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Welcome to our Sixth issue of Focus series at the duologue. The reading time to finish this one is around 6 mins.
The Duologue is a concerted effort by Vivek and Bheem to make sense with a unique lens. Now, on to the post!
Hey,
Flipkart is back in the news with a slew of initiatives to remind people it's not all Jio. Last week we wrote about the narrative war of e-commerce which Jio clearly won [1]. Flipkart has not been a media darling since its exit to Walmart. It was still making some interesting moves all this while.
Hyperlocal Play
Let's start with the money, a fresh equity of $1.2 Billion was infused with post money valuation set at $24.9 Billion[2]. It helps our cause if we zoom out and back to pre-pandemic days, remember them.
Flipkart made some strategic investments. First on Decemeber 5,2019 it announced a minority investment into Shadowfax's Series D round[3]. It followed it up with an another strategic investment the following week in Ninjakart*[4].
Flipkart has been on the beat of Hyperlocal services for a long time. This time it is trying to expand through investments in two companies that will aid in the growth. This come with a huge "if" as the strategy needs to be executed to the desired intent.
Intent
The investment in Shadow fax which is an on-demand logistics service for businesses is to enable Flipkart's delivery fleet and enhance last mile tech in order to do hyperlocal deliveries from local kirana Stores. This was done with the view of using Kirana stores as both warehouses and suppliers. With Flipkart's Supermart launching with groceries 6 months back[5], kirana stores have become ideal participants in theory.
The second investment into Nijakart was directly associated with helping Walmart's Best Price wholesale stores to have produce offerings through Ninjakart. It was also aimed at making the produce available for supermart deliveries to its customs.
Ninjakart is a B2B produce supplier. They have a wide array of retailers and Kirana stores as customers across 7 cities [6].
The paperless Ninjacart supply chain creates a seamless link between its more than 44,000 farmer suppliers and its customer base of 60,000 Kirana stores and restaurants across seven cities.
Strategising
Shadowfax being used for delivery services from existing Ninjakart Kirana stores through Flipkart's Supermart service. A B2B startup ( Ninjakart) leveraging its business customers to power a B2C e-commerce (Flipkart) to sell directly to customers with delivery being fulfilled by a B2B logistics partner (Shadowfax). It is quintessentially a dream come true scenario. They missed one key aspect though, no one asked the kirana store owner.
I am certain Flipkart thought by promising more sales and pickups through kirana store, everyone will onboard. It makes logical sense, why wouldn't anyone onboard? Before they found out more, in quick succession Covid-19 struck and then Jio happened.
Execution: Improvised
This brings us to recent announcement post equity raising. Flipkart wholesale was launched, which is essentially the online version of Best Price. Best Price Stores were owned by Walmart India Private Limited. The launch also covered the transfer of ownership to Flipkart [7]. It is now solely responsible for the fate of Walmart in India.
Best Price has a network of 1.5 million members who belong to Kirana Stores, HoReCa, MSME and Processing industries. These customers are served by 28 stores across India.
The model of Best Price is similar to Metro where you are only able to buy if you are a member. With the launch of Flipkart wholesale, they want to turn the cash and carry retail model to an online store where the same (hopefully new) customers can buy from an assortment of fashion, electronics and grocery categories. The development is in line with e-commerce company turning into a full-fledged commerce company catering to multiple types of customers( business and consumer). This move is in line with changing times and competition. The need to start thinking synergies all across their product suite is paramount.
The reasoning and positioning of Flipkart Wholesale, Kirana stores are looking to get back on the feet due to pandemic disruptions. They form a large set of customers looking to leap to the future and are our ideal partners as we bring them on to digital platform.
Such a shift in focus is not being done for the first time. A number of analysts ascertain the boom of commerce in China to Alibaba's model post SARS-Covid in 2002. Flipkart looks to replicate this by leveraging its existing Best Price members into becoming its Hyperlocal partners.
Quick
Now, Flipkart is implementing all these synergies with a service called Quick, deliveries in less than 2 hours, tops. More details from the press release[8]:
Flipkart Quick will provide consumers with a handpicked assortment of more than 2,000 products in categories varying from Grocery, Fresh, Dairy, Meat, Mobiles, Electronics Accessories, Stationery Items and Home Accessories in the first phase. Consumers can choose to order in the next 90 minutes or book a 2-hour slot as per their convenience. Customers can place orders anytime of the day, and get their orders delivered between 6 am to midnight; starting with a minimum delivery fee Rs 29.
So like a good consumer that appreciates premium delivery service, I checked the Supermart offerings. There is only one seller that sells groceries on Supermart, SuperComNet. A little bit of digging and I found out its actual parent company has been a seller on Flipkart for the past 4 years. This was not hard to predict as onboarding Kirana Stores is not easy. Yet, Mr Sandeep Karwa who heads this initiative is optimistic:
In fact, Indian families are so comfortable with what we call the ‘hyperlocal context’, that there is a tendency to develop deep, familial ties with vendors, shopkeepers and service providers - now with the convenience of e-commerce. While we start with our dark store (no-walkin) model, wherein we enable sellers to store inventory close to the consumer; this model has the potential of encouraging local entrepreneurship and enabling new business strategies and partnerships.
In essence, there are no takers as of yet. So, Flipkart decided to bankroll it themselves and see if there is a traction with consumers. The only challenge is that the Hyperlocal segment they look to launch into is hotly contested. Mr Karwa addressed this with a dig at on-demand apps [9]:
“Dunzo and Swiggy have built an amazing logistics capability. But what we're providing is a complete end to end solution,” said Karwa. “It's about ensuring that the seller on our platform always has that inventory. It's not the guesswork that you place an order and then someone goes to the store to see if it is available,” he said.
The on-demand apps are in the fight for customer retention by serving customers needs. By taking on delivery of groceries and other products Flipkart is in direct contention with them. It begs to ask the question whether this move was a culmination of 6 months of strategy or was it just throwing a bone in the new commerce battle on Kirana Store front?
Time will tell whether their intent was to be an alternate or was it to become a serious contender. If the strategy is on course then we should see “Quick” quickly expanding on the back of Ninjkart's store network and Shadow fax's delivery tech to multiple locations.
Putting all eggs into one Brand
Walmart moving Best Price under Flipkart is analogous to moving Jet.com to Walmart online in USA at the beginning year. Simplifying the brand recall and pruning the leadership has reaped rewards against it competitor, Amazon. It is now entering into a similar competition in India, not with Amazon India but with Jio Mart. Unlike Flipkart’s complex structure, Jio on paper has a sister retail chain that has wider reach in terms of store network. Jio is already available in 200 cities.
It would be interesting to see the narrative wars that will ensue in the future where every e-commerce store, on-demand service and B2B commerce company will want to partner with Kirana stores.
There is no better time to be a Kirana store owner, you have everyone's attention. But, has anyone asked your intentions or answered what's in it for you properly? More on Kirana Stores in a subsequent Original Post.
Regards,
Vivek
References
A lot of these are written with the press releases from Flipkart which were difficult to use to cite. They have better website than their competition but Amazon has a better newsroom blog than Flipkart.
[2]: Press release on Flipkart Wholesale
[3]: Press Release on Shadowfax investment
[4]: Press Release on Ninjakart investment
[5]: Flipkart to Resume its Grocery service-Entrackr
[6]: Press Release on Ninjakart investment
[7]: Press release on Flipkart Wholesale
[8]: Press Release on “Flipkart Quick”
[9]: Flipkart Launches 90 Minute Hyperlocal Delivery
[*] : I am a founder of a small produce store that caters to businesses.
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