An insight into business model of Flipkart – India’s E-commerce Giant !


Flipkart is one of the top 3 unicorns from India in the online selling space. It is the second most preferred websites by the people who look for shopping online in India. According to ComScore and Amazon claims, Flipkart lost its number one position to Amazon. In this article we try to briefly analyse the Flipkart model and perhaps find answers to some of its nagging growth issues. Before we do that a little background of the ecommerce giant !

Flipkart – India’s E-commerce giant

Founded in 2007 by Sachin Bansal and Binny Bansal , Flipkart is an e-commerce company which is registered in Singapore and has its headquarter in Bangalore (India). Initially the company was an online bookstore which has now come of age and operates through a complex structure of business with 20 million products across 70+ categories at its disposal.

Flipkart to raise $1 Billion                

After years of raising millions of dollars to tap into the expanding online market in India, Flipkart targets to pick up more investment.  The company is about to raise up to $1 billion for funding its business and seize competition from the global giant Amazon and the local rival Snapdeal.

Why so much money?

One of the other big reasons for FlipKart to raise such huge funds is its competitor,  Amazon is growing way too fast in the Indian-subcontinent which is bank rolled in billions by Amazon US. Most recently Jeff Bezos announced $3 billion in new investments sending a strong message that he wants to win India at all cost. With Snapdeal funded majorly by softbank and Alibaba are a close third. Lot depends on execution and execution needs a war chest to beef up ecommerce infrastructure ranging from Logistics , Warehouses Customer support, returns handling , technology infrastructures up-gradations and hiring talented workforce and outspace and innovate the competition.

E-Commerce is still evolving which means FlipKart cannot fund all of these through its core business and without on-time expansion, it won’t last long in the market with Amazon gaining the market share with heaps and bounds.

Losing a major chunk of its value!

Valued at $15 billion last year when it raised $700 million from Qatar Investment Authority, Tiger Global Management and other investors, Morgan Stanley has marked down the value from $103.97 per share as of 31 December last year to $87.9 per share as of 31 March this year. Hence, valuation has dipped to $9.5 billion, pushing it back to the 2014 level.

From an online bookstore to multibillion dollar E-commerce portal!

Flipkart initially started with selling books online. The ambitious online portal soon expanded with offering a range of goods. It also acquired companies like,, etc., to mark its presence in the Indian market. Its journey from a book e-retailer to a largest e-commerce portal inspires and encourages a generation of start-ups. Flipkart’s story demonstrates that a great idea backed with hard work can provide you with great success.

Understanding the business model

This online platform is a B2C portal which provides shopping opportunities to the Indian consumers. It allows the sellers to sell their collection of products by giving appealing discounts to its consumers who wish to buy them. The buyers choose the products they like to buy and are hence shipped to them. The sellers get an agreed price after deducting the Flipkart’s commission for their services provided to these sellers.

The various options for selling and buying through Flipkart are through

  • Flipkart website
  • The web app
  • The mobile app
  • Social websites
  • Affiliated networks like review websites, coupon websites, bloggers, etc.

The percentage of the commission charged by Flipkart varies from the type of products and type of sales. It may range to 5-20% excluding taxes and discounts.

This is the basic manner in which Flipkart earn its bread butter.

Flipkart’s other sources of income

The e-commerce portal generates revenue not just by selling products but has various revenue channels, some of which includes:

Web portal: as it provides a platform to its sellers, it charges a commission for all the services given to them. This is the basic source of revenue of Flipkart.

Listing and convenience fee: this is another method of revenue to the company; it charges some amount of listing fee to its sellers and convenience fee to the buyers for faster delivery. The convenience fee also includes the gift wrapping charges, billings that add up to the total revenue of the company.

Logistics: this is an amount collected from the sellers for shipping their products. It provides services to its sellers which are similar to other delivery courier companies. The charges of delivery services vary from place to place and the distance required to be covered.

Digital media: it sells ads to the sellers or brands as well as various products such as co-advertising, co-branding, etc. the ads are put into 3 categories:

  • Co-branded opportunities on the Flipkart’s homepage: here the slider of the Flipkart’s homepage introduces a chance for advancement to the sellers, product launches, and various brands to show up on their page which gets millions of views on daily basis.
  • Co-advertised products towards publications: these are the ads that are shared by the newspapers and magazines’ front pages and allow the brands to advertise themselves. Suppose a new phone has been launched in the market. Flipkart gets its ad on the front page of the newspaper and the cost is actually shared with the brand that has to advertise the product.
  • Target search results: this works like when you type to search for a product, Flipkart decides which sellers’ products are to be shown on the top. This is the space that will be solved by Flipkart in the near future.

Cash and carry: this is the wholesale division of Flipkart. The revenue earning methods is same as it earns from the B2C transactions. The only difference here is that here B2B transactions take place.

Myntra: myntra is a website owned by Flipkart which is another online fashion portal that boosts up the overall fashion category of Flipkart. Myntra earns a huge amount of sales on its fashion products and has been measured to be higher than the fashion sales of Flipkart. The revenues earned by the website myntra are accounted in total earnings of Flipkart.

