flipkart Business Model – How does flipkart make money

What do you do if you want to buy something? Do you go to a store or do you look for it online? If they are something like groceries then it is easier to go to a store and get them. But if it is something like clothes, shoes, appliances, or other products then many people will be inclined to buy them from e-commerce websites. But why? Before a decade ago online shopping was not as prevalent as it is today. Then how come more and more people are willing to buy from e-commerce websites with each passing day? Earlier people used to go to stores to buy anything they wanted. It can be clothes, shoes, sports gear, fitness equipment, cosmetics, and others. However, this is not the case today. People love to shop online these days. This is not just a phenomenon in some countries but it is true all over the world.

Almost all the countries in the world have a successful e-commerce industry. One of the most important reasons for this is the rise of the internet. If you look at it, the internet is cheaper than what it was ten years ago. Not only that but it is also faster than ever before. Above all, it is available to a lot of people on the planet. The other reason is technological advancements. If you take the technology that was available a couple or even a decade ago it looks primitive compared to the technology you have today. This helped e-commerce websites reach more and more people around the world. There are other sets of reasons why people love e-commerce websites. The first one is the convenience it provides. You can just order anything online and it will be delivered to your doorstep. Apart from that, it offers a wide range of options to choose from. You can find similar products in the same category that you didn’t know were available. It definitely has all kinds of products you need. 

Today online shopping is more popular than ever before. Even though there are many e-commerce websites there are only a few that are really big. These e-commerce companies occupy a large amount of market share compared to others. One such e-commerce website is Flipkart. If you are from the west then many of you might not have heard about this company. This is probably because it is an e-commerce company that is most popular in India. Flipkart is considered to be one of the best e-commerce websites out there. Despite being one of the top e-commerce websites not many people know about its business model or the way it makes money. This article is completely about that but before learning about the business model let’s know a little bit more about the company. 

What is Flipkart?

As it is already mentioned Flipkart is an e-commerce site that is widely popular in India. There is probably no one in India who is not aware of this company. Flipkart is a fairly young company compared to other e-commerce giants like Amazon. It was founded in the year 2007 by Binny Bansal and Sachin Bansal. The company was located in Bangalore. This was a great place to start a company as Bangalore is known as the silicon valley of India. Interestingly both of the founders worked at Amazon before starting their own company. But this was not always the e-commerce website that people know it as today. When the company started it focused on selling books just like Amazon. They wanted to ship all kinds of books across India. It took them one year to see good results. 

By 2008 Flipkart was receiving more than 100 orders every day. After the two years of its foundation, Flipkart’s business model looked promising enough to raise $1 million. After that they partnered with Tiger global to raise another $30 million in the years 2010 and 2011. By this time Flipkart was doing what no other e-commerce company was doing in India. It became a game-changer when it decided to sell mobile phones on its website. The partners of the company warned the founders that it is too risky as losing phones will result in a lot of loss. But the Bansals went ahead and did it anyway. The suppliers who were initially skeptical about the idea started urging Flipkart to buy more phones from them. 

In 2014 Flipkart made a great acquisition by purchasing an online fashion retailer called Myntra for $280 million. Other important acquisitions made by Flipkart were Jabong which is similar to Myntra and PhonePe a mobile payments startup in 2016. These acquisitions proved to be very beneficial for the company. eBay which is one of the largest e-commerce companies in the world sold its Indian subsidiary to Flipkart and invested $500 million in the company in 2017. In 2018 Walmart bought 81% of the stake in Flipkart. Today Flipkart holds almost 40% of India’s e-commerce market share. 

Business model of Flipkart

When Flipkart started out running an e-commerce business in India was different as people were not very familiar with the concept of online shopping. So Flipkart’s founders used their experience and expertise to focus on things that would make it a success in s country like India. Let’s look at the important aspects of its business model. 

Offering products for cheap

This is something that works anywhere in the world. People love to save money. If they think that they can save a couple of bucks by buying from an e-commerce website then they will definitely do it. This is exactly what Flipkart did. It offered products for less price compared to the market. Because of this more people were drawn to buy from them compared to traditional stores. 

A wide range of products

This is the most important thing that made Flipkart so successful in India. It made the decision to sell all kinds of products on its platform at the right time. When it sold books not many people knew about the company but when it started to sell all kinds of products people started to notice it. The great thing that it did is it got suppliers for the products that people used locally. Due to this, it had all the products that people were already using or aware of. It also helped many unknown local brands to grow their business by selling their products through their website. People had more options to choose from than ever before and they made the most out of it.

Trust

Scams are quite common on e-commerce websites. There are many fake retailers who put up offers selling products of top brands. But only after receiving the products people would find out that they are fake. Flipkart made sure that it warns the customers before buying products. It has an icon that says Flipkart assured at the bottom end of the listing. If you find the icon then it is from a legitimate retailer but if you don’t then it may not be from an authorized retailer. Not only that but Flipkart makes sure that it provides good customer service. It has customer support to help the customers deal with all kinds of issues. It also has a return policy that a customer can use. 

How does Flipkart make money?

There are multiple ways in which Flipkart makes money. Let’s look at them. 

Listing fee

Flipkart does not own all the products that it sells. Most of the time it gets the products from the retailers that are associated with them and ships them to the customers. The retailers are getting a platform in the form of Flipkart to showcase their products. Because of this, the retailers have to pay a small amount to be able to list their products on the website. 

Commissions

As mentioned above Flipkart provides a platform for retailers to sell their products online. Flipkart is one of the top e-commerce websites so it is definitely going to sell more products compared to the others. Every time a person buys a product from their website Flipkart charges a commission from the seller.

Advertisements

This is the most common way in which websites are making money these days and Flipkart does too. Flipkart sells space on its website and applications so that brands can put up their ads. The amount of money is dependent on the size of the ad. Not only that but Flipkart also puts advertisements of brands in newspapers, TV, social media, and radio during a sale. Flipkart charges money to promote these brands in the advertisements.

Logistics

E-kart is Flipkart’s logistics wing. This takes care of everything from shipping to delivery of the products. It charges money from buyers or sellers. The amount varies depending on the geographical location. 

Conclusion

This is the business model of Flipkart. It is definitely one of the best e-commerce websites out there as it offers great service. Flipkart occupies 40% of the e-commerce market share in India which is insane as the country has more than 1.3 billion people. The ability to understand its customers and clients is what made Flipkar so successful. You can learn about other interesting business models on Zeen. Click here to know about the business model of Dell.

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