel services last year. Therefore, it shall make sense if Flipkart launches its travel segment through PhonePe, its in-house payments arm.
Strategy for the new business
At the beginning of the year, Flipkart CEO Kalyan Krishnamurthy said that increasing the monthly active users on the platform would be the key metric going forward. With the infusion of $2.5 billion from Japanese investment giant SoftBank last September, Flipkart is leaving no stone unturned to drive customer stickiness. This strategy includes launching its own private label in various categories like electronics, furniture, large appliances etc. including releasing its own smartphone range. Therefore, increasing the consumer base and retention of consumers is the big goal for Flipkart, and the company plans to achieve it through diversification into different verticals.
Tackling competition
There is a flip side to the launch of the travel segment: the presence of established players in the business. An estimate of 40 percent of all travel transactions takes place online. With companies like MakeMyTrip, Yatra, Goibibo, Goomo and Cleartrip, which are dedicated travel service providers already dominating the travel space, it shall not be easy for Flipkart to motivate users to switch their base. In the hotel booking space alone, there are newer tech-enabled and well-funded players like OYO, Treebo and Fabhotels, among others. So Flipkart will have to make an effort to bring something new on its platter to promote its travel segment. Therefore, unless Flipkart brings forward a unique USP, the travel sector shall prove a challenge for Flipkart.
The biggest competitor for Flipkart, Amazon has a history of coming up with innovative product lines and thereby increasing its customer base. From the current developments in Flipkart, it can be observed that Flipkart is trying hard to stay ahead in competition through acquisitions and diversification in its product lines.