Regular readers of Marketing Practice know that I am not a big fan of Brand Extensions. I always feel uneasy when a brand moves from its defined space to a broader field of play . Flipkart has done just that. From a simple , clutter free online bookstore, the brand has now become an online store selling not only books but mobiles, music videos and gift vouchers.
Reflecting the change in the business strategy, the tagline of Flipkart has also changed from " The bookstore at your door " to " The store at your door ".
Flipkart within a short span of time was able to quickly gain consumer interest because of the simple interface , better pricing and quick service. Customers like me who found other sites like Indiaplaza too cluttered began to look at Flipkart as a serious alternative. In my opinion, Flipkart was a classic example of a brand which offered a simple highly focussed solution for the customer.
Not any more !
Flipkart now is not a bookstore. It is now an online store just like any other online stores. The only differentiating factor is that it retains the simple interface.
The change in the business model of Flipkart will have a serious impact on the brand itself. The brand was built as an online bookstore and now has diluted its core positioning . Now what is the difference between Flipkart, Indiaplaza, Infibeam, tradus and numerous online stores that retails everything from books to innerwears.
While in the books' retailing Flipkart has demonstrated its strength in getting the best price and ensuring fast delivery, will it be able to do that in other categories like mobilephones ? The business logic behind Flipkart to get into other categories is to get more revenue, the question is whether it could demonstrate its success in other categories aswell.
There can be many reasons behind this move :
- Book margins may be underpressure and does not make business sense to concentrate on books alone because of price/margin/competitive pressure.
- Wanted to emulate the business model of Amazon which successfully moved from books to other categories
- Investor pressure to deliver more returns.
- Other categories offered lucrative opportunities.
- Want to cash in the brand equity.
- Founders want to build scale and exit ?
Does it not make sense for Flipkart to concentrate on books alone and become the best/largest/most profitable online bookstore in the country ? I assume that the founders may be under pressure to grow very fast and give more returns to the " angels " who have invested in the venture ( its my assumption !).
I am not going to predict the future of Flipkart as an ordinary store. But in a branding point of view, Flipkart will be diluting its current stature as a highly efficient online bookstore. Thus leaving its exclusive space to potential competitors.
I wish that the brand replicate its success in the current ' diluted ' avatar.
Related brand
But what makes us believe that they will not be able to deliver books efficiently just because they have included some more categories?
ReplyDeleteMay be they have taken requisite measures to ensure the proper and efficient supply chain for all the products.
I think the biggest risk in such cases is dilution of the brand and that happens generally in two cases:
1. there is dissonance in new product offerings and previous ones which built the brand
2. Service quality will be adversely impacted
And so far we have no reason to believe that either of the two is (going to be)true. And there is always some risk associated with business. To me this risk appears to be calculated.
Manish Sharma
So, Harish, what would you recommend Flipkart to do ? To launch a new e-shop and a new brand for selling mobile phones online ?
ReplyDeleteReally really wonderful and informative.
ReplyDeleteNot only to the students but also for the faculty reference, it is very much handy.
Topic wise, product wise, brand wise...we can use all these references as our study materials. In simple words...simply superb.
So, Harish, what would you recommend them to do ? To launch a new e-shop and a new brand for selling mobile phones ?
ReplyDelete"Thus leaving its exclusive space to potential competitors."
ReplyDeleteHarish, Flipkart was engaged in an unsustainable price war in books. Given the industry structure,exclusive online book seller will find it impossible to survive. Mobile phones are high margin products and fits well with their usp of efficient delivery.
A brand is as good as the cash flow it generates and how it satisfies the needs of its customers
@Manish,Tomas, Yusuf, agree with ur points. My argument is that flipkart will lose its position of an efficient online bookstore by moving into other merchandise. how will it differentiate with rediff, indiatimes,ebay,tradus etc who are all online stores ??
ReplyDeleteThanks for the information that you have been shared. Hoping that this site will be known by other so that they could visit it if they have a problem.One worthwhile task carried to a successful conclusion is worth half-a-hundred half-finished tasks.
ReplyDeleteThere are ways how to differentiate, simply by the brand.
ReplyDeleteHarish i would still like to know what would you do. Let's pretend that you have e-shop which is selling books(famous, with a trust of consumers, like Flipkart) and you are thinking to start selling mobile phones couse economical environment is very good for doing this. What would you do ?
@tomas, I will not launch the mobile business under flipkart because it is my feeling that flipkart keep its strong association with books.I f I would really want to launch mobile business, i will start something like phonekart or cellkart with a strong secondary association with flipkart.
ReplyDeleteWell that's clever. Thanks for answering, Harish.
ReplyDeleteI agree with Harish. Flipkart will not only dilute its brand value , it will lost its position as a premier online bookstore. For me , the indian book market is just about to explode as internet phenomenon is reaching to tier 2 and tier 3 cities . Its totally mind boggling to think about the numbers should you start catering to these cities.
ReplyDeleteFlipkart is just another website for me... indiaplaza, fabmall, etc. The movie & mobile section is hopeless.
ReplyDeleteHi,
ReplyDeleteLets keep aside the fact about brand dilution. I have another doubt. You have mentioned that they have changed business model by adding mobile and movie section. But what I think is their business model is still same i.e selling goods online by offering discounts along with safe and timely delivery. Isn't adding other items is change in strategy? Please clarify. Even I am confused.
i dont agree with the writer. From a purely branding point of view (read Al ries & Jack trout school of thought) maybe it dilutes brand image. But from a serious business point of view it all makes sense. If you have the trust and service levels established why not expand your product line to serve more needs of consumers. Flipkart is strictly following the footsteps of Amazon which is the greatest example of e-tailing. Sometimes brand practioners have to see the bigger picture of business. Also differentiation and positioning are overrated maybe outdated concepts. Even if you are talking about differentiation, Flipkart has excellent customer service (just like Amazon). We are not in the business of making brands but in the business of making brands to earn bigger revenues. Money is the name of the game Sir.
ReplyDelete