What Flipkart got wrong (and right), on its journey from innovative startup to major business

One of the biggest drivers of Flipkart’s growth in 2011 was forced on the company by Sachin [Bansal] against the advice of many colleagues. Even though Flipkart was expanding at an extraordinary rate, Sachin hankered for more. He was particularly unsatisfied with the mobile phones business.

A year after launching the category, Flipkart was selling up to a couple of hundred phones every day. Vipul Bathwal, who had overseen the mobiles category, had left the company to join a rival. In early 2011, he was replaced by Flipkart’s Bombay office head, Indranil Dutta, who had moved to Bangalore to take up the new role.

Sachin had gone to the US for a visit that same year. There, he observed that Amazon and other e-commerce companies offered shoppers the choice of returning or exchanging products that didn’t satisfy them. In India, however, it wasn’t easy for customers to return products as most sites struggled to get products to customers in the first place!

No Indian e-commerce company had built the infrastructure to handle returns; the logistical cost was thought to be prohibitive. This prevented them from allowing shoppers to return unsatisfactory products, who, in turn, would be displeased on being stuck with products that didn’t match up to their expectations.

Since Flipkart’s founding in 2007, Sachin and Binny had known that Indians lacked trust in online retailers, preferring to go to malls or independent stores to buy books, electronics and clothing. There was too much uncertainty online, too many annoyances. This only compounded the customer’s inherent resistance to buying things they hadn’t seen or felt.

Although Flipkart’s unrelenting pursuit of pleasing customers had won over a few hundred thousand sceptics, e-commerce was still just a niche business.

Sachin came to realise that Flipkart would have to constantly coax and lure customers with special incentives to encourage them to overcome their mistrust of e-commerce. He also understood that offering product returns wasn’t even a special incentive; it was an essential feature of commerce anywhere.

In a low-trust society like India, how could a retailer not offer this facility? It would have to be done. In the middle of 2011, he proposed the introduction of an ultra-flexible thirty-day returns policy.

Flipkart executives were shocked. The company had just begun expanding its nascent in-house logistics service; it wasn’t equipped to handle returns. Besides, Flipkart’s overhead costs would shoot up. Even Binny [Bansal] protested, pointing out that their spending might go up by two per cent. To this, Sachin had a ready counter: “But our business will grow as well.”

Another senior Flipkart executive insisted that a returns policy would lead to fraud, that it would be misused. Sachin shot back angrily, “For that one per cent, why would you penalise the ninety nine per cent? We’ll just blacklist them.”

In the second quarter of 2011, Flipkart introduced its returns policy.

Customers could return any product within thirty days without having to provide an explanation. It turned out to be an inspired move. Customers took to the policy immediately and orders increased further.

But introducing the returns policy wasn’t enough in itself. It had improved Flipkart’s popularity with its existing customers, but it didn’t attract large numbers of new users. The problem was that while the company had surpassed its predecessors and peers and greatly improved the online shopping experience, most Indians, even in the cities, were yet to hear about Flipkart. And most of its present users still saw Flipkart primarily as a books retailer that happened to sell other goods.

They were tremendously loyal, but their numbers were insignificant within the overall retail market; Flipkart was still just a cult brand. To take e-commerce to the masses, at least in the urban areas to begin with, the company would have to turn to mass advertising.

Around the time it launched the thirty-day returns policy, Flipkart had started considering marketing seriously. This was hard to believe if one was familiar with the company’s first advertising campaign of April 2011.

Set in an old English village, the ad featured an English grandmother who ordered books online through her pet mouse.

Ordering books online was presented as an act of magic. After ninety seconds, the fantasy abruptly ended with the punchline: “You don’t need magic. Just log on to Flipkart.” Few bothered to.

In 2016, Sachin spoke about how he had unsuccessfully described the concept of Flipkart to his own grandmother, “I have tried [to describe Flipkart to my grandmother]. But I don’t think my grandmom really liked it. I told her, ‘This is a phone. You press a button on it and the product arrives at your doorstep.’ She told me, ‘Why would somebody do that? Why wouldn’t you just go to the shop and buy?’”

