‘Flipkart Assured’ took off in August 2016 to ensure that high quality products are delivered within two to four days. Find out how this initiative boosted Flipkart's business.
When e-commerce entered India, the first and biggest step it took to attract customers was steep discounts and offers – which offline retailers could not afford to match. This meant a higher cash burn for online players and a dip in sales for offline ones.
If cash burn is part and parcel of e-commerce, logistics is the fuel. But 2016 brought something new to e-commerce: discounting – which initially got the customers on board – which is not the only factor that online shoppers care for. Speed of delivery and quality are equally, if not more, important to them.
Lack of product quality and mismatches in the product displayed versus the one delivered were major hindrances to customer satisfaction. Add to this poor packaging, and you have high returns and low net promoter score (NPS).
All these factors made efficient logistics a necessity for e-commerce companies. Most of the horizontal players, backed by billions of dollars, have in-house facilities. Yet, enhancement was essential.
This was the motivation for India’s largest online marketplace, Flipkart, to launch what it claimed to be India’s first ‘Quality and Speed assurance’ programme. ‘Flipkart Assured’ took off in August 2016 to ensure that high-quality products are delivered within two to four days. The programme, which is available across categories and regions for free, is available to all of Flipkart’s customers, not just the 100 million registered users.
Flipkart claims that the products with the ‘Flipkart Assured’ badge have gone through six levels of quality checks. Anil Goteti, Head of marketplace at Flipkart, says, “Since we are a marketplace, there are products from across the country. Product X and Y will have different quality due to different problems. We wanted to differentiate the ones for which we can assure good quality, versus the other products we have.”
Four months since the launch, Flipkart’s story has changed for the better – its Big Billion Days (BBD) sale created history, it launched a private label (Flipkart Smartbuy), and most importantly, sent a clear message to arch rival Amazon that the game is surely on.
The role of Flipkart Assured was not small. Flipkart claims that the usage of the Flipkart Assured filter had increased by 40 percent during BBD, when they sold five times more units than on an average day. Post-BBD, Anil says, customer awareness on Flipkart Assured has substantially increased. About 65 percent first-time customers have been purchasing ‘Flipkart Assured’ products since then.
According to Anil, customers are finding Flipkart Assured a value addition for shopping online. “Now, 60 percent of units sold are Flipkart Assured. Returns are half of what they are in the Non-Flipkart Assured category. There has been a 20-30 percent increase in sales because customers see this as an important criterion and start buying more compared to non-FA products,” he explains.
Consumers are concerned about quality, price and speed of delivery. Anil claims that they are choosing Flipkart Assured for all of these factors coming together. However, he is quick to add that just because a product does not have the Flipkart Assured badge, it doesn’t mean that the product lacks good quality. “The badge just gives confidence on quality because of the data we have acquired and the diligence done around it. There are many reasons for why a particular product might not have the badge right now. Maybe we didn’t have the time to evaluate the product before it went online on our platform,” he adds.
US-based Amazon’s similar service - ‘Fulfilled by Amazon’, where the products are stored, packed and dispatched by Amazon - is available for orders worth Rs 499 and above in India. Amazon had also launched the ‘Amazon Prime’ model in India, by which it offers fast delivery and returns for products that have been checked for quality at an annual subscription fee of Rs 499.
When Flipkart Assured was launched, it was widely seen as an attempt to win against Amazon Prime, although Flipkart Assured is a non-subscription affair. “The six metrics, if approved from our side, guarantees quality. This is very different from what our competitors do,” says Anil.
While Amazon has had a much larger learning curve over a longer period and across geographies, Flipkart has had to take extra care. Besides proprietary algorithms and data sciences, they consider customer feedback on products along with insights from their sellers.
Additionally, return ratio is analytically estimated with data sciences and machine learning. For instance, an electronic device’s return ratio will be different from that of a pair of shoes, as the latter has a chance of a size mismatch. “But if the return ratio is say 40-50 percent, it doesn’t matter whether the product is in Flipkart Assured or not. To maintain quality, there is a lot more granular clearing of the product,” Anil adds.
Since Flipkart Assured began, reduction in returns owing to damage and wrong shipment has reduced by 15 percent. Returns for Flipkart Assured in November were at least 40 percent less than those of non-FA products.
Criteria for the Flipkart Assured badge are at the product level, not the seller level. A seller who gets a badge will not automatically get Flipkart Assured approval for all his products. But Anil adds that sellers are rated as Gold, Silver, and Bronze, according to the quality and value they offer to customers consistently. Gold-rated sellers have a higher chance of getting the Flipkart Assured badge compared to someone who has relatively poor quality. Also, only Flipkart Assured sellers are allowed to sell Flipkart’s private label products.
Sellers try and reduce returns and improve their catalogues to get the Flipkart Assured badge. Anil says, “We are raising the bar higher on quality checks. We are also bringing in more people. Sellers will be enabled to bring in more products under this umbrella as we want to expand the range in all categories. We are a marketplace; we help our sellers meet customers’ demands by understanding them through technology,” he says.
Horizontal marketplaces are particular about training their sellers. Flipkart claims to give them insights in a customised, personalised way. “With a seller who has 1,000 products, if you identify that 300 products need to be improved, we meet him/her in person. We also run promotions for higher quality products, and give incentives to sellers who bring down the number of poor quality products,” says Anil.
Sellers are all competing for the same consumer base in a marketplace. As a law of nature, bad sellers are weeded out. An additional advantage to the customer is that since sellers are now well aware that customers choose Flipkart Assured, more inventory is ensured to avoid an out-of-stock situation.
India might have only 300-odd million internet users, but this has not stopped online commerce from establishing itself here. The Indian e-commerce industry is expected to form the largest part of the Indian internet market, which is projected to be approximately $100 billion in market value by 2020, as per the CII-Deloitte report published in April 2016.
For any other industry, it takes decades of effort to have companies that are worth a billion dollars. But India already has four horizontal online marketplaces in the unicorn club. The competition between the market leaders Flipkart and Amazon has never been fiercer. Flipkart already has more than 45 percent higher NPS for Flipkart Assured products than those of non-Flipkart Assured products. Quality beating discounts for customers is good news not just for Flipkart, but for the whole ecosystem.