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Flipkart SWOT & PESTLE Analysis

Last Updated : 19 Jun, 2017

OVERVIEW

Name of the Company: Flipkart

Business Sector: Retail, E-commerce

Operating Geography: India

About the Company: Flipkart is an e-commerce company based in Bangalore, Karnataka. This online retail megastore was founded in 2007 by Sachin Bansal and Binny Bansal. Despite being based in Bangalore, Flipkart is registered in Singapore. With its modest beginnings in selling books, Flipkart has today expanded to include a wide variety of goods. It was also the first e-commerce website to introduce the concept of cash on delivery, which is something that is endorsed by every e-commerce website in India today.

Revenue: INR 13,177 crore (FY ending 31st March 2016)

SWOT & PESTLE Analysis

The SWOT analysis for Flipkart is presented below:
Strengths
Weaknesses
1. Internal fleet helps in streamlining deliveries
2. Various initiatives to boost employee engagement
3. Development of strong in-house brands
4. Exclusive tie-ups with established brands to attract customers
1. Lack of an independent board
2. Sales not in sync with increase in internet penetration
3. Too desperate to overcome Amazon
Increasing levels of uncertainty
Opportunities
Threats
1. India’s growing logistics sector can provide a good ground to highlight its own fleet
2. Leverage the nationwide vibe of ‘Make in India’
1. Amazon India, the formidable competitor
2. Introduction of the new GST bill
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Strengths

1. Internal fleet helps in streamlining deliveries: Flipkart has invested around $100 million in its in-house delivery service, Ekart. Ekart has been able to reduce costs by Rs 20 per shipment. Flipkart has reduced its delivery time by 2 days since January 2016.

2. Various initiatives to boost employee engagement: Programs like adoption assistance, flexible leave policy, wellness programs, CEO for a day, sabbaticals, etc. help Flipsters (as employees of Flipkart refer themselves) to live their dreams while managing high profile roles.

3. Development of strong in-house brands: SmartBuy, the umbrella brand encompassing a total of 13 in-house brands features low-priced products such as chargers, accessories, etc. These help fill the gaps in product offering and the consumers have also gotten comfortable with private labels. Margins on private (in-house) labels are as high as 45% on fashion products for Myntra.

4. Exclusive tie-ups with established brands to attract customers: Flipkart commands 70% of the market share in online smartphone sales. It has also revived exclusive deals with smartphone giants such as Motorola, Lenovo, Xiaomi, Apple etc. which has helped Flipkart to outperform Amazon India during festive sales.

Weaknesses

1. Lack of an independent board: Flipkart is majorly an investor-driven organization. There have been several tussles between the founders and high-level executives which has led to no innovations in the past two years.

2. Sales not in sync with increase in internet penetration: Flipkart expected sales to boost after introduction of Reliance Jio 4G, but has not happened. It seems investors as well as executives have overestimated the growth rate of e-commerce.

3. Too desperate to overcome Amazon: Instead of focusing on net promoter score (NPS), customer service and other metrics, Flipkart is on an acquisition spree to become a monopoly. The soon-to-happen acquisition of Snapdeal is a prime example of this. Snapdeal has almost nothing to offer to Flipkart as most of its customer base is overlapping with Flipkart. Flipkart is just following dog-eat-dog strategy to overcome Amazon India.

4. Increasing levels of uncertainty: Flipkart has raised an approximate of $1.4 bn in 2017. This can be seen as an increase in number of investors, dilution of control. As investors eye to squeeze profits from their investments, they seem to have resorted to pragmatism (appointment of Kalyan Krishnamurthy as CEO by Tiger Global). Moreover, Tiger Global may be planning to sell a part of its stake to Microsoft and other investors which can be a warning sign to Flipkart to tighten its belts and boost sales to reinstate investor and customer confidence.

Opportunities

1. India’s growing logistics sector can provide a good ground to highlight its own fleet: Logistics market in India is set to grow to a value of $307 billion by 2020. Coupled with India being the next manufacturing hub, Flipkart can leverage these factors to start and offer its own logistics arm Ekart as a 3PL provider to the businesses in India.

2. Leverage the nationwide vibe of ‘Make in India’: Flipkart is set to introduce goods (from electronics to apparels) manufactured by local businesses under its own private label. The subsidies and tax benefits for Make-In-India products and favourable central government attention make this opportunity much more profitable and exciting.

Threats

1. Amazon India, the formidable competitor: In 2016, Amazon surpassed Flipkart as the most preferred online retail destination. Moreover, Amazon has reported a five-fold growth in number of new customers (70% of these coming from tier II and tier III towns). This shows how deep Amazon has mastered the art of customer service. It recently ambushed Flipkart’s Big Billion Day sale (15-18 May, 2017) by launching its own Great Indian Festive Sale on 11-14 May, 2017. As both the giants are backed by deep-pocketed investors, it will be a crucial battle of their core competencies in the coming days.

