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strategic analysis of flipkarts decision of opening its logistics arm to its competitors

Alok K
Alok K

Flipkart is opening its logistics arm, eKart Logistics, to deliver packages for other e-commerce companies in a pilot program. This move allows Flipkart to scale its logistics operations and positions it to capture growth in the Indian e-commerce logistics market. It also aligns with Flipkart's vision to become the Amazon of India by developing a large logistics infrastructure like Amazon's that can also be used by other companies. Opening eKart Logistics to competitors gives Flipkart several strategic advantages over rivals by improving efficiency through increased volume and establishing control over the growing e-commerce supply chain in India.

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Flipkart to throw open its logistics arm 'eKart' to deliver packages of competitors Alok Raj.K Abstract Online retail firm Flipkart will begin to deliver packages for its competitors, as the company's logistics arm, eKart Logistics opens services for other e-tail ventures. Flipkart is running a pilot with a few partners which is in the very early stage now. It rebranded last year as it wanted others to use their logistics arm. This move makes sense for the company as the potential for growth in e-commerce logistics is quite large. The strategic analysis of the same is discussed in detail in the further part. Analysis On the first look it seems to be a scaling up of the operations to capture the first cream of a green logistics market in india. But on a second thought, why does a company that grows on a steady rate of 100% yoy needs to scaleup and that too using its logistics arm where the core business is retailing? The vision states that it wants To become Amazon of India. The mission states To provide a delightful and memorable customer experience. The act of opening the logistics arm to other competitors is in perfect sync with the vision statement where, Amazon internationally built a huge technology infrastructure for their use and then opened it out for others. Now, in one of the stated objectives it promises, Completely hassle free shopping experience with best prices in India, which also is in sync with the CEOs statement regarding the same which says, We want to get into all major cities and towns as we believe the problem is bigger in tier-II and III cities. As a 1st conclusion the company seems to be fair as it looks very much in-line with the vision mission and the objectives of the company, nothing to be skeptical about scaling up a business which posted a total income of Rs 1,345.63 crore in fiscal 2013 and showed a profit of Rs 2.03 crore where Flipkart India earned total income of Rs 1,180 crore and reported a loss of 281.7 crore before extraordinary items and tax for year ended in March 2013. But the possibility of a hidden objective cannot be avoided which is to gain control over the total e-tail market in india whose valuation is 2 billion usd and grows at a steady 100%. Better clarity on this argument demands a look at the porters 5 forces on Flipkart which says, 1. Internal rivalry is very high in the industry. 2. Bargaining power of buyers is high which means the demand is perfectly elastic for the top 10 product categories searched online.
3. Bargaining power of the suppliers is low which makes the entry for new players relatively easy. 4. Threat of new entrants is moderate in the industry as capital funding is possible through VCs. The main capex for them would be in the area of procurement and logistics part of the value chain. 5. Threat of substitutes are less as the e-tailing industry augments itself with the COD mechanisms and more product categories and varieties which are far more than the reach of a retail outlet next door. Here Flipkart saw a big opportunity in the logistics part which is favourable to both the parties in the following ways. 1. It gives a definite advantage of full truck load over other logistics providers as there are products from multiple service providers. 2. As the industry grows there will be multiple specialist service providers as clients which allows Flipkart to shift their generalist approach to a specialist approach, hence maximizing their profits. 3. Opportunity of emerging as an omnipotent in the logistics industry with strong technical infrastructure like UPS. 4. Bargaining power over its own competitors by controlling their supply chain. 5. Getting a cut of profit share or market share of its own competitors and hence minimizing the threat posed by them. For substantiating this intuition, it is very much necessary to examine the resources and capabilities of Flipkart. Strengths of Flipkart 1. Brand 2. Inventory management 3. Innovations and technology competence 4. Self-owned delivery network 5. Supplier relation Opportunities of Flipkart 1. Self e-publishing 2. Tie up with manufacturers (motorola) and education institutions 3. Untapped mobile users Resources & Capabilities
1. Delivery Logistics: 100+ cities network, through the capable hands of our 1500+ delivery experts. 2. Reverse logistics: ekarts specialised services for reverse logistics provide exceptional customer experience and advanced costsaving. 3. Payment On Demand: Payments via cash / credit card facilitated by a robust payment gateway. 4. Customer support: Information delivery systems allow e-commerce players to provide superior customer support during and after shipping. 5. Technology integration: Supply Chain Systems allow easy and seamless integration with our e-commerce partners Order Management systems. With key strengths supporting the logistics in a market where it possesses opportunities for immense growth potential and resources and capabilities strong enough for the idea to fly, the strategic move of Flipkart in opening its logistic arm to its competitors looks promising. It will enable Flipkart to excert a control over the total industry whose magnitude only time will prove. Conclusion The strategic move by Flipkart is an open-check strategy which shields its interests and take advantage over its competitors in mostly a fair way.

