Big Billion Day Analysis Essay

Flipkart's small town push for Big Billion sale

NEW DELHI: A few weeks before the Big Billion Day's sale began, Flipkart’s team handling the crucial smartphone category did a survey among customers to know what they are looking for in terms of products, offers, and prices, according to Arvind Charanyan and Abhaya Srivatsan, members of Flipkart’s smartphones team. Both were perched on a mattress at their head office in Bengaluru two days before the sale began on September 20, looking sleep-deprived.

“For the first time, we opened a survey on our app and website to see what consumers wanted this year. We got over 200,000 responses in 3-4 days, where consumers told us the exact offers and discounts they were looking for,” said Charanyan, who is associate director for the smartphone category.

Several of the more than 200,000 respondents listed a few common demands: phones with longer battery life, better space (ROM) over speed (RAM), and a price range of Rs 4,000 to Rs 6,000. Their focus was more on specifications than on brands.

What was interesting was that many of the respondents were from small cities and towns. Flipkart took note of that. For this year’s Big Billion Days sale, the online marketplace has introduced about 10 smartphones in the Rs 3,000-5,000 price range as compared to just two last year. It also worked closely with Chinese smartphone maker iVoomi to introduce multiple handsets in this range.

“We went deeper in understanding what the customers wanted and whatever they wanted, we are offering two times of that. If customers want Rs 500 off, we are giving Rs 1,000 off,” Ayyappan R, who leads Flipkart’s smartphone category, told ET on the night the online marketplace’s annual flagship sales kicked off.

This is the Flipkart of 2017. With about $4 billion raised in funds this year, unlike last year it does not have to worry about if it will have enough capital to battle Amazon India’s war chest. Its annualised gross merchandise volume (GMV) is growing again, and was pegged at around $6.5 billion a few weeks before the sale began, up by more than 60% as compared to last year when GMV was relatively flat. This gives Flipkart a comfortable lead over Amazon India, especially with its domination of the smartphone and fashion categories.

Flipkart is also a much leaner organisation with around 8,000 employees now, as compared to about 15,000 at the beginning of 2016. Clearly, Flipkart is not an underdog this year.

Customer acquisition and increasing traffic, where Flipkart lags Amazon India, have become more critical for the online retail major over driving profitability. The battle between the two companies is shifting to acquiring the next set of internet users, beyond the top 30 million net-savvy buyers mostly found in the large metro cities.



“A large portion of our customer acquisition will be the SEC-B and SEC-C (the middle segment of Indian consumers) customers. About 70% of new customers will be from this profile,” said Smrithi Ravichandran, who heads BBD sales, predicting triple-digital growth in new customers shopping on the platform compared to the last festive season.

Amazon India has made its move to capture the loyalty of the country’s top layer of internet customers with its subscription service Prime, which accounts for more than one-third of all the orders made on the platform. The company is also aggressively catching up in terms of total customers—more than 100 million now as compared to Flipkart’s 135 million. To put this in context, Amazon India began operations a little over 4 years ago in June 2013, while Flipkart is celebrating it 10th anniversary this year.

As strategic investors including Chinese internet conglomerate Tencent, US marketplace eBay and Japan’s SoftBank Corp become large shareholders in Flipkart, they would not like the homegrown e-commerce major to fall behind on this metric (customer base). For these investors, data is the new oil.

FLIPKART v AMAZON INDIA IN NUMBERS

Red - Flipkart
Blue - Amazon
Source: Flipkart, Amazon India Source: Flipkart, Amazon India







Source: Flipkart, Amazon India



Source: Ministry of Company Affairs



Source: Praxis Global Alliance

There is a reason why acquiring new customers is important for Flipkart’s investors, who have now pumped into the company a total of about $7 billion, valuing it at nearly $14 billion.

“Only way there can be a 5-6 times multiplier at the valuation and stage at which Tencent and SoftBank have invested is if there is an expansion in the pie. Unless Flipkart acquires new customers, that is not possible,” said Rutvik Doshi, director at Inventus Capital Partners.

