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6 Reasons Why Flipkart's App-Only Strategy Is A Masterstroke

21/07/2015 8:11 AM IST | Updated 15/07/2016 8:25 AM IST
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I'm finally jumping in, with all guns blazing, into the latest e-commerce debate which was kicked off by Alok Kejriwal's controversial article on Flipkart's strategy of going app-only.

He said that this was a "cost cutting measure", contending that e-commerce companies make losses on every sale due to delivery costs, returns and so on. If they sell less, they lose less. This drop in sales, claimed Kejriwal, was the real reason for companies to go app-only. This view drew sharp criticism from Sachin Bansal, CEO of Flipkart.

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I agree with Bansal. Bhai, tu rehne de. If Flipkart had to cut losses due to sales, they could have simply lowered the deep discounts on their products. They needn't shut down their website.

That they are going ahead with the move is a masterstroke and the real reasons for it are not difficult to find if you look closely enough.

By going app-only, Flipkart will shoot two birds with a single arrow. It will cut infrastructure costs (not sales) and expand its market to cover all of India, eventually beating Amazon. Here's how.

1. Mobile is the unconquered frontier

In India, web giants like Google and Facebook easily beat Flipkart on the number of website visits and other vital web statistics. However, this changes drastically if the battleground shifts from the web to mobile.

There is no alpha among mobile apps at this point in time and going by Flipkart's vision, it clearly wants that position with a certain degree of desperation.

"There is no alpha among mobile apps at this point in time and going by Flipkart's vision, it clearly wants that position with a certain degree of desperation."

Why did Facebook take over WhatsApp? Why are mobile payment platforms the preferred acquisitions of e-commerce companies? The signs are there for all to see. The next innovations are happening in the mobile platforms. And before any nifty startup attempts to leverage the power and features of the mobile platform and establish itself, Flipkart aims to grab the platform by the neck.

Flipkart, after it goes the app-only way, is likely to take a cue from Amazon's Kindle strategy and integrate vertically to finally bring out its own hardware with a dedicated software and build an entire ecosystem around it.

2. Deeper smartphone penetration in India

"India is set to overtake the US as the second largest market for smartphones in the world by 2016 as smart mobile devices become affordable", said eMarketer, a US-based global research firm. Globally, there will be 1.91 billion smartphone users in 2015 and increase by 12.6% the following year to touch 2.16 billion in 2016.

Mobile penetration in India has increased at an exponential rate. Several e-commerce firms have seen a sharp growth in transactions using mobile platforms. SnapDeal saw mobile transactions rise from 30% in 2013 to 50% in 2014. Flipkart said that 75% of its total traffic is already coming from its mobile app, compared to 6% in 2014.

Cheaper handsets enable the rural population of India to connect to the internet with ease. They won't need a laptop anymore. So, the penetration is creating vast opportunities. And to reach the unexploited rural population in villages, the only logical way forward is to go all guns blazing the app-only way. Are they sacrificing their urban population in the process? No way. Up to 70-75% transactions are through mobile anyway and its increasing as we speak.

"Flipkart will aim to build an ecosystem around the cell phone to compete with the Amazon Kindle experience."

Question is: Why should Flipkart waste resources and huge maintenance costs on making its website capable for the use of the huge population of India (IRCTC anyone!)?" It is likely to be a liability in the future when billions transact every second (big billion day anyone?). All the resources can better be used on the app to break new ground regarding the personalised app experience and its features. India is a very heterogeneous market and hence, for the Flipkart app to be successful with all the customers, it has to meet each diverse set of requirements that may present itself such as low bandwidth needs and vernacular features etc. to name a few.

The market is new and its challenges are unknown. The opportunity is up for grabs. It is better to come prepared.

3. Getting personal with consumers

The mobile phone is a personal object and Flipkart aims to make shopping a seamless and personalised experience by going the app-only way. They will be able to make marketing more targeted while also enhancing the shopping process for users with features like geo-tagging, being logged in at all times and personalised notifications based on shopping history.

But it won't stop there. Flipkart will aim to build an ecosystem around the cell phone to compete with the Amazon Kindle experience. Things it cannot do in the desktop are possible in mobile. Groundbreaking innovations like cash-less transactions, being able to run the app in negligible bandwidth, geo-tagging should all be in the radar of Flipkart if they want to make their mark in the mobile arena and get the advantage.

4. Competition from the likes of Google and Facebook

In a way, going app-only also reduces competition from the giants like Google and Facebook, or at least segment the markets, if the behemoths choose to take a slice off the e-commerce market in India.

Google already has the option for book searches available. What prevents it from adding a "buy it now" button beside any book that you look for on Chrome or on Google search?

Facebook is number three among websites with the highest number of Indian users at any given point of time. What prevents Facebook from enabling company pages/groups to sell directly to its users?

I am not even getting into Amazon and Indian e-commerce companies like SnapDeal. But the move is set to give Flipkart a competitive advantage over Amazon in India because the unexploited rural market comes into the picture.

5. Stop feeding competition

The browser (much better if it is Chrome!) basically feeds the companies that own it. It records all user preferences and stores them in the owners' servers.

"The Indian market is inherently disloyal. Customers are likely to switch allegiances depending on the most competitive prices. A mobile platform changes all of that."

Somehow e-commerce companies have understood that browsers are not neutral and always pro owner. So, they would definitely want to get out of the browser ecosystem as soon as possible and not let it analyse their customers and later use it against them. Better be self-dependent. Compared to this, Android (or iOS, windows) is much better. Android can't analyse what's going in an app. Period.

6. Force loyalty on the disloyal Indian market

The Indian market is inherently disloyal. Customers are likely to switch allegiances depending on the most competitive prices. A mobile platform changes all of that. No more handy Google for you to search for cheap alternatives. No longer the distraction of jumping websites comparing various products. You are more or less trapped. But with new technical innovations waiting to happen in the near future, the app experience may just trump anything that a browser can offer - for example, features such as notifications for price change or for a new product launch that would suit your profile.

So, I would like to close this marathon of an article by agreeing that Flipkart would indeed cut huge costs by going the app-only way but not suffer a drop in sales. Sales will increase exponentially. This move is aimed at spreading Flipkart's wings and, finally, beating Amazon in India.

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