While the initial glitz of Indian e-commerce is all but gone, the companies are now focusing maintaining strong growth and becoming profitable. And to do that, improving the overall customer experience, including timely delivery of the products has gained immense significance — as evident from recent investments by both Snapdeal and Flipkart into numerous logistics solutions.
To continue that aggressive growth Flipkart achieved initially, it is important to ensure the growth of its logistics and other related services as well — all to keep the entire system robust and growth-worthy. In that respect, the company has infused close to a $100 Million (around Rs. 666 crore in Ekart), the online retailer’s logistics arm.
The investment was on January 21, which is the second fund infusion from Flipkart in around seven months, which falls under its newly created entity called Instakart Services, reports Economic Times.
According to a report from Goldman Sachs, Flipkart’s net worth is estimated to expand to around $36 billion in the year 2016-17 from about $11 billion in 2014-15. Those are old numbers though, considering that a recent investment into the indian e-commerce poster boy valued it at close to $15 Billion already.
Earlier in July 2015, Klick2Shop Logistics Services International had invested Rs. 127 crore in Instakart Services. It competes with more than just efficient, in-house logistics services of Amazon in India.
However, plans for strengthening its logistics arm isn’t something Flipkart took up just today. In September 2015, the company bought back its logistics service company from WS Retail (which again, is a part of the complicated company structure which Flipkart has right now).
The acquisition was made through a new entity called Instakart Services Pvt. Ltd., which was registered in June 2015. The newly formed entity has Ankit Nagori, CBO of Flipkart and Rajnish Singh Baweja, Finance controller of Flipkart, as shareholders and directors. Ekart has since then, expanded its total warehouse space to 1.6 million sq ft at the end of 2015 across 17 delivery or fulfilment centres, second only to Amazon.
On the other hand, Snapdeal has also invested around $20 million in GoJavas to further strengthen its supply chain and logistics.
As per the report from ET, Flipkart has taken approval of its board to increase the share capital of Instakart from Rs 130 crore to Rs 4,000 crore. This room for more infusion makes us believe that the company may invest even further.
Flipkart is also said to be preparing to build out Ekart into an independent business which will cater to other companies as well. We are analysing that this trend could be a bid to make separate divisions profitable, in order to fund those massive discounts on the primary e-commerce site, and in turn lift the entire company to profitability. multiple reports have already confirmed, that the company has already in talks with investors to raise capital for the logistics unit separately.