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Project Report on

MARKETING STRATEGIES OF FLIPKART

In partial fulfillment of requirement for the


Award of Degree of M.Com

Subject:
International Marketing

Submitted By:
Mr.VickySingh
Roll No. 121
M.Com. Part II, Semester - III

Under the Guidance of:


Prof. Prakash Mulchandani

SMT. CHANDIBAI HIMATHMAL MANSUKHANI COLLEGE


ULHASNAGAR 421003

UNIVERSITY OF MUMBAI
2015 2016

This is tocertify that, Mr. Vicky Singh of M.Com Part II, has successfully
completedtheprojectinInternationalMarketingtitledMarketingStrategiesof
Flipkart under my guidance for the academic year 201516. The information
submittedistrueandoriginalaspermyknowledge.

Mr.PrakashMulchandani
(InternalGuide)
Prof.GopiShamnani
(Coordinator,M.Com)

Dr.PadmaV.Deshmukh
(I/CPrincipal)

________________
ExternalExaminer
2

DECLARATION

I, Mr.VickySinghstudent of SMT. CHANDIBAI HIMATMAL MANSUKHANI


COLLEGE, ULHASNAGAR studying in M.Com Part II, Semester III, hereby
declare that I have completed this project on MarketingStrategiesOfFlipkart
for the subject International Marketing in the academic year 2015-16.The
information submitted is true and original to the best of my knowledge.

_______________
Mr.VickySingh

ACKNOWLEDGEMENT

The satisfaction, which accompanies the successful completion of the project, is incomplete
without the mention of a few names. We take this opportunity to acknowledge the efforts of the
many individuals who helped us make this project possible.
We would like to express our sincere gratitude to our Prof. PrakashMulchandani for giving
us an opportunity to work under her esteemed guidance which helped us to improve upon our
lacunae during the project research. We are very grateful to her for providing us with every
possible opportunity & freedom to learn and explore. We are deeply indebted to her for her
suggestions, constant inspiration and encouragement.

EXECUTIVE SUMMARY

The concept of e-commerce is downloading at a fairly rapid pace in the psyche of the Indian
consumer. In the metros, shortage of time is a big driver for online shopping. On the other hand,
accessibility to a variety of products makes audiences from smaller towns and cities opt for the
online route. Major retailers face challenges in stocking their stores adequately. Often, customers
are unable to purchase items of their choice, thus prompting them to resort to e-retailers.
Flipkart has accorded a lot of importance in trust building exercise that is why it has a strong
Customer Support Team which helps the customers with the website guidance and resolving
issues.
Flipkart uses its in-house logistics (FKL) as well as third party logistics (3PL) services as the
logistics is one of the most important for a success of any ecommerce venture. Along with the
logistics, reverse logistics of Flipkart is also well developed with a 30 day return policy and
flipkart bearing courier charges for returned products.
Flipkart when it started employed the consignment model of procurement as it was the most risk
free way to operate but then they changed to Inventory model to ensure superior delivery times.
But with foreign direct investment (FDI) favoring the marketplace model in April 2013, Flipkart
changed its business model to marketplace model.
WS Retail a pet project of Flipkart now handles the inventory and warehouse management.
Flipkart has continued to fare very well in terms of the delivery time because of their developed
supply chain management and dedicated customer support team to ensure customer delight. This
causes them to build a lot of slack into their existing systems causing higher costs at several
points in the supply chain. How they address this challenge is what will determine their future
success.

TABLE OF CONTENTS
1. Introduction
Overview- E commerce

08

Market Size and Players

09

History

14

Funding

15

Acquisition

18

2. Flipkart

3. Marketing Strategies
Market Overview

25

Major Competitors

26

Market Segmentation

32

Market Positioning

01

Strategies

01

Cyber Security Challenges

31

Taxation Challenges

36

4. Challenges

5. SWOT Analysis

38

Conclusion

44

The Way Ahead

40

Bibliography

43

INTRODUCTION
Over the last decade, the Internet has changed the way people buy and sell goods and services.
Online retail or e-commerce is transforming the shopping experience of customers. The sector
has seen unprecedented growth especially in the last two years. The adoption of technology is
enabling the e-commerce sector to be more reachable and efficient. Devices like smartphones,
tablets and technologies like 3G, 4G, Wi-Fi and high speed broadband is helping to increase the
number of online customers. Banks and other players in e-commerce ecosystem are providing a
secured online platform to pay effortlessly via payments gateways.
The homegrown players have shown tremendous growth and attracted some big investors. The
entry of global biggies like Amazon and Alibaba has taken the competition to a new level. Etailers are differentiating themselves by providing innovative service offerings like one-day
delivery, 30-day replacement warranty, cash on delivery (CoD), cashback offers, mobile wallets,
etc. The supply chain has improved significantly and e-tailers are even leveraging on the services
of Indian Post for greater reach across the country. In 2014, Indian Post collected 2.8 billion
through CoD option of payment.
India slipped from 14th to 20th rank among the top 30 developing countries in 2014 Global
Retail Development Index (GRDI) that looks at measures for retail investments worldwide. Chile
and China are leading in the GRDI rankings. The sector is still in its growth stage in India and
has enormous potential to offer in the coming years. The governments most prestigious Digital
India project could take the sector to new heights.

MARKET SIZE
The digital commerce market in India has grown steadily from $4.4 billion in 2010 to $13.6
billion in 2014. As per industry estimates, the digital commerce market in India is expected to
reach $16 billion by the end of 2015 on the back of growing Internet population and increased
online shoppers. Online travel accounts for nearly 61% of e-commerce business while e-tailing
contributes about 29%. Visa India spend data showed 53% growth in the number of e-commerce
transactions in 2014.

