Big Billion Startup: The Untold Flipkart Story

by Mihir Dalal

  The Bansals had become the faces of the new era of internet entrepreneurship in India. Sachin was invited to speak at several events and panels on entrepreneurship. One such panel was attended by Pranay Gupta, whom Sachin knew from IIT Delhi. In an attempt to avoid awkward conversation about their IIT years, Pranay fibbed that Sachin had always been ‘super-smart’, an outstanding student at IIT, the implication being that Sachin was destined to become a successful entrepreneur. But he was surprised when Sachin responded, ‘Nahi, yaar. I must confess – if you had asked anyone in my batch if I would be an entrepreneur, no one would have said that. I was normal, nothing special.’ At IIT, Sachin had indeed been a regular guy, another face in the crowd.

  Pranay did notice that Sachin was now a changed man. ‘There was a distinct difference ... He had a presence about him ... a certain confidence.’

  FLIPKART HAD STARTED off by sourcing products from distributors and brand companies as and when it received orders. But in late 2010, in its push to cut delivery times, the company had started stocking books, phones and other products before customers even ordered them. Flipkart also started developing mechanisms to predict demand. In most product categories, a majority of sales came from a small selection of the products. So, Flipkart began buying many of these products in advance. This was, in fact, illegal. Indian law prohibited e-commerce companies that had raised foreign capital from stocking goods, allowing instead a marketplace model whereby an e-commerce platform could connect shoppers with third-party sellers. There was no reasonable rationale behind the law. It was in place mostly because the government exercised tight control over the retail business. Powerful lobby groups with political influence had ensured that foreign retailers were barred from operating directly in India on the grounds of protecting domestic trade. The checks on e-commerce stemmed from these regulations.

  Nevertheless, Flipkart had realized that in order to maintain its high service standards, it would have to hold inventory. There was no ecosystem of sellers capable of delivering the excellence in service that Flipkart wanted to give its customers. The company began to consult with law firms about ways to circumvent the law. A new plan was drawn up. On paper, Flipkart would present itself simply as a marketplace that operated the website Flipkart.com. An entity called WS Retail Services was created that would act as an external seller to the company.8 WS Retail was a nod to the name ‘WSpot’ they had once considered as an alternative to Flipkart. In practice, however, the entity was controlled by Flipkart.9 Sachin and Binny, along with a relative of Sachin, were the owners and directors of WS Retail.10 Through this questionable structure, versions of which were later adopted by other e-commerce firms, Flipkart managed to skirt India’s rigid investment laws.

  AS ORDERS INCREASED through 2010, the company’s tiny offices in Bangalore, Delhi and Bombay that had doubled up as warehouses, ran out of space. The growth in sales had convinced Flipkart executives that the company would need far bigger warehouses. By the end of the year, the company opened two huge warehouses in Bangalore and Bombay. A few months later, in 2011, it rented an even larger one in Delhi.

  Flipkart had now turned into a proper operations company, doing real-world things, getting its hands dirty. It was no longer just engineers running a website, tapping away at their keyboards, writing clever software. Technology was an essential aspect of Flipkart’s business, but its scope and application were limited. At the centre of the company was the operations machine. (This was, however, not how Sachin saw it.)

  There were essentially two Flipkarts. One was the Flipkart of the Bansals, located in Bangalore. This was the brain of the company, the direction-setter, the part that kept customers happy through smart use of technology and marketing. The other Flipkart comprised the sales and operations machinery. This was the brawn of the company, the part that made it tick every day, that negotiated with suppliers, wrangled with courier companies, packed books, laptops and phones in big warehouses, hit the road every hour, every day, to deliver orders to the homes and offices of customers.

  The two sides of Flipkart coexisted awkwardly. While Sachin recognized from the early days the importance of a powerful operations machinery, he was insistent that the technology function would be ascendant at Flipkart. Sachin was like a father favouring the child who had taken up his profession. A sales executive says that Flipkart functioned like two different companies. According to him, ‘the product–tech people used to have their offsite in Goa. We would have to make do with some random resort near Bangalore. We had to work six days a week. They had weekends off. They had Nintendo, company food, Red Bull. We had roadside chhole kulche every day in Delhi. The product–tech guys also had loose accountability. Even if there was a delay in shipments and it was proven that it was because of a tech glitch, we had to manage the customers’ wrath.’

