Leaders who ascend to the top of the corporate ladder often exude a sense of urgency. They want you to see the point they are making. And, get on board quickly.
Kalyan Krishnamurthy, the man who has been at the helm of Flipkart for seven years now, has the same aura. The energy in the room is almost palpable.
Krishnamurthy has been the one constant amid wider changes, sometimes turbulent, at Flipkart in the last decade- the departure of its storied founders Sachin and Binny Bansal, Walmart’s acquisition of a majority stake and the exit of early investors such as Accel and Tiger Global.
At the headquarters of Flipkart in Bengaluru, where we met one of India's most influential internet bosses, Krishnamurthy tells us he has the best job in the world.
"What job can be better than this? Influencing the quality of life of hundreds of millions of users, right?" he said.
It seems there's nothing like a seven-year-itch when you steer the fortunes of a company estimated to be $35 billion in value.
In an hour-long conversation, Krishnamurthy spoke with us about the evolution of e-commerce in India, what ails the governance of startups in the country, how Flipkart aims to use artificial intelligence and much more.
Edited excerpts
Give us a sense of how the e-commerce industry is faring in India. 2023 was tepid, with some estimating that it grew at a decade’s low for the first time outside of the pandemic years. What is the outlook for 2024?
Getting e-commerce solved or digital commerce solved takes a lot of capability building. For example, launching an e-commerce business with books is easy.
Then it goes to certain categories. Let's say it goes to branded electronics, it's a bit more sophisticated because in books, people pay a small price. So, the risk they're taking is very low.
And the customer in this discussion itself is evolving from a trial. The final stage of all of this is, let's say, loyalty. Let's go from one trial to repeat to loyalty. After this evolution, let's say there are categories like unbranded categories. You're looking at smaller sellers, you are looking at a huge amount of selection. And I think the last capabilities are related to categories like grocery, which are very different.
This is the final stage of evolution of e-commerce. India is heading towards the last few stages. You asked why growth rates are coming down, it is because sophistication and capability building is at a stage which everybody cannot easily do.
And that's the reason you see that the growth rates have over time stabilised or tapered down, and now people are looking at these more difficult and sophisticated categories to solve. And driving the customer from trial to repeat, now to loyalty, saying don't keep comparing prices everywhere or don't keep comparing service levels everywhere. If you're a Flipkart user, be a Flipkart user. So, this is the evolution of e-commerce that is going on.
So, will this be the new normal or is this an adjustment phase and then we will again see a spurt in growth?
At this scale, there will be broad stability of numbers. It's not going to be hockey stick anytime soon. And, the market will settle down to players who build capabilities, rather than anybody at any point in time just coming in throwing some money and doing e-commerce. And you will see that continuously happening, that people keep falling off the curve the moment sophistication comes in. You need supply chain capabilities in all of these categories.
If we look at Flipkart over the last 15 years, your strengths have been smartphones, electronics, fashion which is still 60-70% of your overall GMV (gross merchandise value)? How do you see that share changing, since you've also entered many new businesses in the last few years?
In fashion, there is still potential, so we continue to invest in that. There are categories within general merchandise, beauty care, and some parts of grocery, all of these are where we continue to invest. So, it's no longer an electronics platform.
How’s the competitive landscape looking like in fashion with Ajio, Meesho and Nykaa? Even in e-commerce, you said players who can build capability will survive. So again, are we looking at a three-cornered contest, or four-cornered contest? How will it evolve?
See fashion, we have just so much going on, and the potential is so immense, that's not the lens we take day in and day out saying that we need to compete with somebody or whatever. Outside of that, I will tell you that the competitive landscape for us has not changed over the last 10-15 years There are good competitors we've competed for over the years and they continue to be there. A lot of new competitors have emerged in the form of store format. When I say store format, people who have stores.
Offline, you mean?
Offline – all of those, I don't want to name any, but a lot of them are doing extremely well. And we do believe that they continue to make inroads into e-commerce and they're doing well. So that's the way we look at competition in general, especially when it comes to fashion.
In terms of your newer bets, Cleartrip is already number two in the online travel space. You also forayed into pharmacy. Take us through some of these newer areas and how one should sort of envision Flipkart beyond e-commerce.
We will be a commerce player, even 10 years down the line, we will continue to be hopefully an influential and a scaled-up commerce player. The challenge, let's say, again, compare the Indian market with the market in parts of China, parts of Asia, and parts of the US also, right?
More than 500 million, which is big if you look at the country's demographics, right?
It's almost a third of the population...
It's a third of the population, right?
Have these customers bought anything at least once?
Bulk of them have bought products at least once.
If you just look at the gap between the people who bought once, which is let's say 500 million versus people who buy monthly, there is a massive opportunity there. A lot of our focus goes towards bridging that gap. That is the big opportunity we see. We are not focused on expanding that 500-600 million to 800 million.
And a lot of things which we do, the question you asked about travel and health and financial services, all of those are in that direction.
It’s a velocity problem. The question is, earlier you were buying two times monthly, now are you buying four times? Next year are you buying six times? Which means you were earlier only buying phones, and then you bought shoes. And now you're also buying televisions and eventually…
Maybe booking a flight ticket as well?
That. But eventually, the average customers' basket in India has a big part of categories like grocery and home. So, once you graduate to that, then you're buying 14 times a month. That's what the market needs to get to.
Are you saying most e-commerce players or overall businesses didn't guess this correctly when you are estimating the market or how the frequency will be?