Similarly, there is an almost similar growth trend of e-commerce in the global market. The
eMarketer report had predicted that the business-to-consumer (B2C) e-commerce sales
worldwide will reach $1.5 trillion in 2014, increasing nearly 20% over 2013. As the e-Commerce
players from the US, Europe and Japan are seeing slower growth in home markets; they are
increasingly looking to enter developing economies of India, Brazil and China which have
forecasted growth rates of more than 20% over coming years. Most popular e-commerce
categories are non-consumable durables and entertainment related products.

PLAYERS
Several players have established their place in e-commerce market just in few years. With the
rising demand of digital commerce, innovative startups are emerging in all segments. Home
grown players are trying to compete head-on with global players who have the advantage of
scale, technology and deep pockets. According to Deloittes study Global Powers of Retailing
2015, Amazon continues to dominate the world of e-Commerce with net product sales of $61
billion in 2013. Flipkart is the largest e-tailer in India with a valuation of about $11 billion and
trying to raise funds to compete with global biggies like Amazon and Alibaba. Snapdeal is
another homegrown player with a valuation of $5 billion. In October, Snapdeal raised $627
million from the Japanese telecom and media group Softbank, who also has a 37% stake in
China's e-commerce leader Alibaba. Other emerging players are BookMyShow with almost
90% of the online entertainment ticketing market; Paytm with almost 20 million users is leading
provider of virtual wallet.
The global e-commerce market is more advanced in terms of technology, awareness, and
payment systems. Amazon and Alibaba are two big players when it comes to global e-commerce
market. Alibaba accounts for more than 80% of all online purchases in China and has a global
presence. It manages the marketplace and has commission based business model with no
products of its own. Amazon, on the other hand, started as online book store and expanded the
business as marketplace and also sells its own consumer electronics such as Kindle eBook
readers, Fire Tablets, and Fire TV. Only two pure play web-only e-tailers (Amazon and JD) of
the top 50 e-tailers were large enough to rank among top 250 retailers.

FLIPKART

Things are easier said than done! To realize our dreams


and that also in such a grand manner is really a tough task.
The founders of Flipkart have probably conquered their
dreams with the amazing success of Flipkart. Flipkart is
something which has really opened up the Indian ecommerce market and that also in a big way.
Flipkart was co-founded by Sachin Bansal and Binny
Bansal in Oct 2007. Both are graduates from IIT-Delhi
and have prior work experience in Amazon.com They
both were solid coders and wanted to open a portal that compared different e-commerce
websites, but there were hardly any such sites in India and they decided to give birth to their own
e-commerce venture - Flipkart.com
Thus was born Flipkart in Oct 2007 with an initial investment of 4 lac (co-founders savings). It
was never going to be easy since India has bad past experiences with e-commerce trading. It was
not an easy segment to break into, people were very particular in paying money for something
which they had not seen and received. The trust was missing in the Indian customers. So what
Flipkart had to do was to instill trust and faith in their customers. And they did exactly the same,
will discuss more on how they did so later in the post.
Flipkart began with selling books, since books are easy to procure, target market which reads
books is in abundance, books provide more margin, are easy to pack and deliver, do not get
damaged in transit and most importantly books are not very expensive, so the amount of money a
customer has to spend to try out one's service for one time is very minimal. Flipkart sold only
books for the first two years.
Flipkart started with the consignment model (procurement based on demand) i.e. they had ties
with 2 distributors in Bangalore, whenever a customer ordered a book, they used to personally
procure the book from the dealer, pack the book in their office and then courier the same. In the
10

initial months the founder's personal cell numbers used to be the customer support numbers. So,
in the start they tried their best to provide good service, focus on the website - easy to browse
and order and hassle-free, and strove hard to resolve any customer issues. Since there were not
any established players in the market, this allowed them a lot of space to grow, and they did in
fact grew very rapidly.
The company started from 2 employees and now has around 4500 employees.
Flipkart started with consignment model as discussed above, since most of the customer issues
like delivery delays etc. result from procurement model, the company started opening its own
warehouses as it started getting more investments. The company opened its first warehouse in
Bangalore and later on opened warehouses in Delhi, Kolkata and Mumbai. Today the company
works with more than 500 suppliers. As on date more than 80% orders of Flipkart are handled
via warehouses which help in quick and efficient service.
A humble beginning from books, Flipkart now has a gamut of products ranging from: Cell
phones, laptops, computers, cameras, games, music, audio players, TV's, healthcare products,
washing machines etc. etc. Still, Flipkart derives around 50% of its revenue from selling books
online. Flipkart is the Indian market leader in selling books both offline and online, it enjoys an
online share of around 80%. The electronic items have a large number of players like Naaptol,
Letsbuy, Indiaplaza, Tradus, Infibeam, Yebhi etc. The electronic market share is distributed
among them in different unknown proportions.
India has around 13.5 crore internet users today where as the number of homes with Cable and
Satellite (C&S) television is 10.5 crore. The expected internet users will reach a figure of 30
crore by 2014 and C&S homes are expected to be 14 crore by 2014. Thus India has a tremendous
internet growth and with the customers getting accustomed to e-commerce, the future of ecommerce sector is definitely rosy. An approximated 25 lac people have transacted online this
year, the number is all set to increase with time.

11

Also to mention most of the Flipkart customers use internet from PC's/Laptops to order goods.
The use of mobile internet is very less at the moment, but with the advent of smart phones the
use of mobile internet for e-commerce transactions will soar with time. India has 8 crore mobile
net users at the moment, the number is expected to swell to 22.5 crore by 2014.