2. Introduction of the new GST bill: The proposed GST model makes Flipkart and other ecommerce companies responsible for the collection of taxes on behalf of its sellers and merchants (up to 2% tax on total payment). This will make online sales expensive and cumbersome for small sellers as a result of which the sellers and merchants may choose offline channels which will hurt the product portfolio of Flipkart.

To get the complete detailed SWOT report on Flipkart please mail us at: support@swotandpestle.com. or contact us here.

Flipkart SWOT analysis has been conducted by Pratik Kamble and reviewed by senior analysts from Barakaat Consulting.

References

1. Flipkart Invests $100M in Its Logistics Arm Ekart- http://www.iamwire.com/2016/02/flipkart-invests-100m-logistics-arm-ekart/131272

2. Ekart aims for 50% revenue from non-Flipkart companies- http://economictimes.indiatimes.com/small-biz/startups/flipkarts-logistics-arm-ekart-pushing-for-business-from-external-clients/articleshow/56345653.cms

3. Flipkart employee will get to be CEO for a day- http://economictimes.indiatimes.com/small-biz/startups/flipkart-employee-will-get-to-be-ceo-for-a-day/articleshow/58340283.cms

4. Amazon, Flipkart Battle to Push their In-house Brands-http://www.adageindia.in/marketing/news/amazon-flipkart-battle-to-push-their-in-house-brands/articleshow/57982108.cms

5. Flipkart re-enters the private label business with Smart Buy-https://www.ibef.org/news/flipkart-reenters-the-private-label-business-with-smart-buy

6. Flipkart, Snapdeal see falling sales despite rise in internet users- http://www.livemint.com/Companies/kXrX7B1bBBMFlra7w9UDNK/Internet-user-base-growing-rapidly-but-averse-to-paying.html

7. Deals with eBay, Snapdeal reflect Flipkart's desperation to counter Amazon-http://www.businesstoday.in/opinion/business-wise/deals-with-ebay-snapdeal-reflect-flipkart-desperation-to-counter-amazon/story/249733.html

8. Flipkart raises $1.4 billion from eBay, Microsoft, Tencent, acquires eBay India- http://www.livemint.com/Companies/RjjyJUShEtiZ2DjgzUBczM/Flipkart-to-buy-eBay-India-as-part-of-14-billion-fundrais.html  

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The PESTLE analysis for Flipkart is presented below:
Political
Economical
1. Government of India (GOI) to boost rural economy and promote Digital India
2. GST, ‘The Game Changer’
1. 100% FDI in online retail of goods and services
2. Removal of distinctions in different types of overseas investment
Social
Technological
1. Startup jobs may suffer a downfall
2. Empowering youth through employment
3. Rise in number of online consumers
1. Implementation of Data Analytics and Cloud
2. Leveraging AI for optimization
3. Advent of payment banks
Legal
Environmental
1. Infringement of Intellectual Property (IP)
2. Regulatory changes for protection of online shoppers
1. Promotion of green environment
Get Your Free Copy of the SWOT & PESTLE
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Our insightful and holistic reports have helped corporate,academia and researchers to take their research forword. Like us on Facebook to stay updated with the latest published SWOT & PESTLE Report.

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Political

1. Government of India (GOI) to boost rural economy and promote Digital India: GOI has targeted to connect more than 1.5 lakh gram panchayats with high speed broadband and will focus on promoting digital transactions (AADHAR enabled payments, BHIM) in 2017. Flipkart has seen spikes in its sales from tier-II cities and beyond, which now account to 2/3rd of their sales. Seeing from the organizational goals, the above mentioned two initiatives work in favour of Flipkart for expanding their reach to semi-urban and rural areas.

2. GST, ‘The Game Changer: Ecommerce players like Flipkart won’t get the pricing benefits from merchants based in states with lower VAT rates, thus impacting the discounts offered. On the other hand, the logistics expenses currently incurred will go down by about 20%, thus promising faster deliveries. But, Tax Collection at Source (TCS) is going to make the process of online selling for sellers more cumbersome and expensive.

Economic

1. 100% FDI in online retail of goods and services: 100% FDI has only been allowed in marketplace ecommerce model, not in inventory-based models. But this new law has also a clause which restricts pricing offered by Flipkart, thus eradicating predatory pricing. Moreover, Flipkart cannot permit more than 25% of the sales from a single vendor. WS Retail, a primary seller established by Flipkart will thus be restricted and Flipkart will now have to restructure its business accordingly.

2. Removal of distinctions in different types of overseas investment: The differentiation between different types of investments i.e. FDI/FPI/FII etc., have been replaced by a single composite limit. This implies that portfolio investment (up to 49%) will not require government approval as long it does not result in transfer of ownership or control of Indian entities to foreigners. This can be seen as a green light towards attracting more and more foreign investments.