Experts tracking the online commerce industry say that the primary driver behind events like Big Billion Days is customer acquisition. That was not a priority for Flipkart last year as it was busy defending its market share on a budget. All registered customers are not necessarily buyers. Of Flipkart’s 135 million customers, about 60% have bought at least one product on the platform in the last 12 months. Sale events can bring back customers who have been dormant or moved to other platforms.

“Ratio of repeats (repeat purchases) to new was higher in 2016. This year, we will see a higher base of new customer adoption, mainly because of our efforts to get a larger share from tier 2 and tier 3 (towns and cities) as well as telecom penetration,” said Ravichandran.

PREPARATIONS BEGAN IN OCTOBER... 2016
The sports-themed first floor of Flipkart’s 11-storeyed head office in Bengaluru was palpable with stress and energy but also exuding confidence on the eve of the company’s five-day festive sales. Employees had been bunking at the office for several days leading to the event. While most of them were glued to their laptop screens making last-minute checks and tests, some were planning their wish-lists. “We will be so busy once the sale begins. So we have all kept our wish-lists ready,” said an employee from the fashion category .

Large screens were erected for the teams to track hourly progress of sales in their specific categories. Employees from the fashion, large appliances, and home and furnishing categories were huddled around the screens, which showed numbers going off the charts soon as the clock struck 12 am on September 20. The home and furnishing team was the first to achieve its hourly target which was followed by peals of applause.

“All kinds of counters have been set up and each category has planned their hourly and daily targets,” said Ram Papatla, vice president for product management at Flipkart, mounting his white-coloured Big Billion Days cap.

After flagging off the sale, chief executive Kalyan Krishnamurthy, who was a managing director at Flipkart’s largest investor Tiger Global Management till late last year, was sitting in the the main control room to watch the sales numbers coming in from across the country.

Krishnamurthy had rejoined Flipkart in June last year as head of category management (he was chief financial officer in an earlier stint), and is widely credited for the company’s victory over Amazon India during last year’s festive sales. In January, Krishnamurthy was elevated to the post of Flipkart CEO, replacing cofounder Binny Bansal who became Group CEO.

Krishnamurthy seemed confident and relaxed despite Flipkart’s ambitious goal of more than doubling last year’s BBD sales. “We are looking at a 70-30 lead (over Amazon India), not just with this BBD but over the next couple of years,” he said. Preparations for this year’s Big Billion Days began soon as the previous edition was over, he said.

PATH TO MIDDLE INDIA
Flipkart’s strategy during last year’s festive sales was to sell high-value items through affordability initiatives like product exchange and payments through nocost equated monthly instalments (EMIs).

For this year, the company’s focus is on adding customers, especially from Middle India (or non-metro cities). According to data collated by R edSeer Consulting, Flipkart scored higher in tapping into the fast-growing non-metro market, while Amazon had a slight lead in the metro cities, during the first two quarters of this year.

Online retailer Shopclues that has been focused on this demographic believes companies need a specific DNA and execution ability to crack such a market.

“You cannot execute for tier1 and tier 3 customers in the same way. Flipkart and Amazon may be targeting the tier 3 and tier 4 customers but how can you give these customers only one-off aspirational products and not the selection they are looking for?” said Radhika Aggarwal, chief business officer at ShopClues.

Targeting lower-income customers has meant that Flipkart has had to tweak product selection across categories, not just in smartphones.

In fashion, which is its second-largest category by sales, product selection has been expanded by more than three times. Nearly half the selection in women’s fashion is in unbranded products, while in men’s one-third is unbranded.

As a result of the surge in customers from non-metro cities (60% of customers during last BBD were from Tier 2 and Tier 3), Flipkart’s data analytics team has been able to glean significant information to understand the buying patterns of this new spectrum of online shoppers. Flipkart is moving forward with personalization as a strategy and offering products to customers based on their previous purchase patterns.