Interesting Statistics about the company


As of today, Flipkart employs over 4500 people.
It experiences 2 million unit sales and 4 million unique visitors per month with sales
growing at 25% per month, eyeing a $50 million run rate.
With close to 11.5 million titles, Flipkart is the largest online book retailer in India with
80 per cent market share.
It has a registered user base of two million customers and ships out as many as 30,000
items a day, clocking daily sales of Rs 2.5 crore.
Flipkart is rapidly expanding its network of warehouses, distribution centers,
procurement operations and 24/7 customer support teams. The company even has its
own delivery network in 27 cities and is set to expand this even further by next year.

FUNDINGS

12

Initially funded by the Bansals themselves with 4 Lakhs(INR).

Flipkart has since then raised two rounds of funding from venture capital funds Accel
India (in 2009) and Tiger Global Management (up to the tune of US$10 million) (in
2010).

Private equity firms Carlyle and General Atlantic are in talks to jointly invest about $150
million to $200 million in Flipkart, according to sources.

In July 2013, Flipkart raised USD 160 million from private equity investors.

In October 2013, it was reported that Flipkart had raised an additional $160 million from
new

investors

Dragoneer

Investment

Group, Morgan

Stanley

Wealth

Management, Sofina SA and Vulcan Inc. with participation from existing investor Tiger
Global.

On 26 May 2014, Flipkart announced that it has raised $210 million from Yuri Milners
DST Global and its existing investors Tiger Global, Naspers and Iconiq Capital.

In early July 2014, it was also highly speculated that Flipkart was in negotiations to raise
at least $500 million, for a likely listing in the US for 2016.

On 29 July 2014, Flipkart announced that it raised $1 billion from Tiger Global
Management LLC, Accel Partners, and Morgan Stanley Investment Management and a
new investor Singapore sovereign-wealth fund GIC.
13

ACQUISITIONS

2010:
WeRead, a social book discovery tool. The stated goal was to give Flipkart a social
recommendation platform for buyers to make informed decisions based on recommendations
from people within their social network.
2011:
Mime360, a digital content platform company.
2011:
Chakpak.com is a Bollywood news site that offers updates, news,
photos and videos. Flipkart acquired the rights to Chakpaks
digital catalogue which includes 40,000 filmographies, 10,000 movies and close to 50,000
ratings. Flipkart has categorically said that it will not be involved with the original site and will
not use the brand name.
2012:
Letbuy.com is Indias second largest E-retailer in electronics. Flipkart
bought the company for an estimated US$ 25 million.

2014:
Acquired Myntra.com in an estimated INR 2,000 crore deal.

14

MARKET OVERVIEW
India has an internet user base of about
250.2 million as of June 2014. The
penetration of e-commerce is low
compared to markets like the United
States and the United Kingdom but is
growing at a much faster rate with a
large number of new entrants. The
industry consensus is that growth is at
an inflection point.
Unique to India (and potentially to other developing countries), cash on delivery is a preferred
payment method. India has a vibrant cash economy as a result of which 80% of Indian ecommerce tends to be Cash on Delivery. However, COD may harm e-commerce business in
India in the long run and there is a need to make a shift towards online payment mechanisms.
Similarly, direct imports constitute a large component of online sales. Demand for international
consumer products (including long-tail items) is growing much faster than in-country supply
from authorized distributors and e-commerce offerings.
India's e-commerce market was worth about $2.5 billion in 2009, it went up to $6.3 billion in
2011 and to $14 billion in 2012. About 75% of this is travel related (airline tickets, railway
tickets, hotel bookings, online mobile recharge etc.). Online Retailing comprises about 12.5%
($300 Million as of 2009) India has close to 10 million online shoppers and is growing at an
estimated 30% CAGR vis--vis a global growth rate of 810%. Electronics and Apparel are the
biggest categories in terms of sales.

15

Key drivers in Indian e-commerce are:

Increasing broadband Internet (growing at 20% MoM) and 3G penetration.

Rising standards of living and a burgeoning, upwardly mobile middle class with high
disposable incomes

Availability of much wider product range (including long tail and Direct Imports)
compared to what is available at brick and mortar retailers

Busy lifestyles, urban traffic congestion and lack of time for offline shopping

Lower prices compared to brick and mortar retail driven by disintermediation and
reduced inventory and real estate costs

Increased usage of online classified sites, with more consumer buying and selling secondhand goods

India's retail market is estimated at $470 billion in 2011 and is expected to grow to $675 billion
by 2016 and $850 billion by 2020, estimated CAGR of 7%. According to Forrester, the ecommerce market in India is set to grow the fastest within the Asia-Pacific Region at a CAGR of
over 57% between 201216.
As per "India Goes Digital", a report by Avendus Capital, a leading Indian Investment Bank
specializing in digital media and technology sector, the Indian e-commerce market is estimated at
Rs 28,500 Crore ($6.3 billion) for the year 2011. Online travel constitutes a sizable portion
(87%) of this market today. Online travel market in India is expected to grow at a rate of 22%
over the next 4 years and reach Rs 54,800 Crore ($12.2 billion) in size by 2015. Indian e-tailing
industry is estimated at Rs 3,600 crore (US$800 mn) in 2011 and estimated to grow to Rs 53,000
Crore ($11.8 billion) in 2015.

16

Overall e-commerce market is expected to reach Rs 1, 07,800 crores (US$24 billion) by the year
2015 with both online travel and e-tailing contributing equally. Another big segment in ecommerce is mobile/DTH recharge with nearly 1 million transactions daily by operator websites.

