This week, we feature Sachin Bansal, who was one half of the duo behind Flipkart, the e-commerce startup that would go on to pave the path for a generation of internet entrepreneurs in India.
India's longest-running show on startups and entrepreneurship Young Turks marks another milestone as it completes 19 years! To celebrate this landmark, we wish to take you through our time capsule, The Young Turks Archive, recounting the journey of some trailblazing entrepreneurial talent over the last two decades.
As India transforms, shrugging off the old cloak and dressing up with the digital debonair, we believe the lessons gleaned from these handpicked stories will be a trusted guide to the next generation of changemakers. Join us in this celebration of ideas, innovation and inspiration!
This week, we feature Sachin Bansal, who was one half of the duo behind Flipkart, the e-commerce startup that would go on to pave the path for a generation of internet entrepreneurs in India. Following Walmart’s acquisition of Flipkart in 2018, Sachin Bansal exited the startup he had co-founded with his IIT-Delhi batchmate, Binny Bansal.
Less than happy, but flush with cash worth $1 billion or Rs 6,700 crore, he went about trying to finish the “unfinished business” at Flipkart by becoming an entrepreneur again. This time, far away from e-commerce. Within six months of stepping out, he founded Navi, a tech-driven financial services provider, which counts the International Finance Corporation among its investors. By himself, Bansal pumped Rs 3,000 crore into the venture last year. “I am bringing all of my capital into this business,” Bansal told CNBC-TV18 in 2020.
To get started quickly in the regulatory-heavy financial services industry, Navi took the acquisition route to enter mutual funds, insurance and microfinance. Currently, there are over 15 lakh customers availing Navi’s financial services, including personal and home loans. Bansal says Navi is not a fintech company as most fintechs don’t lend. Also, it never developed a payments platform as Bansal is against it having observed PhonePe while at Flipkart. “Payments on their own don’t make much money,” he told Moneycontrol.
Bansal wants Navi to be compared with banks and NBFCs. His aspiration is to build a bank for a billion underserved Indians, for which he has applied for a universal banking license. On the reason he chose financial services after exiting Flipkart, Bansal explained, “I want to solve big problems.” However, the plan may face some niggles after the Enforcement Directorate (ED) recently sent notice to Bansal and Flipkart over alleged FEMA violations during his time at the e-commerce company. He has moved the Madras High Court challenging ED’s notice.
Sachin Bansal has funneled his Flipkart fortune not only into Navi, but also into other startups from cab aggregator Ola and electric-vehicles maker Ather Energy to a host of fintech ventures, which are becoming a priority for him now.
From Flipkart, it is not just fortune that Bansal brought with him, but also a decade-long experience of battling deep-pocketed rivals in the highly competitive e-commerce space.
In this 2012 Young Turks interview, he predicted how ‘Bharat’ (small-town India) would become important for e-commerce companies. We have seen it playing out with Tier-II cities and beyond becoming the El Dorado for India’s consumer-tech startups as they chase scale and seek to please the new digitally savvy customer.
From a two-member embryonic idea to a 5,000-member company, the Flipkart story is not just about phenomenal success and mind-numbing numbers, but much more than that. It's about redefining customers’ shopping experience. Sachin and Binny Bansal found themselves stuck in boring tech jobs after graduating from IIT Delhi. A stint at Amazon.com, the world's largest online book retailer, was the first chapter in their startup story. Inspired by Amazon, they began Flipkart.com in 2007. What started as an online bookstore with just Rs 4 lakh and 50,000 titles, is today India's online mega store selling 17,500 items every day. Sachin and Binny are looking at grossing revenues of ₹2,500 crore this financial year. But, there are question marks on sustainability and profitability, and the kind of cash the venture will need to burn over the next few years. It's time to talk business with Sachin Bansal.
Shereen Bhan: Hello, and welcome to this Young Turks Tutorial. I'm Shereen Bhan. If you're wondering where we are, let me break the suspense for you: we’re at the Flipkart Headquarters in Bangalore. The reason we're here is because for the last year and a half Young Turks has focused on the e-commerce market, on what e-tailers are actually doing to drive sustainability and profitability. So, we decided to come down to Flipkart, bring with us a bunch of startups who are just getting into the business of e-commerce, to talk about the lessons learned from the Flipkart story and what the road ahead looks like.
Narrator: Co-founded in April 2012 by 28-year-old Hari Rastogi and Vinod Nair, Laptopwale.com, as the name suggests, is a specialized retailer of laptops, tablets and laptop accessories online. Accessible to individual customers, Laptopwale also focuses on offering affordable bulk deals to educational institutions and SMEs across India. With an average monthly turnover of ₹25 lakh, Hari and team are confident of doing ₹1 crore a month by October.
