
Indian E-Commerce Firm Flipkart Raises Eye-Popping $1B - dandrewsen
http://dealbook.nytimes.com/2014/07/29/indian-e-commerce-firm-flipkart-raises-eye-popping-1-billion/
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tn13
I find Flipkart's valuation very puzzling clearly the investors have seen what
I haven't. Flipkart's revenue is extremely less for a population of the size
of India. They makes ~$200M in revenues per year with an operational loss
which I am told is significant.

Flipkart has managed to scale its revenue but without making a profit. Even
this would have appeared as a good opportunity if Flipkart was kind of de-
facto e-commerce business in India. Turns out that it is not. Snapdeal,
Junglee (Amazon India) are pretty close. Myntra was the leader in apparel and
fashion products sale online which was then acquired by Flipkart. (Myntra was
not profitable either).

I find it hard to understand why anyone believes that Flipkart would ever make
profit in next 5 years or so. I find it hard to believe.

Unlike USA, India has not yet figured out how to build proper usable roads,
the cities are not planned and India does not have a proper addressing system.
Government regulations have further made life difficult for courier companies.
All this has resulted into cities and towns where traveling over few kms is
very expensive and time consuming as a result small shops catering to need of
local communities have sprung up like mushrooms. Current India is probably
resembles more to the A&P days of USA.

My assertion is validated by the fact that Travel Booking and Movie ticket
booking websites in India are growing fast and also very profitable.

~~~
devnonymous
I find people's (especially Indian's) puzzled reaction to news about
flipkart's funding puzzling. Flipkart has altered the online buying habits of
urban Indians significantly. I would be surprised to meet an urban Indian
today who has _not_ heard about flipkart. By urban I mean the tier 2-3 cities
as well. So is it just the fact that the _current_ revenue numbers do not add
up that makes it puzzling to some (most??) ? If I was an investor, I'd bet on
flipkart, solely based on watching the change in spending habits of the urban
Indians over the last 5 years. Instead on narrowly focusing on the online
business if you take a broad look at the way things are changing the tier 2/3
cities in India you'll understand the investor optimism. You mentioned:

    
    
      > Unlike USA, India has not yet figured out how to build proper usable roads,
      > the cities are not planned and India does not have a proper addressing
      > system. Government regulations have further made life difficult for courier
      > companies. All this has resulted into cities and towns where traveling over
      > few kms is very expensive and time consuming as a result small shops
      > catering to need of local communities have sprung up like mushrooms.
    

...but like almost any other success story in India, flipkart has become a
recognizable brand _despite_ this !! ...isn't that reason enough to undestand
why the investors feel like this is going to be worth it ?

~~~
majani
My brain is racing with assumptions right now, but I'll just come out and ask,
what's a tier 2/3 city?

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piyushpr134
For the uninitiated: Flipkart is AMZN of India. They are doing tonnes of sales
here. FK is getting so much valuation as India does not have a big enough
organised retail (roughly 5%). This means there is a generation which would
move on from unorganized retail to online. And hence the astronomical
valuations. FK also has some unique ideas. For instance, they launched Moto e,
g and x in India as exclusive sellers. They managed to sell 1 million of those
phones in last 6 months. This alone would have easily resulted in a $20-25
million rev.

~~~
shimon_e
20-25 million revenue? I think you left off a zero there.... Unless those
phones only have an average price of $20-25 in India.

~~~
ashray
He could mean net revenue for the retailer as in profit. I don't think these
phones would have a margin much greater than $20-$25 ?

~~~
frandroid
Then that's called income, not revenue.

~~~
ashray
No need to downvote if you just disagree, that's not how HN is supposed to
work :( It appears that you are using a different meaning for revenue.

[http://en.wikipedia.org/wiki/Revenue](http://en.wikipedia.org/wiki/Revenue)

Revenue normally refers to top-line or gross income. This is why I clarified
with the 'net-' addition, it's probably what led to the confusion in the first
place.

Flipkart nowadays anyway operates on a 'store' model for the most part so
sales margin for this discussion could actually be meaningless anyway. But
since they were doing an exclusive, perhaps they were directly selling, in
which case it would be pertinent to the discussion.

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jestinjoy1
The best part about Flipkart are

1\. They made online selling popular in India

2\. Products got delivered in door steps

3\. I could buy books at 20%-50% discount and foreign edition textbooks
easily. This is something we couldnt even dream about, in some parts of India

4\. I could easily get products from lee, nike, puma,... at discounted price
too. If you are not in a big city, then its difficult to get branded products
and if you get then you need to worry about whether they are original or not

I bought close to 150 books from Flipkart, which would cost some 70$ more if I
buy from local sellers.