By early 2011, Ravi Vora had joined Flipkart as the head of marketing. A short, dour-looking man, Ravi had spent nearly a decade with the consumer goods makers, Hindustan Unilever and Heinz, known for their expertise in marketing and sales. He was unimpressed by the previous advertisement that had been overseen by Sachin and Tapas. Immediately he set to work on a new campaign.

It had two primary goals – to attract new users, people who had never shopped online before, and to position Flipkart as an all-purpose retailer that sold a range of products from phones and laptops to cameras, and not just books. The overarching feeling that the ads would need to cultivate among viewers was that of trust.

It was decided that this would be best achieved by promoting Flipkart’s cash-on-delivery and flexible returns policies, its low prices and expansive product assortment. After some hesitation, Ravi retained Happy Creative, the agency that had helped create Flipkart’s first ad.

Work on the new campaign went on for more than three months. A few weeks before Diwali, it was ready.

The ads featured two children conversing in would-be adult voices about shopping on Flipkart. One child was sceptical about online shopping, their scepticism playfully dismissed as ignorance by the other, who pointed out the various benefits of shopping on Flipkart. The tagline “No Kidding No Worries” suggested that one could shop on Flipkart without anxiety, and it was so easy that even children could do it.

The ads were memorable and created a general feeling of warmth and familiarity about Flipkart. In the weeks and months after the ads were released, Flipkart’s brand was transformed. The company saw a huge increase in traffic and sales. It continued to run the campaign for two years.

Internally, Flipkart executives cleverly transposed the message of the ad campaign. Flipkart had once been dismissed as a kids’ enterprise by cynical suppliers, investors and rivals alike. The company had now proved that the kids could hold their own.

The Kids campaign, as it came to be known, was launched towards the end of a spectacular year for Flipkart. The gross sales of Rs 10 crore in December 2010 had more than quadrupled a year later. The company was hurtling from one milestone to another, month after month, demolishing barriers, becoming stronger and greedier for more.

Flipkart’s rise had helped spawn an entire startup ecosystem in the country. Naturally, it also attracted critics. Future Group CEO Kishore Biyani continuously predicted that the end was near for Flipkart and other internet startups that burned through investor cash with no concern for profitability. The larger corporate world was similarly dismissive. But in its early years, the most vociferous Flipkart critics were from within the startup ecosystem.

Prominent among them was Mahesh Murthy, the chief of Seedfund, a venture capital firm. There were many others. They had valid and irrefutable reservations about the poor economics of e-commerce, as evidenced by the fact that Flipkart’s soaring sales were offset by its losses. It was commonly believed that this trend would continue for many years.

Sceptics also thought it was futile to invest in a business that would some day have to compete with Amazon.

While these reservations were legitimate, Flipkart was mocked for being a “copycat” of Amazon, one of the most innovative companies in the world. This analogy would come to be well established. It also happened to be nonsensical.

Selling goods to people was not an idea for which Amazon deserved credit. It wasn’t even the first company to think of selling products online. What made Amazon inventive was that it discovered, through trial and error, a series of business innovations that made buying online a habit for a majority of Americans, and Amazon the country’s most compelling shopping destination which remained indispensable to its customers through constant improvements to its service.

In effect, Amazon had invented the rules of e-commerce. Even if a new competitor entered the field, that company would have to operate within the paradigm Amazon had created. Flipkart had done the same thing in India. There was no doubt that it had taken inspiration from Amazon. But e-commerce in India had few similarities with the retail space in the US.

The innovation of cash on delivery, the creation of unique warehousing and logistics processes, the introduction and implementation of the product returns policy, the unique methods of managing everyday dealings with customers, and dozens of other smaller inventions particular to the Indian ecosystem, are what comprised the paradigm of e-commerce in this country. Here, Flipkart had set the rules of the game. Amazon’s entry later and its adoption of these ways and means would validate just how innovative Flipkart had been as a company.

Sachin had come up with a pithy counter to the “copycat” argument. A venture capitalist who had remained sceptical about the company had once told him, “So what’s the big deal about Flipkart – you’re just copying Amazon.”

Sachin had replied, “Haan, theek hai. Tu kar ke bata de.” Yeah, sure. You show us how it’s done.

Excerpted with permission from Big Billion Startup: The Untold Flipkart Story, Mihir Dalal, Macmillan.