I first met him in February this year at the launch of the first-gen Motorola Moto G. It was the first big partnership for Flipkart where it was exclusively selling the Moto G in India in a first of its kind online-only sales model. The Moto G turned out to be a mega success, selling more than half-a-million units within five months. Soon after Flipkart also became the exclusive online retail partner for Xiaomi, the Chinese smartphone vendor known for its sensational flash sales that have sold out in seconds in India. Meet Michael Adnani, Flipkart’s vice president – retail & head – strategic brand alliances, who is responsible for spearheading Flipkart’s efforts to not just be an online retailer and marketplace but also becoming the platform to enable international players enter the Indian market.
I probably did not start on the right footing with Adnani, having scooped the Motorola-Flipkart deal a fortnight before the announcement and following it up with the news of Flipkart being Xiaomi’s retail partner in India. Yet, Adnani has always been gracious and forthcoming during our impromptu interactions at various launch events.
Apart from partnering other brands, Adnani also leads Flipkart’s efforts to launch its own range of tablets and accessories under its Digiflip brand. Having spent nine years at Fry’s, one of the largest electronic gadget retail chains in the US, he has over 25 years of experience in retail and e-commerce in the US.
While the Motorola partnership has been extremely successful, Adnani’s team became the target for consumers venting their frustration after being unable to buy the smartphone that go out of stock within seconds. But he remains unfazed and looks at it as an opportunity for Flipkart to learn and scale up.
I sat down with Adnani last week where we talked about Flipkart’s plans on becoming a platform for brands to enter India, how others are trying to ape Flipkart’s exclusive partnership model, the situation with Xiaomi and much more. Read on for some edited excerpts from our meeting.
Why did Flipkart get into the business of becoming a platform for other brands to enter the Indian market with Motorola?
Well my background is doing this in the US. So what we are doing here today is what worked for me 13 years ago back in the US, going through the dot com boom. So all the challenges and all the opportunities, how they affect the customers, how they affect the brand, is nothing new to me at least.
I did not go into this thinking it would be a risk, I knew it would be a solid win. How hard it would be, or how long it would take, those are the things I didn’t know. But when we look at this partnership starting seven months ago, look at the number of units we sold. You are then aware of everyone wanting to do this with us. What we decided to do is rather than having a kind of hit-and-miss partnership, why not build an end-to-end capability.
The way I use it is by telling the brands to put their products on the boat, and I will take care of the rest. So from the moment it lands at the airport, I will pick it up and I will do everything else.
India is a pretty complex country, in terms of custom duties, and VATs and taxation, Octrois and customer service, payment platforms, logistics, these are all the things that are probably a lot more easier in many other countries. So for a lot of people who would want to come to India, this would be a challenge, and thus they might put India at the bottom of their list, because of these challenges.
Now I can tell these folks that they have great products, which are successful in other countries, they have the quality, and Indian consumers are eager to buy these products. I can tell these people that they do their part – building the product – and I will do everything else. This way I have made the brand happy, as well as the Indian consumers happy.
It’s because when I build this capability, I am sort of taking out elements that are costly like distribution and all those elements that were costing a lot of money, which would result in the cost of the item being a few times higher. So that is what Flipkart is doing for the customers.
So when did you decide that this was the right time to start?
The moment I landed. I came to India on August 25 last year, I talked to Motorola three weeks later, and there was no doubt in my mind that this was what I have to do.
There are a lot of brands that now think Motorola’s success of an online-only model, is successful irrespective of the product. The Motorola model was successful since they had a great product, at a great price. In seven months, the price dynamics have changed, but today we are seeing just about every brand trying to put one product out in the market that would be available exclusively on Flipkart or Amazon or Snapdeal, and they think that it is going to fly.
Well, I’m glad that you bring that up, because it is not what you do, it is how you do it and what are the reasons behind you doing it. Lot of people are doing it, and they are copying us and they just want to have exclusivity on the product. Exclusivity means nothing to a customer, it is absolutely no reason for a customer to buy something because it is exclusive.
