In 2007, Sachin Bansal and Binny Bansal, former employees of Amazon, decided to launch Flipkart.com in Bengaluru. Like Amazon founder Jeff Bezos, they began by selling books, but eventually diversified. The company was then seen as India’s answer to Amazon.com, given that it was selling a book a minute.

But how did Flipkart zero in on books as a category to sell online? Surely, their Amazon background alone could not have been the reason.

Sachin Bansal, co-founder Flipkart.com, told CNBC-TV18 in 2010 that a book has a lower transaction size — the cost is as low as Rs 100 — and so it is easy to coax a customer to trust an online retailer with the first transaction. But if one were to sell mobile phones or cameras, it becomes difficult for a customer to trust a company because of the higher costs, he said. More so if one happens to be a new, unknown company like Flipkart, according to him.

So it made sense for Flipkart to launch with sales of books and diversify later after building trust and establishing itself.

For an online retailer, books are also ‘painless’ commodities. Shipping and handling of books are easier than other items because they are not easily damaged while shipping and have a better shelf life as well, said Sachin Bansal.

But It Wasn’t Easy

While stocking virtual shelves with books was easy, convincing suppliers of the concept was not. The absence of an online payment gateway and low internet penetration in India didn’t help, according to Sachin Bansal. But the Bansals worked their way around hurdles by providing users nationwide shipping and discount of up to 35%.

Here is how Flipkart then worked. Once a customer places an order for a book on the website, the book is first checked in the inventory at Flipkart’s three centres in India. If a book can be serviced from the inventory, it was sent and if it was not available, the company would procure it from the suppliers.

Flipkart then had partnered 300 suppliers in India in five cities. The books were brought to one of Flipkart’s several distribution centres, packed there and then couriered to customers.

The money that Flipkart made was after paying up for courier costs, packing costs, delivery costs, and payments to the suppliers of books. The Bansals effectively made 10% revenues from the sale of every book.

Early Signs of a Leader

The book retail industry in India then was valued at Rs 10,000 crore and the internet contributed less than 1 percent of total sale. Flipkart by then had already corned a 50% market share. And thanks to its partnership with publishers such as Penguin, Tata McGraw Hill and Rupa, Flipkart has already sold more than 5 lakh books.

The company, which had 120 employees, had also received funding from Accel Partners. With that money, the company was about to setup three new distribution centres in India. Flipkart was also planning to sell more books and looking to add regional language books in its catalogues.

Sachin also said Flipkart was looking at other categories of products. The company would soon after quickly diversify its bouquet of products and become the largest player in the Indian ecommerce market.

Read our comprehensive coverage of the deal here.

First Published:May 9, 2018 5:06 PM IST