Trying to be prudent in this macroeconomic environment: Flipkart CEO

'We have focused on compliance as a very key and fundamental pillar of the company for the last several years', he said

Walmart-owned e-commerce giant Flipkart will be more cautious in investing in acquisitions and businesses in an uncertain macroeconomic environment. In an interview with Peerzada Abrar, Chief Executive Officer Kalyan Krishnamurthy says the company will focus more on growing the bets it made in the past 12-18 months, including health, travel, and externalising its supply chains.  Edited excerpts:

How do you see the impact of the external macro-environment, including fears of a recession and inflationary pressures, on businesses and consumer sentiment?

Last year was a strong and accelerated-growth year. And of course, these days, it’s difficult to compare those periods because of Covid. Though India continues to be among the fastest-growing economies in the world, somewhere in the middle of the year, we did see some consumption slowdown at a platform level, maybe for about six weeks. In the past three weeks or so, we started seeing a bit of a pickup in consumer demand once more.

Now we are getting into the festival season and are confident that we will grow and the sector would grow.

Do you see Flipkart reducing expenditure?

On our core business, which includes product commerce and all the ecosystem bets we made in the past 12-18 months, including health, travel, and externalising our supply chains, where we are enabling other commerce companies to do digital commerce, we are continuing to invest. But for investment in capex, acquisitions, and completely new businesses, we are being a little more cautious. We are trying to be prudent in these times, when the funding environment is going to be a bit tricky in the next one to two years. For example, in the past one and a half years, we did several mergers and acquisitions (M&As), including Sastasundar Marketplace in health, invested in fresh supply chain firm Ninjacart, and bought Cleartrip and ANS Commerce. Maybe in these kinds of new categories or businesses, we might just not invest in a big way until we stabilise and grow them. That is the way we are thinking about it for the next 12-18 months.

Are you seeing a big reset for companies this year at a time of correction in valuation for tech firms?

In every sector of consumer internet across the world, there have been corrections. No country, category, or sector has been spared. At the peak of Covid, there was a surge in digital adoption, a bit disproportionate and abnormal. I think a lot of people misunderstood that to be a permanent shift. Some of those trends are now reversing. Companies that were valued on the basis of those accelerated temporary digital adoptions are getting re-valued across the world. Thankfully, we are a well-funded company, but the softness of the funding environment does apply to every sector and company globally. Also, the end of cheap money is definitely a trend we have witnessed in India and across the world.

Did you overestimate the digital shift due to Covid and what is the learning from the growth observed during that time?

I think the biggest learning is that for the business at scale to be successful in today’s times, there has to be a lot of flexibility and adaptability that needs to be built to scale up and scale down, and even for spending and investing. In the two years of Covid, we saw demand shoot up three times in one or two months. How do you adapt to that? There were also times when there was a 70-80 per cent drop in demand due to some kind of local shutdowns. How you quickly adapt to these kinds of scenarios was the biggest learning for us.

How are you gearing up for the festival season and what are your expectations? How is this year’s “The Big Billion Days” (TBBD) going to be different from past events?

The employees are very excited to collaborate and work with each other to pull off an event of this magnitude and scale where it touches hundreds of millions of customers in India. After two years, we are seeing all employees who have come back to the office. On the customer side, there is a big focus on widening our selection, especially at price points. We want this to be an inclusive festival season, where we have a selection for all kinds of consumers and price points. If you want to want to buy clothes for more than Rs 1,000 and less than Rs 700 or Rs 250 across our platforms including Flipkart, Myntra and Shopsy, consumers should have that selection and value. Compared to the last festive season to now, our seller base has more than doubled. Today across the group we have more than a million sellers on the platform.

In April the investigative arm of the Competition Commission of India (CCI) raided the Flipkart and Amazon seller offices. How do you view the overall regulatory and policy environment for businesses including e-commerce firms in India?

We have focused on compliance as a very key and fundamental pillar of the company for the last several years. When we are approached by any government authority, local or central, we collaborate with them. It has worked well for us. What we’ve seen in the last few years is that the government of India has just done a tremendous job in bringing a lot of digital platforms and making them democratic.

The government-backed Open Network for Digital Commerce (ONDC) is making a huge noise about disrupting large e-commerce players. Do you see any role for Flipkart to engage with them?

It is inclusive, democratic and good for the country and the e-commerce ecosystem. We have committed our participation in a meaningful way. We continue engaging with the ONDC team. And as and when an opportunity presents itself, we’ll continue looking for more ways to partner ONDC.