It has to be desirable as well.
Exclusivity really should not even be talked about, because the net result of that exclusivity is what sells the product. And that net result is the capability I told you before. I’ll give you an example. If I wore a customer hat, you go there and buy a phone of any brand. Once you buy a phone, monitor its price from the time you ordered it, until you get it three days later. How many times do you think the price is going to change? I’m willing to bet that you will see the price change at least half a dozen times.
Now what exclusivity does is, it will eliminate one other piece that you have to think about – is this the right time to buy this item? This is not a stock market, phones are not a commodity, and the Moto G is the perfect example. On February 6 it came in at Rs 12,500 for the 8GB variant, and it was only few weeks ago, while it was being phased out, it had one price change. So anybody monitoring it day or night, they would always find the same price. So they did not have to worry about price, quality, support, or features.
So why not buy that product, instead of something that you would not know the quality, you would not know that by the time it gets delivered you are going to get beat up, since your wife would say, “If you would have waited, it would have been Rs 500 cheaper.” That’s real, and that is why it has worked for me before, because buying is supposed to be fun.
It is interesting that you say buying should be fun, another partner of yours – Xiaomi – buying it no longer fun. It has become a frustrating experience.
We are a platform, and we do not tell our brands how they should market or how they should sell. We give them data and feedback, and we let them decide what they should do. The only time we get involved is if a product is illegal to sell, or it doesn’t have the right quality.
We are also hearing a lot of reports of quality issues with the Mi 3. Is it higher than the industry average?
I don’t think so, cause actually if you go to the Mi 3 page, the product still ranks around the mid-4′s.
But have there been more returns than the industry average? If you look at the smartphone markets, and the kind of returns that you normally see.
I don’t have the exact numbers to respond to that. But I doubt if that is the case.
Let’s talk about the Redmi 1S. The product was launched on September 2, but the shipments date is somewhere around September 15 or later.
That was an error in messaging. The product is in India, and everybody will get it in the same time frame that they would get everything else. The Redmi 1S that we sold is in India, and you would get it in the normal delivery time frame.
So that was more of an error, and not a case wherein the second sale happens and people who bought it in the first sale haven’t got their handsets yet?
So when we go and say up to 40,000 units for sale, we mean that we have up to 40,000 pieces ready to sell and deliver.
So when you say up to 40,000 units…
The reason we say “up to” is because we always reserve a quantity of products for mishaps, or sometimes we get products with their boxes crushed that we do not want to sell. So there are always times when one pallet gets stuck at the customs, so there are always fluctuations. But it is not 20,000, it more like a couple of thousand here and there. So when we say 40,000, we actually mean somewhere between 35,000 and 40,000. But we never give an exact number, cause if we miss it then we will have a lot to explain.
Are you keeping more reserve units of the Xiaomi products, as standby for replacements?
Not really. The difference is the method of sales that we have. With Motorola we have a little bit of control, because the flow is a normal flow. With Xiaomi since everything comes in and goes in seconds, we have to be a bit more worried about things that might happen to distort that inventory quantity. But it is not because of the quality of the product, or us not believing that it doesn’t fulfil the needs of the customers.
It is just a method, and let’s face it, we are new to it and India is new to it, and I think we have come a long way in 4-5 weeks. You can see the messages and tweets we receive and people acknowledge that we are getting better at it.
Going back to what you said that is far from being fun, it is your choice. You don’t have to do that. You can go and buy the Motorola, or Asus Zenfone 5 and a lot of other products. So it is a choice, and a lot of people don’t choose to do that. Frankly I wouldn’t register for a product, and if I want something I will go and buy it. But what is interesting is that social community that follows Mi all over the world is fine with that.
Is it worth it? Most of the people are interfacing with Flipkart, when they are buying a Xiaomi product, and most of them are frustrated.
See there are two situations – one is that do we have the capability to do this, and we are building up these capabilities because Diwali is going to come and we are going to have 100 times more customers for the Xiaomi than we would ever have. So we have to build capabilities.