“There are customers who have locationpersonalisation and there are customers who have credit-personalisation. There is also personalisation around life-stage,” said Mayur Datar, principal data scientist at Flipkart. “There are around 40 insights that we are playing around with,” Papatla said. Serving customers at different corners of the country also means making changes to the supply-chain, which has to be both fast and cost-efficient. Flipkart expects to make 1.2 million shipments daily in the days following BBD.

This year, Flipkart is doubling down on alternative delivery models by appointing different last-mile delivery agents.

Flipkart is also working with more than 5,500 last mile agents as compared to 3,000 last year. “Safe to say that more than 20% of the orders, or one in five, will be fulfilled by this channel. Maybe we can get close to one in three,” said Rohit Sharma, vice-president (operations and design), at Flipkart’s logistics arm, Ekart.

Driving rapid growth in the customer base across geographies will not be easy for Flipkart going forward, as the numbers shared by the company reflect.

For instance, during BBD 2016, Flipkart registered a 50% year-on-year growth in the number of pin-codes from where it received orders in the first 12 hours of the sale. This year, that number stands at 40%. Analysts tracking India’s ecommerce sector say that over the last 3-5 years, the space has grown with customer acquisition through deals, discounts and advertising.

“There was a time when investors were starting to get worried and were pulling away. That was evident during 2016. Given that (Flipkart) have enough capital now to back their customer acquisition strategy, they are going all out to do so,” said Devangshu Dutta, chief executive, Third Eyesight, a consulting firm with a focus on consumer products.

(J Vignesh contributed reporting)

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[UPDATE]

If you're a Flipkart customer, you must have gone through some amount of agony while making purchases during the Big Billion Day. Keeping true to its reputation and philosophy of great customer service, Flipkart went ahead and apologized to everyone. When was the last time you saw an organisation saying sorry to their customers for not living up to the promises?

Dear Customer,

Yesterday was a big day for us. And we really wanted it to be a great day for you. But at the end of the day, we know that your experience was less than pleasant. We did not live up to the promises we made and for that we are really and truly sorry.

It took enormous effort from everyone at Flipkart, many months of preparation and pushing our capabilities and systems to the limit to be able to create this day. We were looking at fulfilling the dreams of millions of Indian consumers through deals and offers we had painstakingly put together for months.

And though we saw unprecedented interest in our products and traffic like never before, we also realized that we were not adequately prepared for the sheer scale of the event. We didn't source enough products and deals in advance to cater to your requirements. To add to this, the load on our server led to intermittent outages, further impacting your shopping experience on our site.

An unprecedented 1.5 million people shopped at Flipkart yesterday. While we stand humbled by the sheer faith that such a large number of customers have shown in us, we are unhappy that we were unable to live up to the expectations of millions more who wanted to buy from us yesterday.

And this is not acceptable to us.

Delighting you, and every single one of our customers, is absolutely the top most priority for Flipkart and we have worked very hard over the last seven years to earn your trust. Yesterday, we failed that trust. We have learnt some valuable lessons from this and have started working doubly hard to address all the issues that cropped up during this sale.

Price Changes As we were preparing various deals and promotional pricing in the lead up to the sale, the pricing of several products got ​changed to their non-discounted rates for a few hours​. We realise that this breaks the trust our customers have put in us. We are truly sorry for this and will ensure that this never happens again.

Out-of-stock Issues We ran out of the stock for many products within a few minutes (and in some cases, seconds) of the sale going live. For example, most of our special deals were sold out as soon as they went live. We had ensured availability, anywhere from hundreds to a few lakh units for various products, but it was nowhere near the actual demand. We promise to plan much better for future promotions and ensure that we minimise the out-of-stock issues.

Cancellations We had large number of people buying specific products simultaneously. This led to some instances of an order getting over-booked for a product that was sold out just a few seconds ago. We are working round-the-clock to ensure availability of additional units for these products and will do our level best to ensure that we minimise any cancellations.