I have my Toshiba Laptop, Moto G phone, Lee Shirt, Sennheiser Headphone,
Reebok shoe all bought from online sellers :)

~~~
2511
Also:

5) They implemented cash on delivery. A very brave and novel approach. This
basically instilled confidence in the indian online buyer

6) Fast delivery. I will go ahead and say probably as good as Amazon or even
better in big cities. They built warehouses in the big cities and stocked fast
moving items in a lot of places

7) almost guaranteed savings on all things. I have rarely seen anything that
is more expensive on FP compared to a store.

8) Good online experience. Little things like checking delivery using your
pincode. Responsive site. Product suggestions.

~~~
Grue3
How is cash on delivery novel? Where credit cards are not ubiquitous this is
the only way to sell stuff online. Pretty much every single online store in my
country did this for years.

~~~
2511
Well..its India..too may practical issues that can dig into your profit

------
fununclebob
Flipkart recently moved away from the Amazon warehousing model to an online
marketplace model and I've heard nothing but complaints from customers
regarding the switch. Even their own presence in the marketplace is unable to
keep up the quality of service as it scales, and all kinds of scammy retailers
have set up shop now which has made it relatively more dangerous to purchase
on their service now.

Time will tell if they pay that billion back.

~~~
Pxtl
So in other words, they tried to follow Amazon's "affiliates" business model
but embraced it too hard because they didn't realize that everybody hates the
affiliates and only ever buy from them on Amazon because of desperation or
accident.

~~~
barry-cotter
Or they saw the way taobao _owns_ online B2C commerce in China and decided
they wanted the Indian equivalent.

------
roguemonk
I see 3 reasons.

I. Flipkart is losing money definitely. But so is Amazon which has not
reported a profit before last year. However Flipkart's losses are not for the
same reasons as Amazon but it should not be forgotten that FK is never afraid
to try out models and kill them if they fail. FK is following a lot of
Amazon's footsteps but it is coming into its own quite a bit and given FK does
not have to do the same mistakes that Amazon had to do for more than a decade,
FK has a good second mover advantage.

II. Flipkart has been a trailblazer in the Indian e-commerce space by forcing
the users to internalize new habits. Getting them to trust the online
e-commerce stores with their money and buying products online without a
rethink, Cash on delivery and now 'online only sales'.

Amazon.in is also being forced to innovate at its own pace in India changing
its last mile delivery models (IBP stores).

So right now this is anyone's game.

III. Flipkart is simply bulking up its warchest on the impending war with
Amazon. Neither of them are going to let go of the massive opportunity that
they do not have any more in China. If Alibaba could do a single day $5.7 Bn
sales on Nov 11, there is no reason to think why we might not be looking at a
similar opportunity just as big in India where the human consumption potential
is just as big!

However, the more it looks like India will not be a winner takes all market.
Amazon, Snapdeal and Flipkart will have to contend with being 3 players in a
huge ecommerce market in India unlike China or US... the rules are just hatke
in India :) Of course there are still the pristine south east Asian markets
for everybody's taking!

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netcan
Wow. Is this real? Does anyone know anything about this company? Wikipedia has
the company's revenue at 200m USD as of January, making an operational loss.
They don't sell internationally.

Is there some important part to this story that we're missing? Seems like
there must be something worth knowing about here.

On a slightly unrelated note, it's amazing that billions can be raised pre-IPO
these days. It almost buries IPOs as a fund raising methods.I realize
exit/liquidity was/is the bigger reason for tech IPOs already, but it seems
somehow unnatural to completely abandon the role of financing. Not sure where
I'm going with this.

~~~
jestinjoy1
Indian here. Will give you an idea of whats happening here in India. This
online sellers got an impact only 2-3 years back. Now its like local
government are formulating rules to curb online sales. This is in part fueled
by the influence of local sellers.

Now people have moved to online stores for buying things, with local sellers
feeling the heat.

First it was thought that Amazon entry to India will bury Flipkart. Not it
seems Amazon is in trouble. Things looks like going in the same way as of
China.

Flipkart started by IIT'ans the brightest minds of India. They recruit from
top tech schools of India with hefty packages. They have a nice site and
customer care. They also bought rival in Apparels, Myntra

There is no reason one shouldn't buy from Flipkart.

*[http://www.thehindu.com/features/metroplus/society/keralas-o...](http://www.thehindu.com/features/metroplus/society/keralas-online-shoppers-feel-the-crunch/article6085358.ece)

~~~
ishansharma
I'm not sure if they can compete with Amazon. They're losing money and
competing with Amazon which has deeper pockets.

Right now, their prices are higher and I can find (and have found) better
deals on either Amazon or Snapdeal. Amazon has always delivered faster and the
sellers are all the same on these sites now.

    
    
        Not it seems Amazon is in trouble.
    

I think Flipkart is in real trouble here. Amazon can discount for long and eat
losses (that's what they have always done) and though Flipkart has good ideas,
they have made really strange moves (making a Tablet? Infibeam tried that back
in 2011. Didn't work.)

~~~
sameerds
> Right now, their prices are higher and I can find > (and have found) better
> deals on either Amazon or Snapdeal

I have the opposite experience. I check prices over a few days before buying,
and Flipkart always comes ahead. Permanently gave up on Snapdeal after
returning a pair of shoes (only one shoe in the box!), then its replacement
(wrong size), and then again its replacement (wrong model).