MAJOR COMPETITIORS

Amazon.com is an American international electronic commerce company with headquarters in


Seattle, Washington, United States. It is the world's largest internet company, based on revenue
and number of employees.

Snapdeal.com is an online marketplace, headquartered in New Delhi, India. The company was
started by Kunal Bahl and Rohit Bansal, in February 2010.

eBay Inc., is an American multinational corporation and e-commerce company, providing


consumer-to-consumer sales services via Internet. It is headquartered in San Jose, California,
United States.

HomeShop18 is an online and on-air retail and distribution venture of Network 18 Group, India.
HomeShop18 was launched on 9 April 2008 as India's first 24-hour Home Shopping TV channel.

17

Yebhi.com is an Indian Online shopping E-commerce portal for Home, Lifestyle & Fashion eretailer, launched in the year 2009.

MARKET SEGMENTATION
The process of defining and subdividing a large homogenous market into clearly identifiable
segments having similar needs, wants, or demand characteristics. Its objective is to design a
marketing mix that precisely matches the expectations of customers in the targeted segment.
Few companies are big enough to supply the needs of an entire market; most must breakdown
the total demand into segments and choose those that the company is best equipped to handle.
The four basic market segmentation-strategies are based on

GEOGRAPHIC SEGMENTATION

CATERS TO TIER 1, TIER 2 AND TIER 3 CITIES

DEMOGRAPHIC SEGMENTATION

75% of online users between the age group of 15-34 years.


Flipkart targets mainly the youth of the country,

BEHAVIOURAL SEGMENTATION

Web friendly people.

PSYCHOGRAPHIC SEGMENTATION

Flipkart concentrates on more Psychographic, which helps in deciding where to display


ads online
18

They target online shoppers and people who dont online shop (thus TVC to encourage
them)

MARKET POSITIONING

An effort to influence consumer perception of a brand or product relative to the perception of


competing brands or products. Its objective is to occupy a clear, unique, and advantageous
position in the consumer's mind.

Points of parity:

Easy locating of products

Competitive prices.

No hassles of going to shops personally and shop for products

Availability of various products on one platform

Discount on purchases.

Home delivery

Gifting services

Cash on delivery

Availability of liquor

Flipifts

Academic related books

Points of Difference:

Flipkart membership cards for premium customers


19

Vernacular language

Better user interface-one drag approach


MARKETING STRATEGIES

Word of mouth (initial marketing even now they want to satisfy customer so they come
back for more)
Good use of SEO
We DONOT sell old books or used books. All the books listed at Flipkart.com are new
books. The books listed at Flipkart.com are NOT available for free download in ebook or
PDF format
Thus when you search free ebooks or pdf books old or used books flipkart will be

displayed.
Good use of SEM
Ads at proper places and use pay per click to pay for ads
Very easy web interface
Payment convenience
Cash/card on delivery there by encouraging students and people with no credit/debit
card to purchase in flipkart, with mobile internet penetration there is chances of capturing

rural market (60% revenue by COD)


EMI by targeting price sensitive customers
Wallet customer can recharge money online and purchase then and when needed those
entering details always is rectified, target heavy purchase and luxury customer
Customer conversion rate is so high more than 70%
Personalization of the user page
Product recommendation with your previous purchases
20

Product:
Aims most segments except automobiles and groceries.

Website is great, easy to use, easy to browse through theproducts, add products to wishlist
or

to

cart,

get

productreviews

and

opinions,

pre-order

products,

make

convenientpayments using different methods and better Search EngineOptimization.

Quality level of the products is absolutely fine E.g., If we take thequality of books
available in Crossword and Landmark is sameas the quality of books ordered by
Flipkart.com.

Products are packed in such a way that they are Tamper proof,weather proof and
breakage proof.

Product line on Flipkart.com have warranties as promised by thebrand of the product if


applicable. E.g., Bajaj MX 2 1200 WattsIron with 2 Years Bajaj India Warranty and extra
paid warranty forthe particular brand is available if applicable.

21

30-day replacement guarantee for faulty products. (Video for the same).
Product line is extensive one as discussed earlier. Derives around 50% of its revenue

from selling books online.


Flipkart as a brand has already differentiated itself as a pioneer in book retailer,
trustworthy in terms of swift services and secure payments, quality-oriented products
with lower price offerings than retail market), innovative product line, customer
delightful service which has helped them to form its own distinctive image better than
few unheard competitors such as Tradus.in and Indiaplaza.com.

Some unique product features of Flipkart.com such as


Wishlist

E-gift voucher

Flipkart launched a

new Electronic Wallet feature that allows shoppers to purchase credit to their Flipkart
account using creditor debit cards, and can subsequently be utilized to make purchases on
the site, as and when required.

22

Affiliate

Price

23

Price of the product taking account of various expenses such as Supplier expenses,
Transportation expenses, Packaging expenses, Shipping expenses, Courier expenses,
inventory maintenance expense, office and stationery expenses, sales and advertisement
expenses, taxes, depreciation, discount allowances and many more expenses.

Roughly about 5-7% profit per book orders which indicates that generation of revenue is
on volume basis.

Differentiated themselves by giving best selections, best services at lowest best possible
prices. (Video for the same)

Discounts up to 35% across all categories.

Upper edge in competitive pricing.

Place

24

Channel type: Words of mouth (if we can say that) which has been key driver for their
growth.

When an order is placed they either serve the order from their inventory or procure the
book on demand from various suppliers and then deliver the customer.

As on date more than 80% orders of Flipkart are handled via warehouses which help in
quick and efficient service.

