Early this year when Flipkart acquired Letsbuy, we had our fair share of analysis (read: Why Flipkart’s Acquisition of LetsBuy is a Great Story for the Startup Ecosystem , Letsbuy and Flipkart – A marriage of INCONVENIENCE!! ). We have been watching LetsBuy and Flipkart synergy for sometime and here are a few observations:
- Letsbuy has killed the buyback option (http://buyback.letsbuy.com/)
- There have been no Letsbuy ads in recent times.
- There have been no mailers as well.
- Their Twitter account (@LetsBuy) was last updated on April 24th. There are way too many complaints/order status requests regarding Letsbuy and none of them are being addressed.
And now some rumors
- All warehouses of Letsbuy except at Delhi have been closed down. Whether its “shut down” or “under renovation (for Flipkart)” is unknown.
- It seems an announcement was made last week at Letsbuy, Gurgaon office that by May-end all 250 odd employees would be laid off (with no visibility into severance package). The story at BusinessWorld also corroborates this.
While the details haven’t been confirmed by either of the two companies (we have sent an email to Flipkart for the official version), we have heard the layoff details from LetsBuy employees as well.
So what really happened?
When Flipkart acquired Letsbuy, the official release mentioned 3Cs (Computers, Communication and Consumer electronics) category expansion as the main reason for Letsbuy acquisition:
“This acquisition fits into our strategy of building dominant shares in all categories we operate in. We are already leaders in the books and media verticals. Given that we managed to build a leadership position in consumer electronics as well since its launch in early 2011, it made sense for us to consolidate when we saw this opportunity. This acquisition opportunity came at a very attractive price for us and the timing has also been ideal. The synergies will now allow us to accelerate faster and get to a share similar to what we enjoy in the online books category”. [source]
Which translates to acquiring the warehouses, integrating the backend/supply chain etc. But none of that has happened so far and now Letsbuy has shutdown all warehouses, except for the one in Kirti Nagar, Delhi.
Flipkart vs. LetsBuy: Exploring Synergy
Let’s chalk down the strength of the two companies:
|Brand||Way stronger – 9+ of 10||3-4 of 10|
|Geography||North+West, mostly. Expanded post TV Ads||North, North-West|
|Popular Verticals||Books, mobiles||All consumer electronics|
|Logistics||Of course well done||Hmmm|
(we used a flaky tool)
So why did Flipkart acquire LetsBuy ?
Was it to address new markets, and get a new user base? Or to get better access to deals in consumer electronics space (no doubt that Letsbuy was much cheaper than Flipkart pricing, when it comes to electronics space). And all of this probably made sense in the short run, but not something Flipkart could not have figured out on its own steam.
The need to add more warehouses could have been an immediate pain point that (also) got solved with this deal – but on its own its too expensive a proposition.
Was it – as believed by many – driven by a financial restructuring of its portfolio at the VC’s end? Given other such signs at Accel’s end, this cannot be totally ruled out. Of course, this is pure speculation.
That must have been a tough one. Not just for us, but for those involved.
LetsBuy is a bit of an expensive hot potato. Let’s remember they were probably bleeding when Flipkart bought them.
So first up – a smart thing to do would be to reduce costs! The ads, emailers disappearing from the online world point to that. Integrating Flipkart with Letbuy would be a medium term process – and doing it at the service/logisitics level would be pointless, painful and risk dilution of Flipkart’s famed service levels. So it would make sense for just the inventory, vendor relationships and the like.
The above doesn’t need too many Letsbuy people, of course. The grapevine is abuzz about many Letsbuy-ers interviewing at other places – so the murmurs of a “restructuring” in there are not unbelievable.
Is the Letsbuy brand hurting Flipkart?
Will the Let’sBuy brand stay alive? It does have a certain amount of recall. However, using it as sub brand for product categories doesn’t make sense especially given the strength of Flipkart’s own brand. But as a new property/direction – say a deals site closely affiliated with Flipkart, or an outfit managing and forging affiliate/channel alliances – perhaps yes. Flipkart must be looking at moving deeper into the hinterland and addressing markets on the fringes to expand.
“Letsbuy employees are, however, certain that the brand will be wiped out. “From the looks of it, Flipkart is going to kill Letsbuy,” says a senior officer at Letsbuy on condition of anonymity. “Our orders have come down drastically and we only get new inventory after orders are placed,” he adds. Incidentally, Letsbuy is still receiving about 1,500 shipments a day against Flipkart’s 30,000 a day” [reports BW]
The one thing that’s clear is to either do a 100% brand integration and ensure that LetsBuy experience is as good as Flipkart, or simply kill the brand and own the logistics. The more Flipkart delays this, the worse will be the impact on its own brand perception.
And this is just one of the several tweets that expresses frustration over LetsBuy’s bad support (and a new trend we have observed is that people are now putting the blame on Flipkart for Letsbuy shipping mistakes/delays).
Given that Amazon is probably feverishly working on its India strategy and Jabong is on an aggressive growth plan (read: Rocket Internet in India: What’s the Big Deal?), we wonder if this isn’t just a huge, expensive distraction to Flipkart? There are sporadic reports of older players like Indiaplaza and HomeShop18 working on improving their logistics and delivery. Everyone must have Flipkart on their radars, and surely, the ecommerce battles are just about warming up.
What’s your opinion?
[The article is co-authored by Sameer Shisodia and Ashish Sinha.]