Every Indian citizen is aware of the e-commerce site called Flipkart. It is a company that has grown rapidly over time, worked its way to the top, and got attention from big names like Walmart which acquired the company for a whopping 16 billion dollars in 2018. Currently, in India Flipkart is the second largest e-commerce platform which has reported a revenue amounting to approximately 346 Billion Indian rupees in the financial year 2020.
Flipkart was first idealized by Sachin and Binny Bansal in 2007 while working at Amazon. The Bansal duos, who are often mistakenly thought of as brothers, were able to successfully design a business model based on their experience and expertise. Their business scheme led to the initial funding process from external sources.
Initially, they invested a total of $5,600 towards developing an ideal online book store. 2 years after their initial launch, Flipkart gained enough potential to raise $1 Million from Accel India. They later formed alliances with Tiger Global, raising a total of $10 Million in 2010 and $20 Million in 2011.
Flipkart- An Overview
Flipkart works as a marketplace that connects all interested sellers to their potential customers and assists them in making the sale. Flipkart follows a clear Business-to-Consumer model or more commonly known as a B2C model. With over 80 categories, Flipkart has sellers for all items, ranging from groceries, toiletries, clothes, books, shoes, furniture, electronics, etc.
Flipkart's Big Billion Day Sale is like a festival in the country. It is usually during the festival season, where we get the best deals and discounts on various products.
Flipkart has now become more of a multichannel platform. It launched its FinTech app called PhonePe. Recently, it has also started its own food retail business called FarmerMart soon.
Flipkart's Revenue Generation
To understand the revenue generated by Flipkart even after facing a loss of INR 46,895 Crore, one has to know the different sources of income for the company. The most obvious source of income is via the sellers it enlists on its platform. It charges a varying and minimal commission along with a convenience fee from sellers as per their sales or revenue or an established deal.
Secondly, Flipkart has its own company called E-kart that provides logistics and delivery services to the sellers on the platform. Hence it once again charges a minimum fee for its services.
Thirdly, when you open the website or the Flipkart mobile app, there are various advertisements visible. Flipkart lends space for them and hence generates revenue from external sources.
Analysis of Flipkart's Business Model
It has an interesting B2C model which includes Customer Relation Management, Supply chain, and Advertisements.
How Does Flipkart Function Exactly?
Flipkart is an online B2C shopping portal, which provides shopping opportunities to Indian consumers. It allows the vendors to sell their ready-to-sell products by giving appealing discounts or sales to its consumers who wish to buy them. The buyers choose the products they want and place an order and they are shipped to them. The sellers get an agreed price after deducting some commission for Flipkart's services that are provided to these sellers.
The various options for selling and buying through Flipkart are through
- Flipkart website
- The web app
- Social websites
- Advertised or affiliated networks like review websites, coupon websites, bloggers, etc.
The percentage commission charged by Flipkart varies from the type of product and its sales. It ranges from 5% to 20% excluding taxes and discounts. This was the basic idea from which Flipkart earned its online place.
Other Sources of Revenue for Flipkart
Flipkart generates revenue not just by selling products but has various revenue channels including:
Providing a platform to the sellers, Flipkart charges a commission for all the services given to them proving to be the basic source of revenue.
Listing & Convenience Fee
This is another method of revenue, it charges some amount of listing fee to the sellers and convenience fee to the buyers for fast delivery. The convenience fee also includes the gift wrapping charges, billings that add up to the total revenue of the company.
This is revenue collected from the sellers for shipping their products. It provides services to its sellers which are similar to other courier companies. The charges of delivery services vary from place to place and the distance required to be covered.
Flipkart sells ads to the sellers or brands as well as various products such as co-advertising, co-branding, etc.
Co-branding Opportunities On Flipkart’s Homepage
The slider on Flipkart’s homepage introduces a chance for sellers to advertise their products and launches to the buyers which get thousands of views.
Co-advertised Products Towards Publications
The ads that are shared by the newspapers and magazines’ front pages and allow the brands to advertise themselves. Suppose a new phone has been launched in the market. Flipkart gets the ad on the front page of the newspaper and the cost is shared with the brand that has to advertise the product.
Target Search Results
This works like when someone searches for a product, Flipkart decides which sellers’ products are to be shown on the top. This is the space that will be solved by Flipkart shortly.
Myntra is a website owned by Flipkart which is another online fashion portal that boosts up the overall fashion category of Flipkart. Myntra earns a huge amount of sales on its fashion products and has been measured to be higher than the fashion sales of Flipkart. The revenues earned by the website Myntra are accounted for the total earnings of Flipkart.
Flipkart is focusing on bringing back local brands to its platform to improve the buying experience for its users. The business model of Flipkart is all-encompassing and has several revenue-generating streams. There is a lot to learn from the Flipkart revenue model.
Frequently Asked Questions - FAQs
What is the revenue model of Flipkart?
Flipkart works on a B2C model, where they basically work as a middle man between buyers and sellers. To make revenue, they charge a commission, a convenience fee, logistic charges, advertisement charges, Myntra as only some of the areas they generate revenue from.
Is Flipkart B2C or B2B?
Flipkart operates on the B2C model (Business-to-Consumer).
Is Sachin and Binny Bansal related?
No, they are not but because of their surname, people often assume that they are.