Social

1. Startup jobs may suffer a downfall: In 2016, Flipkart deferred joining of campus hires from IIM Ahmedabad and IITs, citing restructuring of its businesses, thus leading to its blacklisting in respective IIMs and IITs. Due to this fiasco, management and tech graduates might prefer joining ‘safer’ companies compared to all the ‘volatile’ startups.

2. Empowering youth through employment: dPronto, a last mile delivery partner, provides jobs to underprivileged youths from rural India. Flipkart has tied up with dPronto to strengthen its delivery system with skilled labour. Due to this, it has access to Empower Pragati’s network of 600 centres that trains and supplies logistics staff. Flipkart stated that it wanted to transform lives of such youth through respectable jobs.

3. Rise in number of online consumers: According to ASSOCHAM-Resurgent India study, number of consumers who purchase online is expected to cross 100 million by end of 2017 with e-retail market mostly jumping 65% on year in 2018. Increased participation of all over the country, improvement in ease of net banking will favour the growth of Flipkart tremendously.

Technological

1. Implementation of Data Analytics and Cloud: One of the main reasons Flipkart’s Big Billion Day 2016 was a success is efficient usage of data analytics. Flipkart recently announced that it is going to adopt Microsoft Azure as its exclusive public cloud computing platform. Microsoft’s strong presence in India and usage of advanced cloud technologies, allows Flipkart to make online shopping more relevant and enriching for customers.

2. Leveraging AI for optimization: 100 million user base and data of online consumer market collected over 10 years will Flipkart’s AI solution to make smarter decisions to predict sales of products. This helps the company to better understand consumer behaviour, purchasing power etc. and better target products.

3. Advent of payment banks: PWC predicts that by 2019, approximately 800 million people in India will have access to e-payment platforms and adoption of e-payments will increase exponentially due to Aadhar. On this basis, Flipkart is hoping its e-payment platform PhonePe (which will use the new UPI which lets users make instant bank transfers) will attract customers due to the ease of payments.

Legal

1. Infringement of Intellectual Property (IP): In July 2015, Westland Books filed a case against Flipkart alleging that Flipkart was violating Copyright Act and Information Technology Act(IT Act) by selling ‘Scion of Ishvaku on its platform when Westland had an exclusive deal with Amazon to sell the book. As per section 30(3)(b) of the Trade Marks Act, 1999 and section 107A (b) of the Patents Act, 1970, once the owner of the copyright has exercised his right to issue the copies, then the owner loses all future rights to control the subsequent sale of the same work. Even though Flipkart cannot keep an eye on every product it puts on its site for sale for copyright infringement, it degraded its brand value.

2. Regulatory changes for protection of online shoppers: The Department of Consumer Affairs is restricting its regulations to enhance protection of online shoppers. In light of the recent Zomato data breach which resulted in a theft of 17 million user data and 20% complaints on national consumer helpline against ecommerce companies, efforts are being put in the regulatory framework to enhance consumer (data and piracy protection).

Environmental

1. Promotion of green environment: With cycling gaining importance across metros and tier I, tier II cities, Flipkart aimed to cater the eco-friendly and health conscious customers by partnering with Hero Cycles for the exclusive launch of their three new cycle models. Flipkart’s humungous customer base will help Hero Cycles to address the needs of health-conscious customers at an affordable price

To get the complete detailed PESTLE report on Flipkart please mail us at: support@swotandpestle.com. or contact us here.

Flipkart PESTLE analysis has been conducted by Pratik Kamble and reviewed by senior analysts from Barakaat Consulting.

References

1. Post Budget 2017, e-commerce players shift focus to rural India- http://www.business-standard.com/article/companies/post-budget-2017-e-commerce-players-shift-focus-to-rural-india-117021300461_1.html

2. Flipkart draws up plans to boost growth in tier-II cities- http://economictimes.indiatimes.com/small-biz/startups/flipkart-draws-up-plans-to-boost-growth-in-tier-ii-cities/articleshow/57642165.cms

3. GST and e-Commerce: boon or bane?- http://retail.economictimes.indiatimes.com/news/e-commerce/e-tailing/gst-and-e-commerce-boon-or-bane/57811799

4. 100% FDI in e-commerce marketplace: If discounts are restricted, sector will never be the same- http://www.firstpost.com/business/decoder-100-fdi-in-e-commerce-will-shake-up-the-sector-but-is-not-all-that-revolutionary-2702590.html

5. FDI on E-commerce: Its Impact on the E-commerce Companies- http://www.marketexpress.in/2016/11/fdi-on-e-commerce-its-impact-on-the-e-commerce-companies.html

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