Now could we have done better? Absolutely. But did we know what was going to happen? We had no clue. What is important is that the same technical issues or the same mistakes never repeat. So the first time we had 10,000 pieces and it took 35 minutes and the site crashed, and everyone were unhappy, but we fixed that. The following week, the site did not crash, but people were struggling to check out, and we fixed that. The following week, we had 20,000 pieces and we sold it in 2 seconds and they were still a bit of checkout issues, which was really a messaging issue. So the fourth week got better, and this week the issue was those special customers, so every time we do something different.
You have to believe that there is a tendency of something going wrong, so there are two ways to do it. Either never do it because you fear that something will go wrong, or do it, take the heat, fix it and move on. We wanted to take care of those special customers, that is why we brought them the pieces. But were we successful? No. But the next time that happens, we will not fail.
How is the communication between Xiaomi and Flipkart? The reason I’m asking that is Hugo Barra went on record saying that we have learnt from our mistakes from the Mi 3, and we promise that the day we launch the Redmi 1S, it will come up with a full range of accessories, which didn’t happen. People who bought Mi 3 accessories are yet to receive it. Why can’t the two companies be on the same page?
You are right. The answer is that we failed. Motorola is a seven month old venture, while Xiaomi is just weeks old. It is a whole different model, we are looking at aggressive prices, and Xiaomi is a different company than Motorola. They build differently, they function differently in China, they are new to India, but none of them are excuses. Every time we fail our customers, I will take personal responsibility. So absolutely, that was another fail.
So what exactly is happening there?
It is a combination of many things. If there was any fault, I would take personal responsibility of that. I don’t want to blame it on Xiaomi. It is just the manner of things that are happening and understanding each other is just like any relationship. You get married, but then you fight, and then you figure out why and how. We are in good communication, the teams work together very closely, but our business models are very different and we are trying to merge them together.
One example of that is we actually hit couple of holidays. So there were a few things that we were not aware of, and neither was Xiaomi, and 2-3 days make a big difference in getting something on time or missing it. It is not a good excuse, but we will not repeat that.
At the same time, Xiaomi has always maintained that this is not a permanent arrangement, and they would prefer selling it from their own platform, when the time comes.
I can’t comment on that.
But what is your take on it, considering Flipkart is certainly investing a lot in terms of the whole infrastructure. Having 200,000 concurrent visitors on a single page, managing all the payment gateways, the customer care support, and so on.
You have to realize that the investment is in our infrastructure. Xiaomi is using it, but tomorrow there could be someone else who will be using it. So yes, you are right that we are putting a lot of resources into doing this, but we believe that these capabilities will come in handy at some point of time, so God forbid if or when Xiaomi goes away, there would be someone else who will use these capabilities.
For us, to bring 250,000 people in few seconds, we have to do 10 times of that in Diwali. So there is always something like messaging or paging or banners that we use specifically with our partners, but we do that wholeheartedly, because that is what partnerships are all about.
We don’t always do something to get rewards right away, some of them are long term, and the best example is Motorola. We have done a lot of things with Motorola that we would not have done with anybody else. Since February 6 till today, you will have never gone to the Flipkart homepage without seeing Motorola somewhere. So is that wise? And is it something others would do? No, within normal relationships you would not do that, but once we make a commitment, we go above and beyond the call of duty to make sure we have this partnership. One day this partnership might not be there, but when that happens, we walk away as friends and we move on.
How does Xiaomi in particular affect the sales of smartphones on Flipkart for other brands?
It hasn’t affected at all. On a Tuesday for a few seconds, but not at other times. So there are two segments – you have got the dedicated Xiaomi community that would not buy anything but Xiaomi, and they keep coming back, and we hope they all get the product. There is also a segment who wants to buy a phone, and they go and register, then on the sale day they either get lucky or they don’t. Now if they don’t they can always come back after five minutes and buy another phone.
That is what our platform is all about. We are not directing a customer or telling a customer what to buy or how much to pay. What we say is we are a platform, we are offering everyone an opportunity to sell their products and you have a choice and that is part of the reason we wanted to be transparent.