We deliver orders in 1 day in Tier-I cities and 2-3 days in Tier II cities and 3-5 days Tier
III cities

Shipping and Courier would act as intermediaries in this process.

Delivery services through e-kart and postal services

Tie ups with local vendors and courier firms (thereby avoiding octroi charges)

Company owned warehouse in major cities near airport

Trying to achieve minimum returns

If the courier cant delivery to the location the product is shipped through government
post

Warehouses are located in the following cities, often near airports

Bangalore
Chennai
Delhi
Hyderabad
Mumbai
Noida
Pune
25

Kolkata

Promotions -

Employees of divisions like Website, Business Planning and Analytics,


ERP, Business Development, Product Managementand Marketing,

26

Supply-Chain

Management

and CustomerSupport

are

generating

revenue for it.

Selection Criteria at Flipkart:-While years of experience arealways


beneficial for a candidate, Flipkart's focus is to hire thosewho are able
to consistently raise the bar and introduce a varietyof innovation to
move this organization forward. As Flipkart grows, we feel it is
absolutely necessary that our employees arealso able to grow
professionally with the organization.

Adequate Training as per their roles and responsibilities is given to


them accordingly and incentives.

Telephone Sales force is only 2% of the total employees focusing to


reduce the unsold/goods not much in demand.

Majority of Flipkart are employed in Customer support division.


It is the only customer support division in India having 24x7customer
support functioning for issues such as regarding choice of the product
to purchase, shipping, courier, how to order on website, mode of
payment, gift voucher, order status &cancellation and returns.

Having even tie up with Skype for the same on the website for user
delight.

Unique tool of Sales Promotion is Affiliate on their website.

Publicity is by words of mouth publicity generating trust and


accountability to users.

As

internet/web

strategy

used

Google

Ad-words,

blogs,

social

networking sites such as


twitter, facebook, used Google ad-words, e-mail campaigns.
27

Advertising focused on first Words of mouth from 2007-10 as the


advertisement cost was not affordable

Focused on Print and TVC from 2011 onwards.

Launched their first campaign in tvc on 05/05/2011 with the concept of


Granny, Mouse, Magic Presenting the Concept of Getting Books
Delivered at Doorsteps at just one click of The Mouse through a FairyTale.

Launched their second campaign No kidding. No worries that we are


serious about our promises we make and experience shopping safely,
delightfully and with ease.

Packaging:

Different packaging for different product to ensure safe delivery

Flipkart the name goes with the online cart

Design and packaging is common so customers can relate it to the company

Positioning:

Customers feel Flipkart is cheap, on time delivery, replacement; the online myth is
gradually eradicated

Competitors see Flipkart as the market leader, with the acquisition of letsbuy.com

General public want to try it once for its creative TVC is making people curious to
experience flipkart.

28

People:

Service people, Sales Clerks, Delivery drivers, Managers, Complaints department,


Accounting, Warranty people, Technical people, all work for the customer ease, customer
satisfaction and customer delight.

CHALLENGES

Though the e-commerce sector is growing exponentially in India, it faces several challenges like
customer mindset, high cash on delivery (CoD) based orders, reachability, poor courier services
and other policy-related issues.
High competition: There are several players doing the same business in almost the same way.
With intense competition the profitability is decreasing due to aggressive pricing strategies,
heavy discounts and offers, free delivery, high commissions to affiliates and vendors during sale
period to name a few. Online retailers lost around 10 billion because of heavy discounts to attract
customers. Poor logistic & supply chains: E-commerce companies live on the reach and the
ability to stock more items than physical stores as these are their biggest differentiators. With this
benefit also comes the challenge of robust supply chains and logistics networks, which are not
comparable and developed to global standards in India. The courier companies do not have
nationwide delivery networks and also do not have the skills of handling commercial value
29

goods. They also do not have the skills for handling CoD, recheck return parcels, and other
complexities related to digital sale. This is forcing several e-tailers to establish their own delivery
network across the country and might have to engage with multiple shipping methods using
FedEx or DHL for the last mile delivery.
Payments: E-commerce companies have to offer a wide variety of payment options including
CoD, credit and debit card, internet banking, among others. 60-70% of the payments are made
using the CoD option in India as customers fear to share information online and do not trust the
website for secure payments. Moreover, the return percentage of orders in CoD is much higher
compared to online payments. To counter these fears, e-tailers have started to provide facility of
paying with Card on Delivery. For example, Amazons delivery person brings point-of-sale
device to accept payment at customer premise.

CYBER SECURITY CHALLENGES

The rapid evolution of online and mobile channels has carved out new markets and brought huge
opportunities for emergent and established organisations alike. However, unfortunately the past
decade has also witnessed significant disruption to ecommerce payment processes and systems.
The interconnected, anonymous and instantaneous nature of these channels has inevitably led to
the development of malicious threats targeting ecommerce and retail services firms, their people
and their customers.
These e-crime and digital fraud threats continue to evolve rapidly, with attackers utilizing
increasingly sophisticated techniques to target vulnerabilities in people, processes and
technologies. The e-crime threats, if successfully realised, can undermine essential digital
services, cause significant damage to brand reputations, and result in considerable financial and
operational pain for organisations and their customers.

30

Worldwide, regulators are also turning their attention to these threats, with enhanced scrutiny of
organisational resilience and the introduction of stringent compliance requirements. The
challenge that ecommerce services firms are facing is to deliver richer, integrated services,
through multiple remote and digital channels, under significant cost restraint, and in the face of
sophisticated e-crime threats. Recent cyber-attacks highlight the urgency for retail organizations
to contend with ever increasing risks to customer protection, continuity, fiduciary responsibility,
and operations.
In order to achieve the security objectives, it is necessary to recognise that the security of the
services and the protection of the customers data are essential. To this end, and specifically to
support the current security equation, it is necessary to have an enterprise wide target customer
security model. This should be designed to deliver enhancements to both customer-facing and
back office security capabilities, and in particular to improve existing security defences for
remote online, telephone and mobile banking channels.