  The two sides clashed often. To please brands, sales executives would frequently ask engineers to make changes on the website. But engineers were given free rein to resist these requests if they believed that the website’s look and feel would suffer. It was a privilege they exercised frequently. Still, the bonhomie amongst the senior leaders meant that both teams ultimately worked towards the benefit of the company and rivalries were kept in check.

  Sachin and Binny had divided responsibilities so that Sachin loosely oversaw the ‘demand’ side (technology, marketing, customer support), and Binny the ‘supply’ side. But the man who exercised tremendous control over the operations function – the most important aspect of the supply side – as well as much of the sales function, was Sujeet Kumar. When he had joined, Flipkart was little more than a books-selling website struggling to make headway with distributors and courier partners. In less than three years, the equation had reversed: book distributors and courier partners were now at Flipkart’s mercy. The company had developed the confidence to start its own logistics fleet. Much of the credit for this belonged to Sujeet and his team. Sujeet was also a popular figure at the company. He had hired hundreds of people, mentored many young sales and operations employees, promoted them to leadership positions. His closest associate, Ankit Nagori, recalls that Sujeet was a ‘big factor’ in building camaraderie at Flipkart. ‘Sachin and Binny are a bit introverted, but Sujeet is the biggest extrovert. He would organize team dinners, lunches and outings. He was always on his toes to ensure everyone was united.’

  But Sujeet came across as abrasive to some employees. His personality hadn’t changed from his college days and people who didn’t know him well found his manner coarse, improper for a corporate environment. He had no qualms about calling out what he thought was substandard performance. As the seniormost Flipkart executive after the Bansals, he had the authority to do so, and he asserted it freely. When Sachin or Binny wanted to remove someone but were feeling awkward about having the difficult conversation, they would sometimes leave it to Sujeet, a task he would take up without reluctance. He deployed very aggressive tactics to undercut Flipkart’s rivals – while this helped the firm, it discomfited the Bansals at times. Sujeet ran the supply chain function in a freewheeling manner. In the rare case, he hired employees to dole out a personal favour rather than purely based on their competence. He would also sometimes remove employees without due process. On the whole, however, the Flipkart co-founders had great trust in him, and both sales and supply chain functions thrived ceaselessly. This was primarily why, in spite of themselves, the Bansals didn’t rein him in. Instead, they generously awarded him large quantities of Flipkart stock in recognition of his contribution.

  In 2011, Flipkart formalized its hierarchy. Sujeet and Mekin, who were already part of the Core Team along with Sachin and Binny, were both given the title of President. There were other promotions, too. Ankit Nagori, Anuj Chowdhary, Amod Malviya, Maneesh Mittal and Vaibhav Pandey were all made Vice Presidents. The move further strengthened Sujeet’s hold over the sales and operations functions. Ankit, Anuj and Maneesh were close to Sujeet and reported to him. Through them, Sujeet had comp
lete control over operations and significant influence on the sales and business development teams.

  Ankit’s rise at Flipkart had been spectacular. After joining the company in April 2010 at age twenty-four at the lowest level in Flipkart’s hierarchy, he had become one of the highest-ranking employees at the company. His role was now expanded to include digital products such as e-books and music.

  The first person Sujeet had hired after coming to Flipkart was Maneesh. For the first few months, the Bansals used to refer to Maneesh – who was about the same age as them – as ‘sir’, a persistent habit from their IIT days. Maneesh had a knack for identifying small fixes in the supply chain that led to huge improvements. He was the brains behind the warehousing systems and processes. The process of collecting thousands of books in a day, sorting, packaging, labelling them, ensuring that no label and book were mismatched, had been designed by Maneesh. He had ensured that the process worked efficiently and at scale. Maneesh had set up a smart, diverse team that included MBA graduates, software engineers and operations experts.

