by Mihir Dalal
Three other individuals, apart from Sachin and Binny, would be present at the Flipkart 3.0 meetings. They were Mukesh Bansal, Amod Malviya and Vaibhav Gupta.
After the Myntra deal, Mukesh had grown close to the Bansals. Amod and Sachin shared a close professional relationship as well; despite their occasional conflicts, each held the other in high regard.
Vaibhav Gupta, simply called VG, had been at Flipkart since 2011. He was Sachin’s senior from IIT Delhi, but the two hadn’t known each other well at college. In his first year at Flipkart, VG had struggled to establish himself as a product executive in the supply chain division. But he had helped implement Sachin’s supply chain software, Flo. Over the past eighteen months, VG had also led the business finance function that had played a key part in the company’s revival and in its fundraising spree. He was one of the few Flipkart executives who was rated highly by both Sachin and Kalyan.
Later, Sachin created another group he called the Flipkart Think Tank which included a few other senior leaders who were responsible for directing the company’s daily operations. This group was to oversee the implementation of Sachin’s new vision.
As conspicuous as those present was the absentee: Kalyan Krishnamurthy, the man who was running much of the company – but this would have to change. In his mind, Sachin was clear about who would or wouldn’t have a place at Flipkart 3.0.
It was clear to Kalyan, too. By the middle of 2014, Kalyan had decided to return to Tiger Global sometime later in the year. His strained relationship with Sachin wasn’t getting any better.
SACHIN HAD BEGUN to reimagine the company in the midst of preparations for a special shopping event.
In early 2014, Binny and Kalyan had attended a gathering of the portfolio companies of Naspers, one of Flipkart’s investors. At the meeting, a Polish e-commerce firm had made a presentation about its shopping festival. It had set Binny thinking about hosting one on Flipkart’s site, and he charged Kalyan with organizing it. Online shopping festivals are common in the big internet markets of the US and China. In the US, Cyber Monday takes place at the start of the shopping season, a few days after the Thanksgiving holiday. Chinese companies have their own – the biggest, hosted by Alibaba, is called Singles Day.
Kalyan was confident that Flipkart could pull off such an event in India. In October 2013, a few days before Diwali – the biggest shopping season of the year – the company had held a hastily arranged sale event. Despite the lack of planning, customers came in droves, taking Flipkart by surprise. That month, the company raked in sales three times higher than the monthly average.
Now, in 2014, Flipkart set a far bigger target for the one-day event: ₹600 crore in gross sales. It was Sachin who came up with the name for the sale: Big Billion Day. It was to be held on 6 October, a few weeks before Diwali. The date of the sale, 6–10–2014, contained the numbers in the address of the NGV apartment – 6–10 – where the Bansals had founded Flipkart.5
Kalyan set about preparing for the event. The finance and sales teams under Kalyan busied themselves with preparations for months. Large orders for products were placed with vendors. Existing warehouses were expanded. Temporary warehouses were rented. Thousands of temporary delivery workers were hired. Courier companies were told to be ready for a spike in deliveries. Third-party sellers were persuaded to offer big discounts, which would be made up for with increased sales and higher visibility to customers. Everyone at Flipkart worked overtime. Amod Malviya and Sameer Nigam, the highest-ranking engineers at the company, made their team work fourteen to sixteen hours daily in the weeks leading up to the sale. New software tools for promotions and marketing were readied. Large tracts of additional server space were reserved to absorb the higher influx of users. The sturdiness of the systems was tested for the anticipated spike in traffic.
