It was a 10,000-a-month allowance from their parents for
almost 18 months that helped Sachin Bansal and Binny Bansal launch an
e-commerce website retailing books in October 2007. Today, the near-20%
stake they hold, along with the top management, in Flipkart is valued at
almost Rs 69,000 crore.
Sachin Bansal, the
chief executive of Bangalore-based Flipkart, says he has a knack for
underestimation. That is exactly what happened in March 2011 when he and
Binny Bansal, who are not related to each other, announced they would
reach the $1-billion (Rs 6,100-crore) sales mark in 2015. Last week, the
site, which now sells everything from books to electronics, apparel and
jewellery, reached the milestone, a full year ahead of the target.
"To
say billion-dollar in 2011 was crazy when we were doing a $10 million
(Rs 61 crore) run rate," says Sachin, 32, in his first interview after
the firm achieved the sales target. "It was just a belief."
Sachin,
like his co-founder, grew up in Chandigarh. That is not the only
coincidence. Both went to IIT-Delhi and worked at different companies
for about a year before ending up in the same team at Amazon. It was
during this stint that the two decided to start up.
The
duo pooled in Rs 2 lakh each and with two computers launched the site
from their two-bedroom apartment in Koramangala, a primarily residential
locality in Bangalore where the company now has multiple offices. For
10 days, the site did not see a single sale and then a customer from
Andhra Pradesh placed the first order for the book 'Leaving Microsoft to
Change the World' by John Wood.
"We were not
thinking about numbers then, but we knew something big can be built out
of ecommerce," says Binny. The two co-founders, who have a tendency to
finish each other's sentences in conversations, are close friends. What
has helped maintain the bond through the ups-and-downs of
entrepreneurship? "By fighting every day," says Binny, 31, as the two
burst out laughing. "But seriously, it is important to know what the
other guy is thinking. That becomes very important as the message and
the thinking become consistent. Communication is key."
The
two are demanding bosses, say their employees. "Both have high
expectations, but that raises our bar. That makes working with them
rewarding as well," says Amod Malviya, head of engineering at Flipkart.
He says the Bansals have complementary personalities. While Binny is
analytical and driven by logic, Sachin is more instinctive and is driven
by emotion and passion, says Malviya, who joined the company in 2010 as
a senior manager.
Employees are also impressed
by the simplicity the duo has managed to retain. As they live close to
work, both walk to office. They also fly and stay budget while
travelling and eat with other employees whenever possible. "They are
very much in the Azim Premji mould and shy away from ostentation," says
an employee, who did not want to be identified.
Experts
say the success of Flipkart can be chalked down to the founders'
attitude. "The two have the right attitude. They are cocky and
confident, and along with that they have the ability to execute," says
Arvind Singhal, chairman of retail consultancy Technopak. This attitude
has helped them deal with the ever-shifting baselines in Indian
ecommerce.
After raising about $190 million
(over Rs 1,150 crore) until 2012 from Tiger Global and Accel Partners,
industry insiders had begun questioning the viability of the business,
which was burning about 50 crore of cash each month. In 2012, the
company took action, by tightening its employee base, using more
technology to cut costs and shutting down its music downloads category,
which was not scaling up. More importantly Flipkart, which started out
as a direct seller of goods, changed to an asset-light marketplace model
where multiple merchants, along with the company's own WS Retail, sell
to customers on the site.
Fund Raising:
In
2013, the company raised $360 million (about Rs 2,200 crore) in two
tranches, primarily from South African Internet major Naspers at a
whopping valuation of $1.6 billion (Rs 9,772 crore). At the time, Sachin
termed the cash infusion as a "great validation" and one which refuted
the scepticism about his company in particular and Indian ecommerce in
general.
In May 2014, Flipkart received $210
million led by Russian billionaire Yuri Milner's DST Global and in July
it raised a mammoth $1 billion led by existing investors Tiger Global
and South Africa's media group Naspers. The July fund-raising valued the
company at $7 billion, a first for an Indian Internet firm.
The
latest deal, which when complete could bring in about $700 million in
fresh funding, values the Bengaluru based firm at about $11 billion (Rs
69,000 crore) making it worth more than some of India's largest consumer
companies. While Godrej Consumer is estimated to be worth Rs 31,000
crore, Dabur India is valued at about Rs 41,000 crore.
Flipkart
is now worth nearly half of India's fourth-largest IT services firm
Wipro, which has a market capitalisation of Rs 1.34 lakh crore, and
nearly seven times the mid-sized IT services firm MindTree that is
valued at Rs 10,000 crore.
Supam Maheshwari,
founder of online babycare site Firstcry, says Sachin and Binny Bansal
managed to find early investors who kept backing them. "They executed
well, especially in logistics and warehouse, and did not lose focus,"
says Maheshwari. "But they have had to spend a lot to reach the
billion-dollar mark."
Flipkart's sales
milestone could also send out a signal to international players that the
Indian ecommerce market is mature enough for them to enter, says
Maheshwari. One such player could be Alibaba, which only has its
business-to-business portal at present in the country.
Comparisons with Alibaba's Jack Ma are inevitable. Ma too started out from a small apartment in China's Hangzhou in 1999.
Ma
diversified into payments, cloud computing and multiple ecommerce
models. Bansals have made their intentions to diversify clear and have
already done so by opening up their online payments solution and
logistics for use by other Internet companies.
Ma
has, however, already beaten Amazon in China. Alibaba expects to triple
the volume of transactions to $490 billion (almost Rs 30 lakh crore) in
2016. For Flipkart, the battle has just begun. Peyush Bansal, founder
of Delhi-based eyewear e-tailer Lenskart, says competition will
intensify between the large multi-category portals. Amazon, which
entered the Indian market a little over six months ago, has rapidly
expanded into 18 categories of products and has been busy setting up its
logistics and warehouse network. Snapdeal, which is targeting $1
billion in sales next year, recently raised a further 830 crore from
investors led by eBay. "The site that would come out on top could be the
one with the deepest pockets or the one with the best economic
efficiencies," said Peyush Bansal.
Technopak's
Singhal says Flipkart, which employs about 15,000 people, will have to
continue to maintain its lead in technology, customer experience, supply
chain management and consumer logistics to hold onto leadership.
"It is like a three-hour movie where just the first 30 minutes are over; the plot is still unfolding," says Singhal.
Flipkart,
which has over 1,000 sellers on its platform, is now shifting focus
towards scale with intelligence, which will lead its mobile commerce
drive. Sachin believes mobile will revolutionise ecommerce and Internet
businesses. "My four-year-old son does not even understand keyboard. He
expects the television to also be a touchscreen device," says Sachin,
who expects Flipkart to become a mobile commerce platform in the near
future with features customised to individual users. "The next
six-and-a-half years are going to be even more exciting."
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