If you want to place your finger on the pulse of India's consumption story, you can do a lot worse than to lounge on a sofa in the lobby of Flipkart's corporate office in Bangalore. On a large multi-panel screen, the real-time transactions happening on the mammoth shopping website bubble up, next to a map of India with location pins pointing to the far-flung wellsprings of consumer demand.
A push-up bra in Kottayam, a Xiaomi Redmi 3 phone in Patancheru, a pair of slim-fit jeans in Siliguri, a premium hookah in Udupi, a cordless beard trimmer in Dewas, a sweatshirt in Jorhat and a nightsuit in Alwar, a pair of JBL headphones in Fatehabad, and in Gandhidham, a DVD of Transformers: The Age of Extinction.
Michael Bay's awful and popular visual effects orgy reaches the Gujarat town named after Mahatma Gandhi via Flipkart.
The transactions are unrelenting, bubbling up at the rate of what seems like hundreds every minute. These come from towns and villages you don't hear from or about very much—Rayagada, Baleshwar, Jetpur Navagadh, Berhampur, Devangare, and so forth. It's like the company has tapped into a deep well of insatiable demand, and is furiously pumping up cash.
For Amazon, India was the country where it got to $1 billion in sales the fastest. Last month, a top Amazon executive said India will become its largest market outside the US in the next few years.
"I have never seen anything like this—not in the US, not in Europe, not in Japan and we are number one in the US, number one in Europe and number one in Japan... This is extraordinary," said the Amazon executive, speaking about the company's growth in India.
There is now speculation that Walmart Inc., the US's largest retail company, will invest in Flipkart, helping it withstand the onslaught of the deep-pocketed Amazon. In many ways, India is the last large market that is accessible to the global giants such as Amazon, Alibaba and Walmart. Every last tactic in the e-commerce playbook that combines technology, finance and logistics, will be deployed.
If all this frenetic activity and high stakes is wearing down Bansal, the billionaire CEO who co-founded Flipkart in a Bangalore apartment nine years ago, it's only occasionally evident on this day. He is polite and friendly, his body language positive and firm, but his answers are optimised for efficiency rather than persuasion.
I ask him about the innovations that the company is currently working on.
He says a major focus area is affordability—how to make mobile phones and consumer durables affordable to more and more Indians. And Flipkart approaches this problem from different directions. Its scale helps manufacturers design and create new categories of products and push the price point ever lower.
He offers the example of smartphones. Today, he says, 30% of all smartphones sold in India are sold online.
"Before 2014, you could buy a good smartphone for ₹18,000–20,000. Below that price point, the quality was not that great. What we did was to work with Motorola and Xiaomi to bring that price point down to ₹14,000, ₹13,000 and to ₹12,000. Today, more than 50% of the smartphones sold in the ₹8000–12,000 category are sold online. We created that category. So the value proposition for the consumer is increasing month after month, quarter after quarter."
Bansal seems the most at ease talking about deals and value propositions. Understanding a deal that is value for money for the average consumer is key to Flipkart's success. It's easy for this picture to get distorted when your personal net worth is $1.3 billion—Bansal reportedly just paid ₹32 crore for a home in Bangalore. But he seems to care passionately about what constitutes a good bargain.
"A couple of years ago, it was unimaginable that a person making ₹20,000 or 25,000 a month would buy an iPhone. Today, on Flipkart, you can pay ₹1500 a month and get an iPhone 6. These are interest-free installments. And you can exchange your existing phone and maybe get ₹10,000 for it.
In the short term, there might have been ups and downs, but mobile-first is absolutely the right strategy in the long run.Binny Bansal
He says this is something the company is seeing a lot now—smartphone purchases from tier-3 and tier-4 towns at a clip that wasn't seen even six to seven months earlier.
Bansal is thrilled by Flipkart's success in mobile phones. But that is not the only category offering a shape of things to come.
"If you look at fashion, in the last three years, 80–90% of the growth of the top 20 fashion brands—I'm talking Nike, Reebok, Benetton, all the top brands—would have come from online. The growth from their stores would be ten times slower compared with online. These are still early days, but it shows you where it's going," he says.
Bansal is dismissive of the criticism that Indian e-commerce is too reliant on discounting and companies like Flipkart are pouring money into discounts without reliably building loyalty.
He says the Indian e-commerce market has now matured to a point where loyalty has started building. "What we see from the data is very encouraging. There is a big set of customers who are very loyal, who buy very regularly, do 20–25 transactions a year, and they are the model of what this is going to be like in the next five–10 years."
So at what valuation is Walmart investing in Flipkart?