EVOLVING DEGREE OF THREATS

The threat landscape is ever evolving and increasingly challenging. Customer data with retailers
and e-commerce firms has been increasing at a rapid pace. As per the incremental service
provisioning in e-commerce, more data will be generated in the next two years than was
generated ever before. Access to all this data has made the retail industry one of the primary
targets for cyber-attacks. Some of the key threats todays organizations are vulnerable to include:

User account takeover via robotic attacks, password guessing, HTML injection and Manin the-Middle or Man-in-the-Browser. Account peeking is a very common behavior by
fraudsters as it allows them to validate the login credentials, identify higher value
accounts and understand the controls which must be defeated to complete future
unauthorized transactions.
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Business Logic Abuse or the use of portals functionality for malicious or exploitative
purposes (e.g., abuse of loyalty point programs or shopping cart functionality, fraudulent
account set up, Scripted attacks to find valid coupon codes.). Impact of such abuse may
include effect on the genuine customer due to unauthorized use of coupon offers, overall
decrease in revenue due to offer abuse, incremental portal overhead due to scripted

attacks and site scraping by resellers or coupon aggregator sites.


Distributed-Denial-of-Service or DDOS attack on the application layer where a deluge of
page requests coordinated by a bad actor overwhelms the server and brings the site down.

Site or Architecture Probing to gather as much information about site structure and

security vulnerabilities as possible to prepare for an attack on that site.


Site & Inventory Scraping or data theft perpetrated by copying large amounts of data
from a website, typically via automated scripts.

As these threats evolve, it is clear that traditional techniques wont be able to prevent all threats.
Additional layered security and specialized visibility into these attacks is needed.

ISSUES
Cyber Security issues lead to brand degradation and change in consumer behavior. Attacks are
exploiting weaknesses in traditional controls, some very destructive. Traditional controls around
Point of Sale and other IT systems are necessary but not adequate greater emphasis must be
placed on preventative controls, rapid detection, and rapid response. Retail innovations that drive
growth (e.g. Digital, Omni-channel retailing, social etc.) also create cyber risk. Cyber risk
management strategy must be a component of business strategy, and cant simply be delegated to
IT.
1. Lack of appropriate control and transparency add to cyber security risk Despite growing
frequency and sophistication of cyber-attacks on the ecommerce industry, payment settlement
agreements between credit card networks, the banks and the merchants have remained a closely
guarded secret. Neither the government nor any database shares the list of defaulters with the
public. Banks and credit card companies determine fault on a case-by-case basis through private
contracts with individual merchants. Fines and the reasons for them remain sealed. Due to the
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lack of transparency, the majority of customers is not aware of any cyber security breaches and
remains vulnerable to cyber attackers.
2. E-commerce firms and retailers face heat to increase efforts to ensure greater cyber security. In
the wake of recent data-security breaches at large retail corporations, retailers have been pushed
to spend more to ensure tighter customer data security. While the traditional retailers have been
investing millions of dollars to compete with online retailers the cyber-security threats have
multiplied their operational expenditures.
3. Third-party cyber risk As firms look to exploit the competitive edge they gain from the data
they capture about their customers, they are increasingly leveraging the expertise of third parties
such as analytics specialists and social marketers. Couple this with increasingly lengthy and
complex supply chains, retail organizations are increasingly becoming enmeshed in very
complex, interconnected value chains where sensitive data is shared and dependencies are
introduced between business critical systems. Firms are rapidly waking up to the realization that
they often have very little visibility in these areas, and that they do not have a good
understanding of where their customers data is travelling, and what their risks are. We should
focus on to map these interconnections, develop robust risk management frameworks, and
provide firms with assurance that they have understood and actively managed the risk of each
partner relationship.
4. Inadequate joint efforts by banks and retailers to counter cyber security threats While
collaborated efforts are expected to ensure tighter cyber-security, banks and retailers differ in
terms of responsibility sharing. Banks want retailers to bear more of the costs of replacing cards
after breaches occur whereas retailers say banks have been slow to adopt new, more secure debit
card technology.

RECOMMENDATIONS
The rapid pace at which technology is changing has provided large opportunities for
organizations to develop new business models, services, and products. While the digital
revolution has transformed the way we do business, it has also created complex and sophisticated
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security issues. Assets and Information that were once protected within the organization are now
accessible online; customer channels are vulnerable to disruption; criminals have new
opportunities for theft and fraud. With organizations growing organically and inorganically,
complexity of managing businesses & security operations are also becoming complex.
So what is needed to address these targeted attacks? How can you gain visibility into these
attacks and how can you stop them from causing further damage?
Organizations today thus face a continuously evolving threat landscape where the speed and
intensity of attack is incrementing and response time is subsiding. As a result, organizations need
to have rapid detection and response capabilities that allow for the synthesis of external and
internal threat intelligence in a timely manner. This situational awareness is a required
component of an organizations overall security posture and critical to maintaining the
confidentiality, integrity, and availability of its information assets. Some of the key
recommendations for an organization to step towards an effective security equation include:

Set risk appetite and drive focus on what matters. Establish purpose and direction.
Clearly articulate your cyber risk appetite and strategy. Support it by requisite action

through funding and resourcing.


Define the right balance between threat-centric vs. compliance-centric programs. Fully

integrate cyber risk management into IT disciplines.