But just before the sale, Kalyan became worried that the company might not be able to achieve its ambitious target. The number was exceptionally high – on a regular day, gross sales would amount to about ₹30 crore. Sales would have to multiply by twenty times for the company to attain its goal. Kalyan feared that they had overreached. In a panic, he decided to spend a lot more money on discounts and promotions. The Flipkart sale event was splashed all over newspapers, billboards and TV channels in the first week of October. In the big cities in particular, Flipkart was omnipresent. It was a classic advertising blitz. The company promised to sell some of its products, including gadgets and various accessories, for as low a price as ₹1. The weekend before the sale, Sachin and Binny wrote a joint email to customers, inviting them to shop on the site. ‘To celebrate Flipkart’s journey, we are going to have a sale to end all sales,’ they said.6
Soon, Flipkart’s rivals responded. On 4 October, two days before the sale, Amazon launched a three-day sale event of its own. They were calling it the Mission to Mars. Cleverer still was its move to buy the domain name BigBillionDay.com – anyone who typed ‘Big Billion Day’ on their browser landed on the Amazon site. Snapdeal, too, engaged in guerrilla warfare of its own. On 6 October, the final Big Billion Day ad on the front pages of newspapers urged customers, ‘Today, don’t look anywhere else. India’s greatest sale is here.’ Snapdeal ran an ad right next to it, with the cheeky tagline, ‘For others it’s a big day. For us, today is no different.’ It was the 2014 version of the Cola wars.
That day, the Flipkart leaders were tense. At daybreak, they assembled at the company’s new offices in Bangalore’s Outer Ring Road area, a few kilometres from the central office in Koramangala. Here, the Bansals, Kalyan and a few others sat in a ‘war room’, from where they would watch the sale unfold. Outside the room were the rank-and-file employees, many of whom hadn’t gone home for days. The density of people was such that the Wi-Fi crashed. Employees were asked to spread out. It wasn’t an encouraging omen.
The sale began at 6 a.m. The first two hours had been reserved for Flipkart employees. At 8 a.m., the sale was finally opened up to customers.
By 8.10 a.m., Flipkart’s website and mobile app stopped working. Despite the extensive preparations, the sites were overwhelmed by the deluge of customers. In India, the government railway booking website, irctc.co.in, attracted the highest volume of users among e-commerce businesses. On 6 October, Flipkart’s website received in an hour the volume of traffic that IRCTC drew across several days. Initially, Kalyan and his associates were thrilled. By 10 a.m., Flipkart had already achieved almost half of its ₹600 crore sales target. Though the website was still down for most customers, the Flipkart team believed it would be fixed soon. But at 11 a.m., the site was still not working.
Outside, everyone was celebrating. Every time a team achieved its target, horns were blown, loud cheers went up, employees danced on their desks. Inside the war room, the atmosphere was quiet, dark. The only light was from the projector screens. One screen showed the sales numbers. Another showed the metrics: the number of users and the ‘hits’ on the website. A third screen displayed tweets and Facebook posts from customers. By noon, the atmosphere had soured considerably. The graphs and patterns on the first two screens kept rising, but on the third screen, customer complaints had multiplied, too, like a drizzle turning into a torrent. Shoppers were very, very angry. They complained that they couldn’t access the website, that products had sold out before they could hit ‘buy,’ that Flipkart intentionally marked up prices just before the sale to make its discounts seem bigger, that every product was ‘out of stock’, and orders had been abruptly cancelled. It was a barrage. Less than ten per cent of the people who came to Flipkart were able to make a purchase. After the extensive marketing campaign promoting the sale, this was a major embarrassment. The pattern continued through the afternoon. Flipkart’s payment system broke, its tech systems crashed, as did the warehousing software.
By 6 p.m., it was done. The target had been achieved in ten hours. Flipkart had miscalculated, grossly underestimating Indians’ thirst for discounts. Worrying about a shortage of demand in the run-up t
o the sale, it had panicked, hurling large amounts of cash on marketing and discounts. The resulting flood of customers had turned out to be a disaster for its systems. The Bansals sent out a joint statement at the end of the sale: ‘The Big Billion Day is an unprecedented day for us as this is the biggest sale ever in India. We are delighted by the overwhelming response from our customers since 8 a.m. today.’ They mentioned that Flipkart had recorded a ‘billion hits’ and achieved its twenty-four-hour sales target of $100 million in just ten hours.7
Behind the curtain, the reckoning had begun. Around 6.30 p.m., Sachin and Binny began summoning those in charge of the sale, one by one, to one of the conference rooms in the office. Emphatically, Sachin pressed his point: ‘This is what happens when technology becomes a slave to business.’ One couldn’t become too tactical and rely only on discounts to grow the business, he pointed out grimly. Their tech systems had failed. ‘This is a huge embarrassment. We’ve let down our customers badly.’ One after the other, the people in charge of Big Billion Day walked out, their faces downcast. Sachin especially blamed Kalyan, later complaining to Flipkart investors that the Tiger Global representative had ‘damaged’ the company’s brand. It was true that, after the sale, the very papers and news channels that had carried Flipkart’s ads had published stories about its image taking a battering with customers. The Big Billion Day sale had been the initiation to online shopping for millions of people. This time, customers felt disappointed, angry, as if they had been duped. Whether this constituted permanent damage for Flipkart was questionable. Sachin believed that it did.