  Another key associate of Sujeet was Anuj Chowdhary, who had returned to Flipkart to head logistics. In 2011, the logistics service, which would later be named Ekart, was expanded to many cities. The company hired and trained hundreds of delivery workers, whose navy blue T-shirts with the Flipkart logo would become a familiar sight on the streets. By the end of 2011, Flipkart shifted a large volume of its deliveries from external courier companies to Ekart. In its biggest markets of Delhi, Bangalore and Bombay, the expansion of Ekart enabled the company to maintain its lightning-speed deliveries even as thousands of new customers came to shop at Flipkart every month.

  Sujeet, Maneesh, Ankit and Anuj were all based in Delhi until the middle of 2011. The Delhi office operated independently from the Bangalore headquarters. The Flipkart founders were, in fact, rarely seen in the Delhi office. The operations team in Delhi jokingly referred to the Bangalore headquarters as Shaktipeeth, the seat of power. In Hindu mythology, ‘shaktipeeth’ refers to places of pilgrimage and worship linked to the god Shiva. The inspiration for the name had come from Jwalamukhi, the IIT Delhi hostel where some of Flipkart’s senior executives had lived. Jwalamukhi is a shaktipeeth in Himachal Pradesh.

  In 2011, on a rare occasion, Sachin visited the company’s warehouse in Delhi. The security guard there had been instructed to allow only those employees to enter who could show their Flipkart identity cards. That day Sachin had forgotten to carry his. Not knowing who Sachin was, the guard wouldn’t allow Flipkart’s co-founder into the warehouse. Despite Sachin’s requests and orders, he refused to yield. Soon after, a seething Sachin had to be coaxed out of firing the unsuspecting guard!

  In its early years, Flipkart tolerated irreverence from its employees. In 2011, in an attempt to rile the marketing head Ravi Vora, an engineer had wondered out loud in the former’s presence, ‘Who made this Flipkart campaign? It’s so full of shit!’ Ravi, who had come to Flipkart from more formal workplaces such as Unilever and Heinz, had maintained a stiff upper lip in response. The same engineer had also caused a furore by making Salman Rushdie’s The Satanic Verses – banned in India in 1988 after Rushdie was issued a fatwa by the religious leader of Iran – available on Flipkart. In reality, Flipkart didn’t stock the book. But the engineer wanted to read it and believed that Flipkart should source any book that a customer asked for. Soon, word spread on social media that Flipkart was selling The Satanic Verses. Many orders were placed. Eventually the company had to cancel them and apologize to the buyers. When the infuriated Flipkart executives asked this engineer to explain himself, he responded, ‘I don’t know ... I just wanted to read it.’

  FLIPKART STRUGGLED INTERNALLY with the problem that blights every fast-growing internet startup: chaos. By late 2011, the company’s staff numbered a few thousand employees, up from less than 100 employees two years ago. It had several offices in Bangalore and one each in Delhi, Bombay and Calcutta. It was no longer a startup; Flipkart had become a medium-sized company.

  The Bansals and their team were locked in a constant struggle to control and direct the ever-growing beast. Every day new problems arose: goods would get stuck at state borders, the warehousing software would break down for hours, there would be a severe shortage of packaging workers during a spike in demand. Dealing with cash was an intractable issue; on occasion, Flipkart delivery workers carrying cash given to them by customers, were attacked by robbers. The company even had to deal with criminal offences by its own delivery workers, a few of whom would abscond with large amounts of cash. Some of the areas where Flipkart had set up warehouses were notorious for poor law and order – this was especially true for northern India. In 2012, a guard working at a warehouse in Gurgaon was murdered by a group of men. Executives in the logistics team filed a police complaint. Thereafter, more cameras were installed across the company’s various warehouses and collection centres, security staff were increased, stricter processes implemented.

  There were several less serious problems which also sprang up on a daily basis. In 2010, the company shipped a mobile phone that exploded in the customer’s hands, an event that naturally drew negative publicity. Sachin and the head of the phone brand jumped onto a conference call with the aggrieved customer and begged for forgiveness.