Having started his entrepreneurial journey, after quitting a cushy job at NetApp, 26-year-old Pavan Vilas Sondur teamed up with Prashant Kumar to provide a clutter-free search interface for e-commerce sites. Founded in 2011, Unbxd Human Search acts as a virtual salesperson on e-commerce sites and helps consumers search more effectively. This team of 13 at Bangalore also offer web and search analytics for e-commerce ventures.
Launched in 2011 by Amit Sharma and John Lee, Go Untucked is a design-driven company that creates t-shirts for the Indian market. With the motto “T-shirts and not a piece of clothing but a canvas for ideas,” Go Untucked challenges designers to create designs on tees. Rather than just a place to buy t-shirts, at Untucked you can submit a design or ideas for t-shirts and win more than ₹25,000.
Based out of Chennai, Gokulraj GK and Balaji Gopalan founded ZAPstore in 2011 - an e-commerce corporate retailing gadgets like mobile phones, cameras, tablets, music players and GPS systems. Sounds like any other e-commerce venture? Well, here's what they do differently - at ZAPstore you, the customer, get to decide on buying the product of your choice and the price that you want. With a monthly turnover of ₹5 lakh, ZAPstore ships 55 orders a day.
Shereen Bhan: Well, let me start by asking you, Sachin - five years ago, when you envisioned where Flipkart was going to be, what was the dream that you actually had?
Sachin Bansal: Five years ago, we had no idea where this was going. Our idea was just to start up and see, as we go along we see where it goes and take it from there onwards. We didn't expect this to happen. Over time, we have been able to expand our horizons and be able to see more and more of the market.
Shereen Bhan: There must have been a one-line vision statement, mission statement. What was it? There was no napkin moment?
Sachin Bansal: The one line was that we need online shopping should work in India. And we will make it work. That was the idea. I think at that time, you were just two years out of college. How much can you, how much can you really know about the world around you, right? So, we just started with that simple statement that online shopping should work as a concept. We should, we will make it work.
Shereen Bhan: Five years down the line, the critics and the sceptics still continue to question whether online shopping actually works. Yes, you're seeing numbers coming in. Yes, you're seeing the traffic coming in. But, when are you going to start seeing the money coming in?
Sachin Bansal: It is possible to become profitable right now. But, I don’t think it's the right time to become profitable. It's time to invest. It's time to build.
Shereen Bhan: So, what is the investment horizon looking like for you at this point in time? How long do you continue to be in investment mode?
Sachin Bansal: The way we see the market right now, I believe, I don't see, in the next two or three years, our investments are going to stop. We should keep investing behind the growth of the company, of the sector itself.
Shereen Bhan: So, which is largely on backend infrastructure.
Sachin Bansal: Largely on backend infrastructure, building consumer trust, to be able to use user behaviour to be able to influence and help them buy more. I think these are the challenges that we will solve over time.
Shereen Bhan: You don't believe it's prudent to pull back and start showing a return on investments and then pick up on the pace of investment?
Sachin Bansal: No, I don't think so. Last year, we did about $100 million in sales, right? Can we be profitable at $100 million of sales? Yes, definitely. It's a pretty decent amount of sales. But, do we want to be profitable at $2 million of sales or $3 million of sales? That is where we want to turn profitable. No matter VC market sizes at that level. It will probably be very stupid of us to be thinking about profitability...
Shereen Bhan: And your investors have bought into this idea?
Sachin Bansal: Exactly. That is why investors are interested in us.
Shereen Bhan: There's a bunch of people who've decided to get on to the e-commerce bandwagon. There's all kinds of e-tailers - some online, some purely online, some online-offline, some specialists, some generalists. A lot of money is being thrown at pretty much everybody who's in the market. What do you say when people question: Is this for real?
Sachin Bansal: All this will not matter two years down the line. People will be saying very different things two years down the line. I’ve seen that change.
Shereen Bhan: What gives you the confidence?
Sachin Bansal: I mean I've seen that change in my last five years. When we started e-commerce, it was a dead sector. We went to VCs, everybody said, “Basically, this is not the sector we invest in. If you open a travel company, I will probably give you money.”
Shereen Bhan: Because travel was hot then.
Sachin Bansal: Yeah, and today it’s e-commerce. I've seen that changing many times. I think it's just a phase. People are basing their decisions on very short amounts of data. It's a very thin margin, very hard business. There's no question about it. It requires solid execution. But, can it be done? Yes. We believe so.
Shereen Bhan: Okay. Questions, guys.
Gokulraj GK: Coming from an engineering background, how did you scale up an IT firm or Flipkart to this level from a startup? How did your engineering background help you out in that?
Sachin Bansal: If you are into an internet business and you want to scale it up, it's always great if you yourself are able to understand some of the scale aspects of it, especially.
Shereen Bhan: What about the service side of it? Because you know the tech part of it as engineers you dealt with. But, what about the service and the customer satisfaction and the customer delight that you pride yourselves on? How did that happen?