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strategic analysis of flipkarts decision of opening its logistics arm to its competitors

  • 1. Flipkart to throw open its logistics arm 'eKart' to deliver packages of competitors Alok Raj.K Abstract Online retail firm Flipkart will begin to deliver packages for its competitors, as the company's logistics arm, eKart Logistics opens services for other e-tail ventures. Flipkart is running a pilot with a few partners which is in the very early stage now. It rebranded last year as it wanted others to use their logistics arm. This move makes sense for the company as the potential for growth in e-commerce logistics is quite large. The strategic analysis of the same is discussed in detail in the further part. Analysis On the first look it seems to be a scaling up of the operations to capture the first cream of a green logistics market in india. But on a second thought, why does a company that grows on a steady rate of 100% yoy needs to scaleup and that too using its logistics arm where the core business is retailing? The vision states that it wants To become Amazon of India. The mission states To provide a delightful and memorable customer experience. The act of opening the logistics arm to other competitors is in perfect sync with the vision statement where, Amazon internationally built a huge technology infrastructure for their use and then opened it out for others. Now, in one of the stated objectives it promises, Completely hassle free shopping experience with best prices in India, which also is in sync with the CEOs statement regarding the same which says, We want to get into all major cities and towns as we believe the problem is bigger in tier-II and III cities. As a 1st conclusion the company seems to be fair as it looks very much in-line with the vision mission and the objectives of the company, nothing to be skeptical about scaling up a business which posted a total income of Rs 1,345.63 crore in fiscal 2013 and showed a profit of Rs 2.03 crore where Flipkart India earned total income of Rs 1,180 crore and reported a loss of 281.7 crore before extraordinary items and tax for year ended in March 2013. But the possibility of a hidden objective cannot be avoided which is to gain control over the total e-tail market in india whose valuation is 2 billion usd and grows at a steady 100%. Better clarity on this argument demands a look at the porters 5 forces on Flipkart which says, 1. Internal rivalry is very high in the industry. 2. Bargaining power of buyers is high which means the demand is perfectly elastic for the top 10 product categories searched online.
  • 2. 3. Bargaining power of the suppliers is low which makes the entry for new players relatively easy. 4. Threat of new entrants is moderate in the industry as capital funding is possible through VCs. The main capex for them would be in the area of procurement and logistics part of the value chain. 5. Threat of substitutes are less as the e-tailing industry augments itself with the COD mechanisms and more product categories and varieties which are far more than the reach of a retail outlet next door. Here Flipkart saw a big opportunity in the logistics part which is favourable to both the parties in the following ways. 1. It gives a definite advantage of full truck load over other logistics providers as there are products from multiple service providers. 2. As the industry grows there will be multiple specialist service providers as clients which allows Flipkart to shift their generalist approach to a specialist approach, hence maximizing their profits. 3. Opportunity of emerging as an omnipotent in the logistics industry with strong technical infrastructure like UPS. 4. Bargaining power over its own competitors by controlling their supply chain. 5. Getting a cut of profit share or market share of its own competitors and hence minimizing the threat posed by them. For substantiating this intuition, it is very much necessary to examine the resources and capabilities of Flipkart. Strengths of Flipkart 1. Brand 2. Inventory management 3. Innovations and technology competence 4. Self-owned delivery network 5. Supplier relation Opportunities of Flipkart 1. Self e-publishing 2. Tie up with manufacturers (motorola) and education institutions 3. Untapped mobile users Resources & Capabilities
  • 3. 1. Delivery Logistics: 100+ cities network, through the capable hands of our 1500+ delivery experts. 2. Reverse logistics: ekarts specialised services for reverse logistics provide exceptional customer experience and advanced costsaving. 3. Payment On Demand: Payments via cash / credit card facilitated by a robust payment gateway. 4. Customer support: Information delivery systems allow e-commerce players to provide superior customer support during and after shipping. 5. Technology integration: Supply Chain Systems allow easy and seamless integration with our e-commerce partners Order Management systems. With key strengths supporting the logistics in a market where it possesses opportunities for immense growth potential and resources and capabilities strong enough for the idea to fly, the strategic move of Flipkart in opening its logistic arm to its competitors looks promising. It will enable Flipkart to excert a control over the total industry whose magnitude only time will prove. Conclusion The strategic move by Flipkart is an open-check strategy which shields its interests and take advantage over its competitors in mostly a fair way.