Break down silos. Cyber risk is an enterprise-level issue. Lack of information-sharing is a

top inhibitor for effective risk management.


Be creative about cyber risk awareness. Your weakest link is the human factor. There is
not enough talent to do everything in-house, so take a strategic approach to sourcing

decisions.
Incentivize openness and collaboration. Build strong relationships with partners, law

enforcement, regulators, and vendors.


Prepare for cyber-attacks by conducting war games, penetration tests, and exercising the

cyber incident response plans.


Have a threat intelligence mechanism in place Focus on restructuring the diverse
unstructured security data and information gathered from all the security entities and
devices (recent and past events) to consolidate intelligent feeds, advice or a product,

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which could be used to make informed decisions in order to mitigate dynamic threats as
pet the environment.

TAXATION CHALLENGES

E-commerce is the new normal with goods and services having moved from a physical
platform to a digital one i.e. goods and services being transacted online or being themselves
digital. The current tax laws could pose significant challenges in e-commerce, especially
international transactions, and this calls for a new tax system which specifically recognizes and
deals with e-commerce.
The Indian Revenue, having been aware of the unique challenges posed by e-commerce,
constituted a High Powered Committee (HPC) on Electronic Commerce and Taxation 39 in
2001 to examine the then current as well as proposed tax treatment of e-commerce. More
recently, in 2013, OECD and the G20 countries adopted a 15-point action plan to address Base
Erosion and Profit Shifting (BEPS) strategies adopted by companies to minimise their tax cost
through artificial structures; Action 1 of BEPS deals specifically with tax challenges in ecommerce.
Unique tax challenges presently posed by e-commerce
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Generally, income of a company is taxed in the country of incorporation. However, a company


with global operations is also taxed in countries in which it carries on business (source country)
in case a physical presence i.e. a permanent establishment (PE) is created in that country.
Profits attributable to the business activities carried out by the PE in such source country may be
taxed. The physical presence could be in the form of a place at the disposal of the company or
presence of employee / dependent agent. The inherent nature of e-commerce permits companies
to do away with the need to have a physical presence to carry out business operations in a source
country and this gives rise to tax challenges for the source country.
For instance, a challenge arises when a company carries out its business through websites, for
example, providing services online, sale of music, etc. As per the Organization for Economic
Cooperation and Developments (OECD) 2014 commentary on its model tax treaty, 40 merely
having a website does not lead to a PE; the website must be hosted on the companys server in
the source country to create a PE. The servers of e-commerce companies may be located outside
the source country, which may lead to the source country being unable to tax the income in the
absence of a PE.

This challenge has also been recognized by the HPC in its report.
One of the most challenging supply types identified by OECD is growth of cross-border digital
supplies to end customers, where it is difficult for countries to tax supplies made by nonresidents. The option for addressing the challenge includes requiring vendors to register and
account for taxes in the country of importation. The non-resident suppliers of B2C supplies can
register and account for taxes in the customer jurisdiction as implemented by the European
Union in 2015.
Another unique challenge arises in case of e-tailers. While maintaining facilities in a source
country and making deliveries therefrom may not create a PE under the existing OECD model
tax treaty, the same may lead to non-taxation in an e-commerce scenario, where maintaining a
warehouse in the market country is a critical activity for an e-tailer which conducts all other
activities through automated processes. Also, the e-commerce scenario makes it easier to
fragment critical functions of a business and locate the same in different countries owing to
increased communication. For example, the intellectual property rights may be situated in a low36

tax country and profits in source countries could be reduced due to royalty payments for such
rights. Such practices may result in avoidance of PE or low attribution of profits to the PE from a
transfer pricing perspective.
The retailers would pay appropriate taxes in B2B or B2C online sale transactions. Where the
online portal provides platform for C2C transaction, who has the onus to discharge tax? Already,
some States are treating e-tailers as agents of the sellers and therefore directing them to obtain
VAT registration and discharge taxes on behalf of the sellers. When the goods are shipped by the
retailer and delivered by the e-tailers, there arises a challenge when the destination State
demands VAT treating such sale as a local sale in their State.
Aggregators were under the scanner of service tax authorities for rendering cab hiring services to
customers. The Union budget 2015-16 has brought in clarity on this aspect. Aggregator or any of
his representative office located in India is being made liable to Service Tax if the service is
provided using the brand name of the aggregator in any manner.

SWOT ANALYSIS OF FLIPKART

Strength:

Top Indian ecommerce portal


Diversified into electronic goods
Two VC investment to build its own delivery system thereby reduce delivery time
Cash on delivery which is making 60% of its income

Weakness:
Coordination with suppliers and courier was tough

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Price biasing to maintain the margins ( e.g. Low price for the best seller book and more
price for the least wanted)
24/7 customer care, thus even mid night is to delivered within 24 hours
Opportunities:
Already working towards customer delight will obtain customer loyalty gradually
Supplier database interface with flipkart website for JIT procurement
Mobile internet usage is increasing there by chances of increase in sales through mobile
shopping.
Threats:
Small players and emerging competitor
Major players like Amazon
In capabilities to manage certain costs like delivery cost, bank charges

CONCLUSION

A credible rival can do wonders to an enterprise and Flipkart is no different. The entry of
Amazon in India has enabled Flipkart develop a lot of in-house innovation and organically
developed best-practices - that have now become the industry standard.
Flipkart began operations on the consignment model; goods were procured from suppliers on
demand, based on the orders received through the website. Later, the books-to-electronics e-shop
adopted the warehouse model. The company had its own warehouses, and maintained its own
inventory. However in July 2013, Flipkart launched its model of marketplace just one month
after Amazon launched its marketplace in India.
It introduced payments brand PayZippy for online merchants and customers seeking fast, hasslefree and safe payment options. Some 70 per cent of its shipments are done by its own logistics
company and about half of deliveries are on a cash-on-delivery basis.
Flipkart has recently introduced the next day guarantee delivery service and shopping from its
own mobile application. Given the critical mass of transactions Flipkart controls - about 100,000
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a day - the company is betting that it has the volumes to lay the foundation of what will be a
profitable business.
Last but not the least; Flipkart has very clearly prioritized customer delight as its chief avenue for
customer acquisition and retention. This causes them to build a lot of slack into their existing
systems causing higher costs at several points in the supply chain. How they address this
challenge is what will determine their future success.

