How Flipkart plans to make televisions a Rs 5,000Cr category this fiscalRadhika P Nair
With exclusive partnerships with global brands, specialised distribution network and plans of same-day delivery, the e-commerce giant is hoping to retain the market share of TVs sold, while bolstering the overall online sale of the category.
Flipkart is planning to do to the television category this year what it did to the smartphone category in 2014. Back then, when Flipkart exclusively launched Moto G in India, it changed the way smartphones were sold and bought in India—online now accounts for a third of all smartphone sales in the country. Sandeep Karwa was the senior executive who brought Moto to India and to Flipkart. And he is the man leading the large appliances category at Flipkart now and has been charged with the mandate of growing the category to a $1.5-billion business this fiscal.
Televisions will lead this growth for the company. Televisions already account for 55 percent of the large appliances category and Flipkart is targeting to grow this to 60 percent. Televisions is the second largest contributor to company’s revenue.
We are on track to hit the Rs 5,000-crore GMV mark in television this year. We are targeting Rs 9,000 crore in large appliances overall. With the current rate of growth we expect the large appliances market to grow to around Rs 70,000 crore in India and at Rs 9,000 crore we will have over 12 percent of the market (this is at the 2017 rate of growth). No retailer has more than one to two percent of the market right now. That’s a significant target and we are on track,” says Sandeep, who joined Flipkart in 2012.
Sandeep claims that no online retailer comes close to Flipkart in terms of its prowess in the television category. At present, online accounts for 10 percent of all televisions sold in India, with Flipkart capturing 80 percent of the online market. He expects online to account for 20 percent of the overall television market this year, with Flipkart retaining its 80-percent market share.
There is the inherent demand in the market; Sandeep shares some data points—of the over 180 million televisions installed in the country, around 150 million are the cathode ray tube box televisions that have almost been phased out. The owners of these television sets will soon be in the market for an upgrade.
Apart from this, the company, specifically the televisions category team, has set in motion a series of initiatives in the last 18 months to grow the television market significantly.
It’s raining exclusives
“We are planning to do exclusive launches with televisions, just like how we did with smartphones,” says Sandeep. The company launched European TV major Thomson earlier this month. The two flash sales saw the televisions stocking out within minutes. Flipkart saw orders from smaller cities like Asansol and Jhansi as well for the brand. Xiaomi TVs are also sold only on Flipkart apart from the brand’s own site.
Flipkart has a simple enough strategy in terms of exclusives: partner with and bring to India global brands and television manufacturers that are neither selling in the country right now nor have a distribution channel here. It is a win-win situation for the brands and for Flipkart.
For Flipkart, large appliances is the only category that has been launched, shut down and then relaunched. This was because the company realised on launching the category in 2012 that it needed a service network and a unique supply chain. Flipkart bought repair and maintenance company Jeeves in 2014 to manage the installation and after-sales service of this category. Flipkart’s logistics arm Ekart, too, began setting up a dedicated network of warehouses for the category. Today, there are 14 warehouses for large appliances with new warehouses coming up in locations like the Guwahati. This means that Flipkart can offer a package deal to the brands that the company is exclusively partnering with.
Brands that do not have a presence in India would have to create a complex distribution network if it goes the offline route.
We have reached a point where we can pick up the products from wherever the brand has its factory, be it Turkey and China or in Himachal in India. We can pick up the product, bring it to our warehouses and ship it to customers. Otherwise, they would need to create about seven layers, from national distributor to end retailer, to reach a smaller city like Jhansi offline. Each layer would need a margin of at least four percent. This means cost inflates and the end pricing inflates,” says Sandeep.
On top of that, the brand would have to build a service network as well.
Flipkart ships large appliances to 1,400 cities and has a service network covering the 10,000 pincodes that make up these cities.
“No one, online or offline, can offer this package solution apart from Flipkart,” says Sandeep.
Flipkart’s other exclusive television brands include Kodak and Cloudwalker TV.
The advantage for the customer is lower price as channel costs are low, with prices lower online by around Rs 2,000 depending on the model.
Disrupting the television market
Flipkart had faced issues with the leading large appliances in the country, who refused to sell online due to channel conflicts. This problem doesn’t exist when bringing a brand that has no India presence. Flipkart is going after the manufacturers, many of whom make the televisions marketed by many of the leading brands in the country.
“This is how we are going to disrupt the television market in India. The CAGR for TVs was around 12 percent last year. We are confident this will move to 25 percent and that will primarily be because of us. This will mean some of the pole positions will change. The top three to four brands in the country will change. The online brands will take these positions. VU (sold exclusively on Flipkart) is already at number four. Xiaomi will enter top three soon. The television manufacturers and not the marketers will become leaders in India,” says Sandeep, adding that currently the margins in the category cover costs for Flipkart. The plan is to reduce operating costs over time.
Expanding sales enablers
One of the benefits of going to an offline store is the presence of a sales promoter, most likely trained and appointed by the brand, who gives the customer all details about the product and clarifies doubts.
To bridge this gap online Flipkart has set up a studio in Delhi where it shoots e-promoter videos with a person giving a three-minute pitch of the product. This video is part of the product page on Flipkart. Flipkart has seen that the conversion rate is three times higher when a customer has seen the video versus a customer who has not seen the video. Earlier, Flipkart used to offer this as a complimentary service, now the company charges the brands.
The company also offers hand-in-hand product exchange, where the old television is picked up when the new product is delivered. The price that the old television gets on Flipkart is similar to what it commands offline.
Sandeep says just the pick-up of the old product is a valuable service for customers, as many do not know how to dispose it otherwise. Internationally, leaders in the online large appliance space like Bestbuy.com and Ao.com charge customers for the pickup service. Flipkart has said in the past that it plans to increase the contribution of the exchange programme to television sales from 20 percent in 2017 to 30 percent this year.
The scope of no-cost EMI and other affordability features too will be expanded. For instance, debit card EMI is available for a few million now. Flipkart wants to increase this base to about 25 million before this year’s Big Billion Days.
The third area of focus is to improve speed and reach. Large appliances are now delivered to 10,000 of the 16,000 pincodes that Flipkart covers. The goal is to reach all 16,000. The addition in large appliance warehouses to locations like the Northeast is aimed at this. This will also ensure that many of Flipkart’s exclusive partners have a presence in areas where even overall market leaders have a limited presence.
It will also help Flipkart start doing same-day deliveries as opposed to next-day deliveries. Referring to competition Amazon’s paid membership for faster and free deliveries on certain products, Sandeep notes, “We do not need to launch a Prime to offer this. Customers won’t have to pay extra for faster deliveries.”
With a similar strategy, Flipkart ensured that smartphones and mobiles became the biggest category online. Can it pull off the same with televisions?