• Flipkart’s new centralised procurement process aims to cut costs

    Flipkart is said to be looking to cut costs by as much as 30% by merging departments, keeping hiring to a minimum and centralising purchases to steer the company toward profitability after years of burning cash as it won customers and became one of India’s biggest ecommerce marketplaces.

    The engineering departments of logistics arm Ekart and the advertising and ecommerce units will be unified into one as part of the exercise, said people with knowledge of the matter. Independent categories such as large appliances, small appliances, furniture, home decor, kitchen and furnishing will be clubbed into one home.

    The sales and marketing for all of them will be run by a single team after the merger. “This will also free up many people,”‘ said one of the persons, reducing the need for fresh recruitments, which are already sharply down from before. Flipkart is hiring only after careful evaluation of each new position, the person said. The company recently courted controversy when it deferred the joining date of fresh recruits from Indian Institute of Management, Ahmedabad.

    The ecommerce marketplace said it would hire the talent it needs to meet business goals. “At Flipkart, it has always been our endeavour to improve organisational efficiencies to achieve our goal of making quality products affordable and accessible to all Indians,” a company spokesperson said.

    The person didn’t respond to specific questions on cutting costs and manpower. “We continue to invest in automation and in driving efficiencies in our operations structure to improve our performance and productivity,” Flipkart said.

    “Our hiring plans are in line with the business goals and we are continuing to hire rich talent in our areas of focus. Over the past years we have built a team of outstanding global professionals. This year we are also emphasizing on internal development of our existing talent.”

    The company is also merging procurement for all functions such as media buying, promotions, IT, supplies and warehousing based on the assumption that the centralised unit will be in a better position to negotiate deals with vendors rather than multiple teams doing so individually.

    Ecommerce firms are yet to show signs of profitability, having focused on gaining market share and winning customers. But they are coming under pressure from investors that have poured billions of dollars into them, banking on the potential of Indian market, which is pegged at $40-50 billion by 2020 from $8-12 billion now, according to a report by Boston Consulting Group and Retailers Association of India.

    Ecommerce firms are also being prodded to optimise operations, curb discounts and focus on improving margins to maximise returns.

    Discounts have declined after the government barred online marketplaces with overseas investment from engaging in price cuts themselves. These have to come from participating vendors instead. This was part of rules issued in March by the government to put online and offline retail on a level playing field.

    As part of the cost-cutting plan, Flipkart recently tightened its returns policy, narrowing the window during which a customer can send back a product bought on its website to 10 days from 30 for most top-selling items. It also told sellers on the platform that they will have to pay higher commissions to Flipkart starting June 20.

    The firm is also looking at investment in automation at its warehouses and the last mile to reduce costs and the need for human intervention.

    The ecommerce firm is also trying out alternative delivery models. As part of this, Ekart has set up experience centres and pickup zones at tech parks, where office employees can collect orders from a single outlet. It has also partnered with 280 outlets of Apollo Pharmacy, where customers can pick up shipments. Baltimore Ravens Womens Jersey

    Share This