THE WAY AHEAD

The digital disruptions are very much visible in the retail industry where online businesses are
embracing technology and innovating at a pace not seen in the past and the offline retailers are
finding it difficult to compete with this change. With the increasing competition in the ecommerce market, players who are able to adapt and innovate in the face of these changes will
be in better position for success.
Although there are several trends that are shaping the market today, some of the key trends that
the companies in digital commerce should focus on in the future are discussed below:

EXPERIENCE MATTERS
Customer is king for the brick-and-mortar stores and the digital age e-retailers. Shopping online
is getting easier and the customer expectations are changing quickly. The e-tailers need to
differentiate themselves to not only attract customers but also to build trust and loyalty. The big

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retailers provide product replacement warranty, after sales service, free delivery, etc., which have
become norms in an online business.
Customer still wants consistent and seamless experience across all touch points: online, in-store,
website, mobile app, social media, customer service, or delivery man. They expect to order, pick
up, receive, ship, return from anywhere, anytime and from any device. The e-tailers need to
analyze the lifecycle of the customer relationship and enhance the offerings at each stage. Hence,
e-tailers need to improve upon the customer experience metrics for attracting and retaining
customers to maximize their lifetime value. The website and mobile application of the e-tailer are
the frontend for a customer where customers can find product information and decide to make
purchase decision. The metrics for analysis could be search optimization, personalization
options, user-friendliness, access to information and content appeal. To cater to these
expectations, e-tailers will need to modify their internal operations, assemble right tools and
infrastructure, and collaborate with third-party vendors and all other players in the e-commerce
value chain.
Leading telecom operators are working with mobile app vendors to improve the overall network
performance on smartphones which would help better customer experience in terms of network
speed, performance of mobile app, battery life of smartphone. 41 All these parameters, although
not fully in control of the e-tailer, influence the purchasing experience for customer.

MOBILE FIRST
There are about 930 million wireless subscribers in India. The wireless teledensity in urban areas
is in excess of 140 while there is still huge potential in rural areas with teledensity of 44. A
significantly large percentage of this subscriber base in India will be using mobile devices to
access internet, estimated at 235 million users as of September 2014 and growing rapidly. This
rapid spread of mobile internet, especially of smart phones could unlock a significant market
beyond the Tier 1 cities for the online retail segment. Undoubtedly, mobile retailing is expected
to continue to grow aggressively. In the next three years, global e-commerce sales made via
mobile devices are expected to top $638 billion. 42

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However, while shoppers want real-time, relevant, and personalized information and offers,
retailers will need to surround this service with very strong privacy and security. Trust,
transparency, and protecting customer information will be critical in retaining loyalty as mobile
retailing becomes the norm.
Online commerce companies should enable all features from search-to-purchase on mobile apps,
such as facilitating product research, price comparison, view ratings and reviews, and payment.
The launch of wearables, such as Google Glass and Apple Watch, opens new opportunities for
reaching out to customers. E-tailers would keep an eye on developments in this arena, although it
might only be an urban phenomenon at the moment.

GROWING POWER OF E-MARKETPLACES


The e-Marketplaces are growing significantly with the increase in the Internet penetration and
Smartphone usage. Internet enabled mobiles are making shopping a unique experience for
buyers. e-Marketplaces provide a technology platform for sellers to participate and a trusted
environment to scale up rapidly, increase profit and is highly valued by the customers. The noninventory led B2C model also allows the e-commerce players to provide attractive discounts and
offers which are difficult for inventory led brick-and-mortar shops as well as for pure e-Tailers.
According to Deloittes study Global Powers of Retailing 2015, online marketplaces rather
than pure inventory-led companies tend to serve as the primary e-commerce model in Asia. The
high costs of holding inventory, poor logistics and supply chain challenges in India are shifting
the inventory-led companies and new
entrants to adopt marketplace model. Also, e-Marketplaces work well in India due to high
fragmentation on supply side.
The rise of online sales in the developing markets is encouraging retailers to go online for global
expansion. The e-retailers are becoming exclusive partners for different brands. e.g. The Chinese
smartphone manufacturer, Xiaomi, entered Indian market through Flipkart e-Marketplace that

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helped to reach a large customer base in a short time. 43 Similarly, OnePlus teamed up with
Amazon India for exclusive partnership.

BIBLIOGRAPHY

www.flipkart.com
www.thehindu.com/features/magazine/the-flipkart.../article3290735.ece
http://articles.economictimes.indiatimes.com/2013-10-15/news/43068552_1_marketplacesflipkart-online
http://academic.reportlinker.com/d012905924/The-Indian-E-commerce-Industry.html
www.startupdunia.com/interview-with-flipkart-founder-binny-bansal-776
www.facebook.com/flipkart

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www.hindustantimes.com/technology/industrytrend/how-flipkart-broke-indias-online-shoppinginertia/so-article1-780440.aspx

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