Website Issues ​We realise that the shopping experience for many of you was frustrating due to errors and unavailability of the website at times. We had deployed nearly 5000 servers and had prepared for 20 times the traffic growth - but the volume of traffic at different times of the day was much higher than this. We are continuing to significantly scale up all our back end systems so that we do a much, much better job next time.

Everything that we have achieved at Flipkart is purely on the basis of our customer's trust and faith. This is why we come to work each day and continue to remain extremely passionate about building the best possible customer experience for Indian consumers. We failed to live up to this promise yesterday and would like to apologise once again to every single customer for our failure.

Thank you.

Sachin and Binny

It's not the size of the dog in the fight, it's the size of the fight in the dog.

The famous American author and humorist, Mark Twain sums the ecommerce war in India pretty well in the above statement.

As a market leader in the Indian ecommerce industry, Flipkart has redefined 'big' in many ways in the year 2014. Be it the big acquisition of Myntra (for an estimated $300 million), or the big funding of $1 billion, nothing of this scale was witnessed before. Riding on the same wave, the ecommerce giant had announced the biggest sale day for 6th October. It was called 'The Big Billion Day' and concluded few hours ago. On one side (which was slightly heavier), it attracted a lot of backlashes on social media, while on other, the company claims that it was able to achieve its sales target of $100 million in GMV in a matter of 10 hours only (fixed as 24 hrs initially).


Also read:Ecommerce wars – what is the real deal amid all the offers and discounts?


YourStory explores the very 'big' nature of the Big Billion Day.

Big Promotion

The climax for the 'Big Billion Day' by Flipkart has been building since last month by ads on television, print media, YouTube, and more. There were two video commercials made to promote the big day, one of them featuring stand up comedian Vir Das.

An email specifying the emotional significance of the date 6th October to the founders Sachin and Binny Bansal was sent yesterday to all the subscribers. Here's what it was like:

610 – The number of the flat from where Sachin and Binny Bansal began a journey in 2007 that no one in India had ever seen before!

6.10 – The day India will see an event like never before!

It’s the Flipkart Big Billion Day!

You have seen the ads – and now the countdown for what we believe will be the greatest sale ever in the history of our nation, has begun. With products across categories like large appliances, books, toys, mobiles, laptops, cameras, clothes, shoes, bags and watches available at heavy discounted prices, Flipkart promises to offer lots of surprises and interesting deals for every Indian on “The Big Billion Day”.

There were more than 10000 field staff to make sure that the ordered product during the deal day is delivered on time.

Big Response 

Achieving $100 million in GMV within 10 hours would have definitely given a reason to smile to the Flipsters amidst all the backlash on twitter. But the happy customers also made sure that there good wishes are reaching the ears of Flipkart. Here's what they had to say:

Sachin And Binny Bansal expressed their gratitude at the end of sale,

“The Big Billion Day is an unprecedented day for us as this is the biggest sale ever in India.

Our technology team has been dedicated towards addressing errors and providing constant support to accommodate the largest scale of traffic and customer visits e-commerce has witnessed across the country.

Our teams and sellers worked days and nights to make this sale a success – and our efforts paid off. We got a billion hits on our site today and achieved our 24 hour sales target of $100 mn in GMV in just 10 hours.

We are truly humbled by the immense faith our customers have shown in us. And this inspires us to dream bigger,”

Big bashing and big jokes

The following tweets captures the mood of tweeps about the #BigBillionDay .

Big fight

Not everything went perfectly for Flipkart on this day. The morning newspapers carried Snapdeal's print advertisement (on front page immediately after the jacket ad of Flipkart) trying to belittle the BigBillionDay's claim of discounts, while the domain bigbillionday.com was redirected to Amazon India. It is yet to be known if it was Amazon's ploy or some enterprising person's 'creativity'. [UPDATE]

At the end of the day, Flipkart is left with the happiness of achieving the target earlier and the thoughtfulness of how to avoid the customer dissatisfaction (at this scale) next time. We'll leave you with the following tweet which caught our attention:

 What do you think about the BigBillionDay? What should have been different?

And here's India's BIG Entrepreneurship Day


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