------
2511
I like that the Indian start up scene is getting serious now. Entrepreneurs
are brave enough to compete with the big players unlike a few years ago when
most start ups were basically simple web apps or a tech consultancy kind of
thing. As an Indian this gives me hope that a soon the brain drain will stop
and a lot of talented Indians abroad (with connections and some money to
invest) will come back to India to either start up or work for one.

~~~
r_singh
I really hope the same.

There was a story on HN just a few days ago about an Indian from Cornell, who
came back to India to do an India centric startup.

Here's the story about why he chose to come back:
[https://news.ycombinator.com/item?id=8090158](https://news.ycombinator.com/item?id=8090158)

------
param
Best of luck to both founders, and this is great news for the Indian startup
industry, but I am confused by this statement:

“We are not thinking about [an IPO]. We have not settled on a business model
that we can take public,”

Shouldn't the business model be validated by your Series A or max B? Flipkart
has taken multiple rounds in the past, and this one looks as large as a Series
C.

Edit: Firms involved also sound like series C firms - Tiger Global, DST etc.

~~~
aashaykumar92
I think their base model is validated, it just may need more. According to the
TC article [1], "In a statement, Flipkart said the 'funds will be used to make
long-term strategic investments in India, especially in mobile technology.'"
So they are predicting some of these acquisitions to help grow that model
before going public.

[1] [http://techcrunch.com/2014/07/29/indian-e-commerce-giant-
fli...](http://techcrunch.com/2014/07/29/indian-e-commerce-giant-flipkart-
raises-massive-1b-round/)

------
chatman
And immediately after this, Amazon invests $2B in India.

[http://www.amazon.in/gp/feature.html/ref=amb_link_182486107_...](http://www.amazon.in/gp/feature.html/ref=amb_link_182486107_1?ie=UTF8&docId=1000818573&pf_rd_m=A1VBAL9TL5WCBF&pf_rd_s=center-2&pf_rd_r=0MW8ZXJW9DHVBDWC8HRN&pf_rd_t=101&pf_rd_p=516940287&pf_rd_i=1592137031)

------
quarterwave
After my family started buying dresses online (average $20 per item), I
started paying more attention. Online shopping in India not only provides a
vast range across vendors, it also saves the cost and hassle of travelling to
a big store - especially for singleton purchases. When discerning dress buyers
are happy to buy online that must signal some kind of shift.

------
skbohra123
After Flipkart’s 1Bn fundraising, Amazon announces $2Bn investment in India[0]

[0] [http://www.medianama.com/2014/07/223-amazon-2bn-
investment-i...](http://www.medianama.com/2014/07/223-amazon-2bn-investment-
india)

------
anizan
Some computer parts like hardisk's are cheaper on flipkart than the purchase
price of an authorized retailer. So when a customer comes to a shop, the
dealer says that stock will come in 2 days and he promptly places an order on
flipkart.

~~~
sameerds
The local dealer I shop with, uses flipkart as the reference price, and gives
a discount on it! We browser right in his store and then reach a deal.

------
akx
Huh. Never heard of the company, but what surprised me is that the site is
actually really fast and snappy, somehow, for me -- especially considering
what I saw when I took a look at the source code.

~~~
Theodores
Agreed. Very pleasing on the eye with clear navigation, puts Amazon slightly
to shame.

~~~
dheer01
You might find it hard to belive - but customer experience is slightly better
on Flipkart than on Amazon(US).

------
techaddict009
Flipkart revolutionized ecommerce in India with the concept of COD (Cash On
Delivery).

That is you pay when you receive the product.

~~~
agyli
I used to buy things from eBay India using CoD in 2004. Flipkart was not even
founded at that time.

I know lot of people who were afraid to buy things from ebay even though ebay
offered buyer protection for long long time.

In my opinion, Flipkart is successful in India because they created trust
among people who were afraid (based on false rumors) to buy things online.

------
hemantv
$1 Billion is lot of money in India. Only future will tell what they will
build from it.

~~~
epistasis
$1B is a lot of money in the US too, even for a company's valuation.

But to _raise_ $1B is, well, astronomical.

~~~
hrjet
But then it deals with physical goods; lots of inventory, physical ops,
street-level marketing. Is $1B really high for such a company?

~~~
adventured
Yes, very high. Especially if the sales numbers thrown around in this thread
are accurate (eg $500m to $1b in sales).

Retail companies historically get relatively low valuations (particularly
compared to your typical tech company), in part because the margins tend to be
very mediocre in retail.

A software company would typically have margins 5 to 10 times greater than
most retail companies. Amazon has been an anomaly in this regard, while they
have the terrible margins, they have been rewarded with a massive valuation.

------
somehanu
this is big. Indian people believes Flipkart how Americans believe Amazon.
Flipkart delivery products quickly with replacement guarantee. This is enough
for them to raise the funds.

