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Flipkart pulls socks up, improves service

August 29, 2016

After months of efforts, June marked an improvement in delivery times, though it still lags Amazon and Snapdeal; other parameters show progress, too

Flipkart chief executive Binny Bansal's cracking of the whip over the past eight months has begun showing results. The company has brought down the time it takes to deliver goods to customers.

Bansal, who took charge from co-founder Sachin Bansal (not related) in January, has been tasked with bringing back its once-phenomenal customer experience, enabling it to become the leader in India's e-commerce market. His first move after taking the office was to ditch the growing of Gross Merchandise Value as a measure of progress, instead boosting the company's Net Promoter Score (NPS, a measure of customer satisfaction).

June marked a turning point, with average delivery time dropping below five days for the first time in close to three quarters, according to data from market research firm RedSeer Consulting. The company still lags Snapdeal and Amazon in delivery times but it's catching up faster.

"What Flipkart has been able to do is better manage eKart, which is accounting for a much bigger chunk of shipments than it used to do earlier. The kind of route planning and near shipping that eKart is doing now is much better than before,” said Mrigank Gutgutia, engagement manager at RedSeer Consulting.

When Flipkart started in 2007, a late entrant in India's fledgling e-commerce sector, it used better customer service to push ahead of other rivals even outdoing relatively cash-flush Snapdeal. However, with competition heating up due to the entry of Amazon, Flipkart, by then the start-up with the largest funding, lost focus and began burning cash to drive business. This led to quality of service being hit.

With growth remaining flat, Binny Bansal put together a new team to find a way to build sustainable growth while not letting Amazon overtake it. Kalyan Krishnamurthy, an old hand at investor Tiger Global, was brought back to help fix the company and make it profitable. His role at Flipkart has been gaining prominence, in efforts to bring back the heydays during which he had previously worked at the company.

"What Amazon has been able to do — and Flipkart has only pushed hard this year - is,, since they came into India, opening of numerous warehouses across the country. One reason was to reduce their long-distance shipping. They were able to do this with the best demand allocation technology they have built overseas over the years,” added Gutgutia.

Today, the US-based company has 23 fulfilment centres across the country and has the largest warehouse space among any e-commerce entity in India. This investment in warehousing right from the beginning meant Amazon could offer one-day delivery to customers within six months of entry into the country.

"This is the largest storage capacity and warehouse infrastructure for sellers in India in e-commerce. This infrastructure it built has helped thousands of sellers to reach millions of new customers and enabled to offer faster and quicker delivery of products to more PIN codes,” said Amazon, in an e-mail response to this newspaper. Flipkart did not participate for this story.

While many say it's already inevitable for Amazon to become the largest e-commerce player in India, Flipkart has shifted focus to building a sustainable business. The hope is that in India, unlike China and the US, this isn't a one-horse-race. In its attempt to boost NPS or customer satisfaction and lock in a loyal band of online shoppers, the company is now taking a step back and looking at ways to improve the infrastructure it has already burnt money to put in place.

Flipkart recently launched a Flipkart Assured programme, which, much like Amazon's Prime loyalty programme, marks products that customers can get in-time delivery on and better experience. Unlike Prime, it will not charge a yearly subscription fee from customers to get access to these benefits.

"They (Flipkart) are picking sellers which have had better performance and are doing more business with them. You can't have many sellers and do this with all of them, and that's where the strategy shift at Flipkart is happening,” said Gutgutia.

Delivery time is only one of the indicators of customer satisfaction levels. There are several other measures Flipkart is taking. The company currently leads the pack in return logistics, having the fastest times in picking up products when a customer calls for a return. Despite having the lead, Flipkart has significantly improved this time in the three months that ended June, dropping the time consistently for the past 18 months to 1.1 days in June.

The firm has also brought back its mobile website, after scrapping it in favour of its smartphone app, a move that lost it customers. More, by giving customers a choice to shop on any platform they like, the company has been able to increase its NPS. Amazon, meanwhile, shows no sign of slowing. It plans 27 warehouses in India by the end of the year, and is already making its move towards rural e-commerce by partnering with non-government bodies and assisted e-commerce entities such as StoreKing.


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