Sachin Bansal: That we had to learn. We were writing code, we were packing books, we were delivering books, we were taking customer support calls, we were doing vendor relationships, we were doing front-end, we were everything, right?
Shereen Bhan: So, what was the response from the family when they saw packing books and delivering them. Say, “What have we done? What did we send you to IIT Delhi?” Was that the response?
Sachin Bansal: Family was very supportive. I think initially they were kind of shocked.
Shereen Bhan: Do they understand what you do now?
Sachin Bansal: A little bit, a little bit.
Shereen Bhan: Welcome back, you're watching the Young Turks Tutorial. We’re at the Flipkart headquarters in Bangalore in conversation with the co-founder of Flipkart, Sachin Bansal and our team of startups. There's a lot of talk about this, that there will be forced consolidation, that we will see people divest, that once investors lose their patience, we're not really going to see the kind of valuation bubble that we're currently perhaps in the midst of. What's your own sense, and you just did an acquisition, do you see a lot more of that happening?
Sachin Bansal: We have been looking at what are the gaps within our service and our offerings, which a potential acquisition can fill up. So, it either fills up a large gap that we are facing or it helps us consolidate the supply and demand in a category.
Shereen Bhan: Letsbuy, for instance. Was that driven by the need to acquire market share?
Sachin Bansal: It was. So, what Letsbuy did for us is it helped us consolidate things from a supplier’s side of things and from a consumer point of view.
Shereen Bhan: Speaking of consolidation, do you see big-ticket consolidation in the industry? Because you've got a bunch of players who are doing exactly the same thing.
Sachin Bansal: Yes, I do think so. I think consolidation will happen, differentiation is reducing. I don't know whether customers are valuing a pure or better online experience as much right now. If you ask my mom, she will probably not even think about shopping online.
Shereen Bhan: I confess, I don’t shop online.
Sachin Bansal: See, our job is not done yet. Unless we make you shop online.
Shereen Bhan: But, I’m not a shopper so I don’t shop offline either. So, I'm a bad example.
Sachin Bansal: Unless people like you and people like my mother and a lot of people that I know...
Shereen Bhan: Yeah!
Sachin Bansal: For them online shopping, until it becomes like the mainstream day-to-day activity, like brushing your teeth, it's not going to be...
Shereen Bhan: Okay, you guys. You're obviously hoping that it will become a “brushing your teeth” type activity. But, what's the kind of patience that you're working with?
Amit Sharma: One good thing with 2012, instead of 2007 or 2008, is that you already have a little bit to play around with, right? You can actually launch a real business, which was not the case five years ago. Very difficult. I mean, maybe a few. So, I think that you already have a few million - 5, 10, 20 - online shoppers, who are used to it.
Shereen Bhan: So you believe that this is a much more real environment to operate in than five years.
Amit Sharma: I think eBay was one of the first ecommerce companies to advertise on TV last year. That, I think, was a transformational inflection point, right? Because then you get mass acceptance. We, for example, have shipped literally from Srinagar and all the way to Lakshadweep. A lot of traction from Tier II, Tier III, Tier IV, Tier V places. Those people are just disjoint from the traditional organised retail.
Shereen Bhan: You know, that's an interesting point and I want to talk about this, because this business of the Tier II and Tier III traction, and every e-tailer that we're talking to seems to be talking about that, as being a big catchment area. What has your experience been like? What are the lessons to be learned as far as targeting that group is concerned?
Sachin Bansal: I truly believe that Tier II and Tier III cities are where the growth is going to happen in the future. In the next two years, these are the areas which will grow the market in. But in those cities where the job is still not done yet, I think a lot of people are still very apprehensive about (e-commerce) or they don't trust the medium as a very reliable one. I think that is where the next two years of growth will come.
Shereen Bhan: Can we do 20 questions now, I'm going to throw, and guys feel free to jump in here. Cash on delivery.
Sachin Bansal: I think it's definitely sustainable. It solves a very important problem for customers. Online payment experience in India is so bad, cash on delivery is way ahead.
Shereen Bhan: Next question in my 20 questions - inventory management, which I'm sure is an issue that just about every e-commerce startup, established company or emerging company is facing at this point in time, and you have had trouble dealing with it as well.
Sachin Bansal: We firmly believe that the ‘inventory’ model is the way to scale. Managing your own inventory, and your own warehouses is the way to scale up.
Shereen Bhan: We have, for instance, his company wanting to be a specialist, laptop seller, buyer and site as far as the online space is concerned. In a commoditized market, and as you get increasingly commoditized with everybody wanting to do everything, what to your mind will make sense?
Sachin Bansal: I think there will be space for all kinds of players in the market. It's not that everybody has to become a horizontal-general or vertical-specific player. I think that works very well.