We did not think and need to estimate anything like that. We just went in and offered value proposition to the customer. All I'm saying is that frequency is a little bit slow to pick up.
As a market leader, it's our job to evolve capabilities and constructs or products for the country. It's not that I'm waiting for some stroke of luck that it would have evolved.
Coming to fintech, where you are testing a UPI product with some users, you mentioned this in your employee townhall last week. It’s almost like you're reinventing the wheel, right? PhonePe was incubated by Flipkart, then they got spun off, and now they're doing their own thing. But tell us about your fintech ambitions?
We are launching some kind of a payments product very soon, matter of weeks or month.
This is UPI-based?
The way the customer would want to pay, they will be able to pay. That's the construct here.
For the customer, the 500-600 million users who come on Flipkart, again, I'm talking to them. They want to make a payment, they want to make a flight booking, they want to buy medicines - that's the way we think about it.
The bigger opportunity there what we're trying to do is frequency. We want people to keep coming back, so that eventually they'll do commerce.
And we believe there is an opportunity for us to make a little bit of money here from the financial institutions who we pass on the lead to.
Personal loans is another very big product, where we launched the product, maybe 9-10 months back, and we made significant progress there.
But when you look at Flipkart, there is already an insurance platform. And then you look at the credit card that you have, which is extremely successful. I mean, I think 4 million as of now or maybe 4.5 million right now….
Credit card is the same philosophy for Flipkart, growth on affordability for customers and we believe that there is an opportunity for us to make a little bit of margin there.
Like I said, this is all under financial services. And this kind of a full suite of financial services, I don't know who has in the market.
How has quick commerce evolved? Is there room for more consolidation there?
If you just ask, what is your strategy to me about Flipkart, it's a bit difficult because we don't have one strategy. India has a huge variety of demographics.
Over the last several years, wanted to be mostly offering value proposition to every user. So, we would like to offer/please all customers across the country. Horizontal platforms normally tend to do that.
On AI, where do you see that playing into because it's a horizontal sort of technology…
Absolutely. It's horizontal and the objective always on AI has been to not see it as an initiative, but eventually it should weave into the culture of the company.
For example, we have more than 1.4 million sellers. How do we offer AI-related services products to them? That's a very big part of it. It should not just become a customer-facing conversational commerce product.
In terms of your path to profitability, if you can give us where you see or how you see Flipkart becoming profitable? What will help you get there?
There is a business which exists in Flipkart and then there are new bets which we have taken.
Bulk of investments of Flipkart go towards the second bucket, which is futuristic businesses, futuristic bets, where Flipkart might not yet be an automatic destination for customers.
Do you have a timeline for profitability?
I have a timeline and I won't be able to share that with you. Of course, I have a timeline.
But has the timeline shifted over the years?
No.
The business has been around for 17 years...
That's not the way we look at it. If we think we need to build capabilities, we can serve the customer better, we will do whatever it takes to do that. I think we are lucky that we have had the privilege of working with shareholders who exactly think like this. We have strategic, long-term driven, do the right thing type of shareholders always, today and in the last several years, who believe in this kind of philosophy.
In terms of your plans for IPO, when will that happen?
We’ve not had a discussion yet with our board.
In terms of the overall Flipkart structure, it's a massive organisation today. Do you see a scope for it to become nimbler, any structural changes that you plan to undertake?
No changes planned. We have moved mountains to make it agile and launch multiple products.
What do you do to ensure that it continues to be this agile?
It's a great question and it's probably one of my biggest jobs. If you ask me how I spend my day? I spent a huge part of my day making sure that this innovation engine, this agility engine in this company continues to get better and better.
In terms of hiring plans, are you going to go slow?
We are going slow. If we need people in certain functions, capabilities, we will absolutely do that. But outside of that, we continue to go slow on hiring new employees.
What’s your sense of where we are as a startup ecosystem? There’s been a funding winter, governance lapses, down rounds…
Governance in the country on startups must improve in general. In the last one, two years, a lot of rigours that has set in. Compliance in general, code of conduct – all these things are evolving and need to evolve at a very big speed. In fact, in open forums I have suggested that you need to have…, every company's board needs to have a reasonable set of independent directors, which is one of the reasons I believe the startups in many cases have governance issues. Because if you're not independent, and if you have some kind of a vested interest with the company, if you're a shareholder investor, if your management, all of those, to question yourself is a little bit less easy for humans, right.
If you just look at our finance and legal departments, they do think about all these things. We've not come to any conclusion as to what we want to do on this. It's a complex discussion
If we look at Flipkart in the last 15-16 years, it’s evolved from a founder-driven company to a professional CEO-run company. But you've sort of been the constant. With or without founders, from a representative of Tiger to interim CFO to later heading category design and then becoming CEO. How do you reflect on your tenure? How long do you see yourself doing this? What tasks have you finished and what is unfinished?
We have stakeholders, customers, and you should never ignore any stakeholder which is also what many people in the ecosystem or all of us have done in the past. Just focus on a particular stakeholder and over index. Don't do that.
We have customers, we have employees, we have sellers, we have shareholders. We operate in the framework of governments around us, be it very local or state level or country level.
I believe that is my job, whatever my board structure has been, shareholder structure has been, I have not moved from that.
Have you thought of life outside Flipkart?
No. See, there is no better job than this in the world. It's a cool job - what job can be better than this? Influencing the quality of life of hundreds of millions of users, right?
(With inputs from Deepsekhar Choudhury)
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