The next day, Sachin, Binny, Kalyan and a few other senior leaders gathered in a room to drafta response to their customers. A few of those present at the meeting said that Flipkart should apologize unreservedly and own up to all the errors that people had pointed out. Kalyan, however, stood his ground on one point. He defended the company’s pricing practices, arguing that Flipkart hadn’t displayed artificially high discounts; the prices had simply reflected the full discount amount on the maximum retail price rather than on Flipkart’s everyday prices, which were admittedly lower than the MRP. But he found his argument ignored.
Flipkart released a long email to customers from Sachin and Binny. The Bansals wrote, ‘Yesterday was a big day for us. And we really wanted it to be a great day for you. But at the end of the day, we know your experience was less than pleasant. We did not live up to the promises we made and for that we are really and truly sorry.’ They conceded that Flipkart’s preparation had been inadequate. ‘... Though we saw unprecedented interest in our products and traffic like never before, we also realized that we were not adequately prepared for the sheer scale of the event.’ They acknowledged all the issues that had angered customers and ended by apologizing again. ‘Everything that we have achieved at Flipkart is purely on the basis of our customers’ trust and faith. This is why we come to work each day and continue to remain extremely passionate about building the best possible customer experience for Indian consumers. We failed to live up to this promise yesterday and would like to apologize once again to every single customer for our failure.’8
The Big Billion Day sale of 2014 turned out to be a bittersweet experience for Flipkart, and especially for Kalyan Krishnamurthy. Kalyan had overseen the biggest-ever sale for the company, one that had revealed the true potential of e-commerce. In a single day, nearly twenty million people had converged onto Flipkart. It was truly unprecedented. And yet, a majority of the shoppers had left empty-handed. It was Kalyan the Bansals had blamed for the inadequacy in preparations.
Next month, Kalyan was back at Tiger Global, although, he still remained on Flipkart’s board of directors.
According to a former Flipkart official, Sachin and Kalyan had two common characteristics that made them incompatible. They were both alphas, they both ‘liked to be the one in command. Neither could take a backseat.’ Both of them also harboured extreme opinions about people, either holding someone in very high regard or thinking they were useless.
For many months now, what one thought about the other had been no secret within the walls of the Flipkart offices.
18
REINVENTING THE KART
‘He had ceased to be a businessman and become a conceptual artist.’
‘He had an animal desire to have what he wanted and not to have what he did not want.’
‘He wanted to create the company that invented the future.’
‘That was the miracle of Jim Clark: by the end of 1995 he had created a money-making machine in which he was the least easily replaced part.’
– Michael Lewis, The New New Thing1
In his mind, Sachin Bansal was now a true visionary entrepreneur. Even the world outside was treating him as such: his investors, the media whose scepticism had given way to hero worship, acquaintances, nearly everyone he knew. In hindsight, it seemed as if seven years ago, when he had started Flipkart, he had seen the future. He had done so when his IIT acquaintances had refused to join him, when venture capital firms had counselled him to stay away from e-commerce, when book distributors and courier companies had dismissed Flipkart. It was Sachin who had thought up the big ideas to unlock the potential of e-commerce in Flipkart’s early years, it was he who had the vision and the audacity to believe that a startup could be converted into a giant company in no time. Now, he would repeat his feat – on a much grander scale.