  The Bansals believed in hiring bright young people and giving them free rein. But they were unable to build a strong human resources function. Hierarchy was loosely imposed, systematic routines were largely absent. Flipkart rewarded people who ‘took ownership.’ ‘It’s better to ask for forgiveness rather than permission’ was the company’s mantra, which permeated its corporate culture. Young hires just a few years out of college were given enormous responsibility. Those who did well were instantly handed out promotions and pay hikes in an unstructured manner. Many employees received generous stock options, or employee stock ownership plans (ESOPs). This was one of the most beneficial aspects of Flipkart’s legacy in the startup ecosystem. After the company awarded and honoured ESOPs, other startups were forced to follow suit so they could attract talented employees. Until Flipkart instituted a proper ESOP policy, stock options had largely been worthless assets for employees. Flipkart’s rise changed that; employees elsewhere now grew more vociferous in their demand for ESOPs, and startups had to set aside anywhere between five and fifteen per cent of the company’s stock for employees.

  While Flipkart’s freewheeling approach in managing employees paid off, it had significant drawbacks as well. The company became an intense political battlefield at the senior levels. Hierarchical restructuring took place every few months. Senior executives would often be found locked in shouting matches. Roles were changed depending on the need of the hour. Most employees came to believe that they had played a pivotal role in the company’s success, that they were indispensable to Flipkart. But suddenly, without notice, they would lose favour. Those who were put on a pedestal would be rudely pulled down, without warning. Many senior employees felt they had done the best work of their careers at Flipkart. But this is where they also experienced their most bitter parting, finding themselves burnt out by the end. For junior employees, the shocks were not as brutal, but the pattern held. Flipkart was like a slaloming rocket: it was great to ride it, but if you fell off, you would meet a devastating end. The growth was so enthralling and all-consuming that no one seemed to care if there was collateral damage.

  By early 2012, many of the better-performing employees had leftthe company. The ones who stayed behind weren’t too concerned, and neither were the company’s founders.

  Flipkart’s was also a corporate culture cultivated and designed by men, for men. Until 2012, the company had no woman employee at the senior level. It wasn’t simply because there were very few women in the tech world at that time; the company’s male executives were also more comfortable working with other men. It seemed that the culture of India’s engineering colleges had been replicated at Flipkart.

  10

&nbs
p; THE KING OF SHAKTIPEETH

  Sachin may have been an unfamiliar figure at the company’s warehouses, but at Shaktipeeth he ran the show. In the words of one of his colleagues, ‘Whatever Flipkart was until 2013, it was what Sachin had imagined.’ In interviews with reporters, Sachin came across as energetic, geeky, and he was always quick to smile. At Flipkart’s offices he was an impulsive, ruthless capitalist, given to temper tantrums and serial impatience. Sachin was perennially unhappy with the state of affairs at Flipkart, constantly finding fault, always demanding more, and stingy with compliments. His inherent shyness notwithstanding, he had long transformed into a daring businessman, relishing the high-risk game that was internet entrepreneurship. In many ways, Flipkart’s internal environment was a reflection of his personality – volatile, chaotic, excited, constantly churning in the rush to grow by leaps and bounds. Thinking small was discouraged and executives who delivered moderate performance failed to survive for long.

  In 2011, Sachin moved into a new apartment near the Flipkart headquarters in Koramangala so he could walk to work every day. He was at the peak of his abilities and immersed himself in all functions at the company. From the start, Sachin had taken charge of the product department, unrelenting in his efforts to offer the cleanest, smoothest interface to users. He directly oversaw many of the improvements on the website. Along with Binny and Sujeet, he backed Flipkart’s push into logistics. While he hadn’t taken much interest in the supply side and had little knowledge of the field, that year he led a project called Flo to design a new supply chain system. Flipkart’s previous software, Open Taps, used to constantly collapse under the ever-increasing volume of orders.

  Working with a small team of engineers, Sachin now hunkered down in the company’s second-ever office, the bungalow in Koramangala. He believed in providence – this was where Flipkart’s rise had begun in earnest. The team emerged only weeks later, when the new software was almost ready. Initially, the new supply chain system caused severe disruption with vendors and at warehouses but over time, after several fixes, it resolved many of the problems with the old system. Some Flipkart employees still complained that the software fell quite short of being sufficiently reliable.