As the head of the books division, Nipun extracted higher margins from publishers and distributors, rationalized discounts and expanded the selection of books. In May 2013, Flipkart launched a sale through which it sold a record number of books in a month. By the end of 2013, its dominance in books was such that offline chains like Crossword and Landmark, which were already struggling, were forced to shrink further.
But it was the electronics category at Flipkart that was on fire. This department was run by Amitesh Jha, an IIT Delhi graduate and a senior of Binny from the Shivalik hostel. After trying for years, Flipkart had finally started establishing direct relationships with Micromax, Samsung, HTC and other manufacturers of mobile phones and laptops. This helped the company gain access to some of their popular models. As with books and fashion, it offered these products at discounted prices. It introduced Equated Monthly Instalment (EMI) schemes and periodically held big sale events, becoming one of the fastest-growing retailers of electronic products in the country.
AS THE MONTHS went by in 2013, Kalyan’s influence at Flipkart grew. Until his entry, the Bansals had had the last word on important matters. Now, suddenly, it wasn’t really clear who was boss. On the surface, Sachin and Binny still had the final word. But as the representative of Flipkart’s largest investor, Kalyan’s authority was unquestionable. While his position – interim CFO – suggested that his involvement would be restricted to the finance function, Kalyan’s influence began to spread rapidly.
Along with Binny, Kalyan would be present at the key sales meetings. In fact, the two worked well together. As the year progressed, Kalyan and Binny came to a tacit understanding that Binny would oversee operations while Kalyan would take charge of finance and sales. Kalyan had developed close relationships with many of the key sales leaders. He didn’t have much to do with Flipkart’s engineering team, which he believed was too slow in fixing errors and developing essential features. He didn’t much care for the technological experiments that excited engineers, believing that the objective of the technology team should be to support the sales function. He made it clear that the sales department should be at the centre of Flipkart. The sales executives were elated – finally, here was a leader who had answered their prayers. Executives such as Ankit Nagori and Amitesh Jha enjoyed having Kalyan as their boss.
Although he was nominally an investor representative, Kalyan dispensed with hierarchy and formalism. Casually dressing down, he was always accessible. He spoke in Hindi and engaged directly with his colleagues. While he, too, had a ruthless streak, he was less volatile, and more predictable than the Bansals. Nearly a decade older than Flipkart’s founders, Kalyan seemed more mature. His energetic, brisk manner of speaking was infectious, and his deep knowledge of e-commerce validated his authority. Every time one of his trusted associates asked him for something, Kalyan would say, ‘Kar le tu – go for it.’ He ran the business as a finance expert would: with a sharp focus on sales, margins and cash flow.
By the end of 2013, Kalyan had fixed the company’s finance function. But it wasn’t that he had cut spending; he had rationalized and rationed it, created a sound financial framework. The main objective of this framework was to allow Flipkart to pour a lot more money into the pursuit of sales growth. Under Kalyan, the company’s spending on discounts increased significantly. In 2013, rival websites such as Homeshop18, eBay and Snapdeal had started a price war. Kalyan instructed his team, ‘Whatever their price is, we’ll be five per cent lower.’ He pointed out that the retail market was huge, and e-commerce a minuscule, insignificant part of it. Investors weren’t interested in a retailer growing moderately and losing (or earning) a small amount of money. What drew them was whirlwind growth – this is what fetched a company high valuations. Both Kalyan and his boss, Lee, were experts at working out what investors wanted in a company, and at constructing business strategies that made for compelling investment stories.
What helped Kalyan extend his influence at Flipkart was his relationship with Lee. Only an investor representative could give quick, unequivocal instructions on perilous matters such as spending huge amounts of cash on discounts. A former Flipkart employee recalls, ‘Earlier we were always nervous about burning too much. But when Kalyan came and told us to increase discounting, there was no fear because we knew that whatever he was doing, it was with Lee’s blessings. We were able to move fast and not worry whether it was the right thing to do or not.’
RUMOURS ABOUT AMAZON’S launch had been circulating in e-commerce circles for almost two years. In May 2013, Flipkart got wind that Amazon was indeed launching operations in India the following month. The company prepared for war, its executives wary, but excited. They believed that Flipkart’s hold over the market was so strong that even a giant like Amazon would struggle to break it.
To prepare for Amazon’s launch, the company had been developing software to manoeuvre product prices on the website. Until 2013, prices had been set manually on Excel sheets. This was no longer viable. The company’s assortment of products was ever-expanding, running into millions; it would be foolish to delay the use of technology in price-setting. Without software, the company would lack the means to respond quickly to pricing changes on rival sites. In early 2013, it began building the new technology, which would collect product prices from across its competitors and adjust its own accordingly. Flipkart was determined to match Amazon’s prices, whenever it launched.
It was common knowledge that Amazon would kickstart with books.