If you remember the first two launches we did with Xiaomi, nobody knew how many pieces were sold. So we figured if I was a customer, wouldn’t it be good for me to know what my chances are? So if we told that there were 200,000 customers and there were 40,000 phones, you can actually calculate what your chances are. We have customers who have registered for all the sales and still haven’t got the phone, and it turns my stomach. I’m not happy about it, but we told that it was going to be like buying a lottery.
You also launched your own branded tablets under Digiflip and also announced a few new tablets with Intel too. So how is that part of the business going, cause as an outsider it looks like a conflict – on one side you are a marketplace, while on the other side you are also developing your own brand?
Our job is to give customers options and that is the reason we developed this series of tablets. Right now we have six devices from Rs 6,000 to Rs 16,000 with a variety of specs. If these products don’t sell, then we will have to look back and see why they didn’t sell – was the quality poor? Was it priced too high? Or did someone else have a better product? But at the end of the day, the customers are going to win because now they are six new choices. We don’t look at them as brands – we look at our customers and by giving them more options, we are giving them more. Now whether it is a success or not, it is the customers’ choice. When you fail it is your fault, you either didn’t have the right price or the right quality.
Why launch a tablet, and not a smartphone, considering you are the biggest online smartphone retailer in the country?
We don’t see a gap. It goes back to selection. From Rs 2,000 to Rs 40,000 there are 400-500 phones, so where would I put my phone? With tablets there was a gap, with phones I don’t see one. Is it going to change in a week or couple of months from now? I don’t know. But if there is a gap we will try to address it. But we would rather address it through a brand than us doing it.
When we read the customer reviews, they tell us about the bad camera, the size of the screen is not good, or it is not affordable. So when we hear this, we say okay let’s all just put these concerns and build something that hits all of those, and at least take care of these customers. If a big brand comes out and does what we do at the same price and customers go there, then more power to them.
You are sitting on a huge amount of data, in terms of what people are looking for, and what are they buying, how the buying process happens. What are you doing with that data?
We are using it to benefit the customers. If they are looking for a price point, if they keep going to a tablet and people don’t buy it then there’s something wrong. Maybe the price is not right or maybe there are features missing, so we read the reviews.
First, we take care of it with the customers, as it may be a logistics issue or a payment issue. So we monitor this data for our internal use. But when these partnerships come in, we share all the relevant data with them. So if they are building a phone which has a 3-megapixel camera, and they want to sell it for Rs 9,999 our data tells them that it isn’t going to work. Or if they are selling a phone in a region or they want to do advertising in that region and we feel that the return on investment is low, we tell them that our recommendation is not to do it. So all this data is to benefit the customer, and to to benefit the brands too, which ultimately is benefiting the customer.
So did you share any data with Motorola, especially with the Moto G?
Absolutely. Most of the times we don’t actually have to do it. If I was an engineer and I was trying to build the next Moto G, I would look at the 15,000 reviews that were on our website and use the really valuable data that is present there. And most of the times they do that. We also talk about the geo data, pricing and what is happening in the market, so all that is transparent, and we don’t have to actually give them the data per se.
If you are looking at the price points and build a phone with certain features, all you have to do is make some comparisons on our website and you will be able to derive a number. But above and beyond that we have some very interesting detailed data that our partners benefit from.
What is it that is keeping you really excited? What is it that you are really looking forward to? Is there any product category that you think hasn’t been explored enough?
I don’t think there is a particular product category. We want to be in every product category that is important to an Indian consumer, whether it is the want category or the need category. In categories that are need based, we want to give consumers the best possible value, and that is our ambition.
Then come the areas where people like to buy stuff. The Moto 360, nobody needs one, but we want to bring it to India, and we want to bring it at the right price. We also want to be able to ship to the guy that is 1,500km away from the nearest city, and he doesn’t have to wait another two months or pay twice as much because somebody brought it to town or take a trip. We want to bring the best products at the value expeditiously and accurately to all Indian consumers.