One year after Flipkart completed the acquisition of Myntra, Myntra moved to App-only model, shutting down their website for e-commerce transactions. My reaction to this was – bold move – perhaps Flipkart is trying to kill Myntra. Bigger brands killing smaller brands they acquire is not uncommon in global business, I thought. Turns out, Flipkart was taking a calculated risk or may be conducting an experiment, which seems to have produced the right results.
Couple of weeks back, when Flipkart announced that they would be shutting their website down by October 2015, there were several eyebrows raised. An article in Times of India on July 9, 2015, analyses why Flipkart is shutting down its website and states ‘cookies’ as one of the most important reason. When I continued reading the comments below the article, I was dumbstruck. Not a single person who had commented seemed to have been happy with the announcement. Not that the app is not good, it is one of the best mobile apps in India for which over a million people have rated and yet the app enjoys a massive 4.2-star rating on Play store. The data from the comments obviously made for some awesome market research. But has the largest e-commerce company in India not thought about the repercussions of its massive leap of faith. They obviously have and yet they are ready to pull the trigger. Let us analyse what the advantages and disadvantages of apps and websites can be:
Apart from the ones mentioned above, there are obviously some more advantages going with the App-only approach:
Data – Flipkart claims that 70 to 75% of its traffic already comes from its mobile apps. It would be interesting to know what percentage of them actually buy and how these percentages fare against those which buy from the web. If there is a negligible difference or if the percentage of conversions through the mobile app, outnumber that of the website, Flipkart’s move starts making sense.
Predictions – Clearly, all global estimates say that eventually, people accessing the internet through mobile is going to be huge as compared to those accessing internet through desktops. In 2014, the former has already surpassed the later. So, there is no question that a major chunk of e-commerce is going to be through mobile devices (m-commerce). It’s the timing of the move that is concerning.
Cost cutting – Since only 25 – 30% of the traffic comes from non-app platforms (and considering that there is negligible difference between the conversion rates through the mobile app and non-app platforms), Flipkart would be spending unreasonable to maintain the non-app platforms. The cost of maintaining the website includes:
- Designing and periodic redesigning
- Infrastructure – servers, support, maintenance, etc.
- Imagery – millions of products sold need millions of images in different sizes
- Testing – On all browsers and screen sizes
- Support – Cost of training the support team
Sellers – Buyers are used to 30-day replacements, no questions asked. The sellers need to bear these costs of replacements and re-deliveries. Flipkart charges a considerable fee from the sellers as well and this is putting an enormous pressure on the sellers. I have personally spoken to a couple of sellers and they are contemplating moving away from selling online. If Flipkart can cut down it’s own cost of operations, perhaps they can relent on the sellers and it will be a huge relief for the sellers.
Inspite of these, the move comes as a surprise to many, including me. Does Flipkart have any hidden agenda behind this move that none of us have been able to decipher? Or is it as clear as it looks? Will the big fish fall prey to its own move? Only time will tell.
If Flipkart is able to pull it off successfully against all odds, they deserve all the respect in the world for this bold move. What do you think?