Sachin’s Flipkart 3.0 team had been meeting once a week at his house to discuss how they could turn Flipkart into a $100 billion company. They debated on the following matters: How was internet usage evolving? How would people’s shopping habits change over the next few years? What should Flipkart do to stay relevant over the next five years? How would Flipkart make money? Were the business models of Amazon, Facebook, Google and other American companies suited to the Indian market? Or was the modus operandi of the Chinese internet firms more likely to work in India? What would be the best business model for Flipkart?
In some ways, their discussion was a microcosm of India’s conundrum post liberalization and in a globalized age. On one hand were the developed economies of the West represented by the US, where post-World War II prosperity seemed to be waning. On the other hand was China, whose economic transformation launched in the early eighties was only becoming stronger. China’s economic achievement has made the country seem like a compelling exemplar to many Indians, not least because of the jealousy aroused when watching a neighbourhood rival that was a fellow backward country break out in such extraordinary fashion. In 2014, Flipkart embodied the anxieties of the Indian economy’s place in the world, its promise, its keen awareness of its inferiority vis-á-vis both China and the West. Sachin had been closely studying the business models of Chinese internet companies such as Alibaba and Xiaomi, as well as the business philosophies of the giant American technology companies, Apple, Facebook and Google. Over the past seven years the Bansals had come a long way towards validating their founding idea – that two Indians could build a world-class internet firm in India. Now, when they were in the final leg of that journey, where they had to find the next iteration, the next set of big ideas that would finally liftFlipkart onto the league of the world’s most elite internet companies, it wasn’t surprising that they were swayed by the business models of the Chinese startups. After all, it was these companies that were redefining the standards of a world-class internet firm.
Sachin had been especially fascinated by Xiaomi; in his eyes, Xiaomi was the ultimate product company. It had become the choice of the Chinese masses because of the excellence of its product design and its technological expertise. Drawing on this melange of sources and trying to adapt it to the realities of the Indian market, Sachin drew up a blueprint to realize his $100 billion dream and achieve profitability at the same time.
It was a plan that necessitated capsizing Flipkart, voluntarily introducing chaos, in the hope that the churn, when over, would produce a far stronger creature – a colossus. Unt
il now, Flipkart had essentially followed the Amazonian principle of pleasing customers at any cost by stocking products at low prices and delivering them quickly. But Sachin and his colleagues came to the conclusion that Flipkart’s inventory-based model of direct buying and selling of products would limit the company’s reach. It had served the company well so far, but to become a behemoth, to take commerce to the masses, the model might prove inadequate. The range of products under such a model would always be narrow, which would circumscribe its expansion. The diversity and size of the Indian retail market called for a more subtle approach. The Flipkart 3.0 team concluded that if the company continued on its current trajectory, it would ‘max out’ at $20 billion in sales. Instead, if Flipkart made itself into a ‘platform’ for all kinds of goods and services, it would become an ‘internet company’ rather than just a retailer. An internet platform is like a bazaar but with a limitless capacity to host vendors and to grow. Alibaba, the Chinese internet giant, was primarily a bazaar. Even Amazon, the world’s largest e-commerce company, had a sizeable marketplace business. The Flipkart council decided that their company would have to build one, too. Strikingly, this is what Kunal Bahl, Sachin’s nemesis-in-waiting, had been saying for years. The platform that Sachin was imagining was, however, significantly different from Snapdeal’s. In Sachin’s view, such a marketplace could only be created at that particular point in time, after Flipkart had helped create an e-commerce ecosystem of suppliers, logistics providers and delivery workers. Without Flipkart’s early efforts, a marketplace could not have delivered the kind of excellent service that Flipkart had come to be known for. But now that this ecosystem was in place, Sachin believed it was an opportune time to withdraw from retail and become a bazaar.
Sachin also argued that such a bazaar could only be realized by a ‘technology’ company, not a retail firm. Hence, decision-making at Flipkart would have to be controlled by the product and engineering teams, and not the sales team. In a sense, history was repeating itself. Sachin’s initiation to the internet business had been with Amazon India, set up as part of Jeff Bezos’ efforts to prove that Amazon was a ‘technology company, not a retailer’.2 Nearly a decade later, Sachin was pursuing the same mission at Flipkart.