Flipkart is also focusing on bringing back local brands to its platform to  improve the user buying experience of its base. On one hand, though it lost an able CTO in Punit Soni for whatever reasons, it is sort of blessing in disguise to them because, that reduces costs and at the same time bringing back old employees will strengthen their core business.

Areas that need attention

In my view, there are 2 critical aspects that are often overlooked.

  1. They need to improve the user buying experience and perhaps innovate better than their competition to derive and learn from machine learning and customer data.
  2. Align or partner with Brick & Mortar stores to extend Flipkart offline as well.

In India, majority of consumers still prefer to “look and feel” the product before purchasing and perhaps a partnership with a brick and Mortar stores will help their growth and to an extent might also solve their logistics issues.

Why Flipkart is in crisis

The company is facing a blizzard of its own making: It is now facing a momentous management shakeup at the top. An organization which pioneered e-commerce in India, growth has hindered since the last year and the management team till now has not figured out ways to re-energize sales. The company’s innovation engine is quite long. In e-commerce lingo, the GMV (gross merchandise volume) sold during a period of time has not increased considerably. In a non-virtual world, this is can be referred to as a scenario where the revenue or sales numbers aren’t growing. This is a very strange for an e-commerce pioneer which until now has raised its GMV by over 200 percent annually for the past three years. The very nation which made the company a roaring success in its initial stage of its existence is now deterring its progress.

The discomfiture of wasting its first mover advantage to a company like Amazon would only intensify the crisis steeping inside. And most likely may force investors to think for make-or-break solutions.

Payment Gateway of Flipkart

The payment gateway of Flipkart is the PayZippy that provides payment services to Flipkart. They charge a small amount of fee for every transaction processed. The rates vary for the different modes of payment like in the case of a debit card or net banking it is the lowest as compared to other modes. It varies from 0.75% to 1% for debit card and net banking whereas ranges from 1.5% to 2.25% for every transaction made through a credit card. The American express cards are charged from 3-3.5%. Thus depending upon the mode of payment chosen by the consumer, the websites make payment of the transaction fee.

Product launch by Flipkart

As the website Flipkart has a number of views, visits, and liking by its users every day, it offers an amazing platform to launch new products over this website portal. Various brands find it easier to launch their products from Flipkart. For example, Xiomi has launched all its phones over Flipkart with an exclusive partnership in India. Here, this online portal earned its revenue by getting a share in the revenue margins of Xiomi along with the advertisement and launching share over its platform.

2015 FY results

As per the latest reports of the year 2015, Flipkart has reported a loss of 2000 crore during the year. The sales for this year have trebled to Rs 10,390 crore as compared to last year. If the past 18 months reports were to be analyzed, it had raised over $2.6 billion where the company spent huge amounts over marketing, improving technology, providing discounts and building warehouses.

The online retail store, Flipkart, is a Singapore-based company that has conceived a complex network of much inter-connected and few allegedly independent companies accumulating a huge amount of money to develop an interspersed e-commerce business.

Getting back on track!

Despite the huge losses Flipkart will be able to make a turnaround with change in policies and working strategies. Some of the factors that can turn get profits to Flipkart are follows:

  • Flipkart has to tie up with more of local vendors reducing its sales from WS retails, which is the largest supplier of the company presently. This is because this retail store took 80% of its logistics and delivery networks. Transferring the work to local vendors will reduce its time taken for delivery as well as its money loss.
  • Based on the online searches for products over the platform, the tech teams of Flipkart should build technology to serve paid ads product based on keywords.
  • Another step taken by Flipkart is the purchase of AdiQuity firm for mobile advertising technology to not only improve its ad platform but also analyze the customer data and the shopping pattern of the customers.
  • It has been able to earn with the introduction of monthly and yearly subscriptions for the third part vendors to boost the earning level to a larger scale.
  • The deal between Flipkart and Airtel zero has been one of the factors that have started leading to huge profits due to the free app support.
  • Flipkart has anyhow created a brand value which is at the last most important for Indian consumers. Flipkart can take advantage of its brand value and work better with its consumer base. Thus with a better brand value, Flipkart needs to just renew its services as it already has a good amount of visiting customers.

Flipkart Success

Flipkart is one of the top online selling web portals in India. The company has produced a large amount of consumer satisfaction and loyalty with its services to the consumers such as cash on delivery options, faster delivery options, great discounts, return policies, refund policies, etc. all these factors have led to the success of Flipkart and the company is doing well in the market today. Customers can get any kind of product simply from one portal without much of searching problems; this organization of various products into the categories makes it convenient for the consumer to find the product they need.

These factors have led to better working of the company and the company looks forward to better and more success in the market.

About the Author:

Sudhi Seshachala is the founder of B2BSphere – Global Marketplace for buyers and Asian Suppliers. With 50 years of combined experience and 2 decades of experience in exports, they founded B2BSphere with a vision to make India $1 Trillion exporter in merchandise, which currently stands @ $322 Billion.

(Disclaimer: This is a guest article contributed on Techstory. Techstory is not responsible for the content in the article.)