Bansal gives me a template response with a wide grin: "So we keep talking to multiple partners and discussions keep happening..." I know the rest of that line. So I ask him when we might hear the next funding announcement from Flipkart. "Anywhere between two months and two years," he says, the grin intact.
Flipkart has raised a lot of money in the last couple of years. "We still have a ton of money in the bank..."
He says the company has managed to reduce monthly burn rate (of expenses) by 40%. This means the company can go on for another two-and-a-half to three years without raising another round of funding.
This of course doesn't mean Flipkart isn't raising money currently. Bansal says they like to raise money when they don't need it, and on their terms. "Once we had to raise money when we needed it and it wasn't a good experience. So we have learnt the hard way."
I ask him about the hubbub over Flipkart's enterprise valuation. Its latest round of funding, in mid-2015, valued the company at $15.5 billion. Since then a number of US-based mutual funds that hold Flipkart equity have written down the value of their holdings in the company in quarterly reports to the Securities and Exchanges Commission, which regulates US markets. While this is in part a reflection of the broader erosion in valuation of privately held global tech giants such as Uber, Airbnb and Dropbox, it has caused anxiety in India that according to these write-downs, Flipkart's enterprise valuation might now be as low as $9 billion.
Bansal says he got an internal team to study what was going on because these reports were attracting a lot of media attention. And he has looked at the data.
His conclusion is that it's not worth losing sleep over. Mutual funds investing in privately held tech companies is a relatively new phenomenon. Part of it is that the overall tech market is depressed. "They have an opaque process for this... On the same parameter, someone will say $100 and another will say $140. So it is like a 40% variance in valuation and it is because everybody has a very different model or whatever it is that they use to do this... Some of these funds about which reports get written own like .01% of Flipkart."
But aren't those the same methods they would have used when buying into Flipkart?
"When you are investing it is not as if you come up with a valuation and you get to invest at that valuation. There is a valuation at which the company is raising money. You decide whether you want to get in or you don't want to get in."
Fair enough. Was this distraction enough for Flipkart to decide to not take money from mutual funds in the future?
Bansal says it's good for the company to get used to these kinds of ups and downs in valuations because that would be a daily affair when it goes public.
So how far along are we on the path to an Initial Public Offering? And is there a decision on whether Flipkart will list in India or overseas? Bansal says right now the company is getting ready for an eventual listing. But the process is long-drawn, and it could eventually happen anytime between two to four years depending on market conditions. And the decision on whether to list in India or overseas, he says, will be made only once the company is ready from a regulatory compliance point of view.
Did Flipkart mess up the app-only strategy it pursued for a while and then abandoned? Was it ill-timed, was it a mistake, did it spark the exodus of some key executives, and what side of the argument was he on?
"It was a very bold move, so obviously there were a lot of arguments," he says.
He doesn't concede that it was a mistake. "In the short term, there might have been ups and downs, but it (mobile-first) is absolutely the right strategy in the long run," he says.
The calculation is that 80–90% of internet users in India are going to be on mobile in the future. So it makes sense to build your company as 'mobile-first'.
"Today Flipkart is a mobile-first company. The desktop mimics what the mobile does and not the other way around."
I ask him about the competition—it's been an intense few years with Flipkart, Amazon, Alibaba-backed Snapdeal and Paytm, and a number of smaller rivals all vying for the customer's wallet.
There is a big set of customers who are very loyal, who do 20–25 transactions a year, they are the model of what this is going to be like in the next 5–10 years.Binny Bansal
He says whoever manages to innovate consistently for India will eventually win. And in his view, Flipkart has done that very successfully so far.
"If you look at the history of e-commerce in India from 2007 to today, and you look at all the phases in which the market has grown, the market has only grown because Flipkart innovated. We did cash-on-delivery, 30-day replacement and we built a brand. That was when the market took off. We did mobile phones, and we changed the way mobile phones are sold and the market took off. We launched a marketplace and fashion, and again the market took off."
I remind him that Snapdeal was a marketplace before Flipkart.
"I am talking about what has driven market growth. Eight to nine times out of 10, the market has grown because of Flipkart's activity. We believe that is the DNA of the company, that is what we do every day."
On one day this October, during its mega sale days called the Big Billion Days, Flipkart said it sold products worth ₹1400 crore.
What was that realisation like, for someone who started this journey himself packing shipments of books out of an apartment?
"That was almost like a crore per minute. So, every minute the ticker went up a crore... I think that was a very thrilling feeling across the company. It was very very exciting."
Did he weep with joy?
He laughs in response. "No, may be when we do one lakh crore in a day."
I don't know if he means never or if he genuinely believes that one day Flipkart will do ₹100,000 crore in sales. I'm afraid to make a guess.