Shereen Bhan: Do you draw the line somewhere? I mean, we've done books, we've done CDs, we've done mobile phones, even laptops. Do you draw the line somewhere?
Sachin Bansal: For us, we don’t. For us, everything. We want to sell everything.
Shereen Bhan: So, apparel is back on the table is it? After saying no way that's not going to be something that we do, it’s back on the table, is it?
Sachin Bansal: No, actually. We never said that. We never said that. I think we always wanted to do it. Just that the timing is very important.
Shereen Bhan: So, the other debate is the hybrid ‘offline-online’ model, which a lot of Indian retailers are trying to experiment with now and have experimented with in the past. The logic seems to be that, “Hey, if I've got my backend right, I can go online and I can go offline as well.” But, is it really that simple?
Sachin Bansal: Hybrid model has had such limited success around the world. I think it depends a lot on how it gets executed in India and how people adapt it here.
Shereen Bhan: Would you recommend it?
Sachin Bansal: We are an online company and we want to remain that way.
Shereen Bhan: We can suddenly see this is not something under consideration. But, a couple of years down the line you will say that, “No, but we never said.”
What has your experience been like with funding? You've raised some Angel money recently? What's the experience been like?
Pavan Vilas Sondur: It's been very bullish around the e-commerce sector. But specifically to what we work on, it's very bullish with technology, per se. Funding in technology-based companies is pretty much seeing the same kind of pattern, as e-commerce is hotting up as well. So, funding has been pretty decent, with technology-enabled business.
Shereen Bhan: What is the realistic exit expectation that an investor now has on the basis of whatever is the most accurate available data?
Sachin Bansal: I think our investors are very clear, this is a long-term game. They need to be invested in it for many more years before they can expect that. That's what we're telling anybody we talk to.
Shereen Bhan: So, are we anywhere close to an IPO as far as an Indian e-commerce business is concerned?
Sachin Bansal: Next two years? No.
Shereen Bhan: An Indian listing would be very, very difficult until and unless you suddenly, within two years, start to deliver on profit. But so it would make sense then naturally to look outside of India for a listing?
Sachin Bansal: As a company, we have not decided that yet.
Shereen Bhan: But, it would make sense, two years down the line for you?
Sachin Bansal: An Indian listing? Yes. Why not? I mean, we are evaluating, we are open to all options, right?
Pavan Vilas Sondur: What do you think is the one thing which limits this growth story?
Sachin Bansal: I think internet penetration is something that can become a bottleneck if it doesn't grow, especially broadband penetration in India. I think that is one thing, one number that we are really looking at very closely. If that doesn't grow as it is expected, I think it can reduce our growth rate.
Pavan Vilas Sondur: Speaking of broadband, do you think other things like mobiles - we have a huge penetration of cell phones in India - is something Flipkart is looking at as well?
Sachin Bansal: Yes. We are looking at it seriously. I think mobile is going to be a very important part of our strategy going forward.
Shereen Bhan: Would you be okay with being bought out?
Sachin Bansal: We'll probably not be okay. We're not looking at selling off to a competitor or to anybody else.
Shereen Bhan: So, a global online giant came calling. What would Flipkart’s response be?
Sachin Bansal: We have been building a long-term sustainable organisation. Not just a business that we can scale up quickly and sell it off. I think that's not what our strategy has been from the very beginning. We want to build a long-term sustainable business. Our dream today is to build one of the best and the largest organisations in India.
Shereen Bhan: Before I let you go, what would your key advice be to young entrepreneurs like them, who are looking at this business and hopefully wanting to create institutions, long-term organisations, not looking for the quick pop at the exit?
Sachin Bansal: The way I see it is that there are two biggest stakeholders in this business of e-commerce. One is your customers, which are the largest stakeholders. The second is your employees. I think you need to make sure that the people that you're getting in a match with, their thought process matches, with what you do.
Shereen Bhan: I know what your five-year plan is. What's the plan of action for the next 12 months?
Sachin Bansal: Next 12 months we want to become profitable.
Shereen Bhan: Will you be profitable?
Sachin Bansal: Yes.
Shereen Bhan: You will?
Sachin Bansal: Yes, that's what we want to be. Internally, we believe that in 12 months it will be the right time to become profitable.
Shereen Bhan: I like the way that you say it, “We think it will be the right time.” It's almost like the switch that you're going to turn on and off. Like profitability is a switch that you turn on and off as and when you like. How did the Bansal brothers, who are not brothers, get together?
Sachin Bansal: I think it’s a big coincidence. We wish we had a different surname. Bania family business, right?
Shereen Bhan: Hopefully, it will not be run as a Bania family business. Sachin, appreciate you joining us here on the Young Turks Tutorial.
Transcriptions by Arunima Rao -- Arunima Rao interned with Young Turks from April to June 2021
First Published: IST