Flipkart and other e-commerce companies in India are going to die a slow painful death if they continue on this path. They are spending excessively on unwanted things. By unwanted I mean labor, marketing expenses, logistics and other costs which could have been avoided.
When I read the headlines that Amazon is going to invest $3bn in India, that made me think how cockroach like Indian e-commerce companies like Flipkart are compared to Amazon. Flipkart says it delivers to about 8 million customers in a month. This is a good number considering India has only recently started to adopt the internet.
I mentioned unnecessary expenses which Flipkart or any e-commerce company in India has. Let me list a few:
Flipkart has about 33,000 employees. Google has 53,000 employees world over and Flipkart has 33,000 employees in India! I believe this is some trend among Indian companies to hire way more than what is actually needed.
Google is into some remarkable innovation. The most innovative thing Flipkart has done is create Flyte which was a music portal like iTunes which not surprisingly bombed. Otherwise, Flipkart isn’t doing anything innovative but mostly ctrl c + ctrl v of what Amazon is doing. They copied Amazon by focusing on books and promoted a lot of e-books at one point of time. They even copied Amazon’s premium delivery service and called Flipkart First (I think).
My point is, why do you want so many employees? When all they are doing is coding. The access to technology these days is incredibly high. It isn’t a big deal if you say you can make an app or create an online store. Hell, I almost created one on my website a few years ago using Woo Commerce. With 53,000 employees, Google has been able to conquer the world. With 33,000 employees, all Flipkart is doing is bleeding its cash reserves.
The average software engineers in Flipkart get Rs. 100,000 per month. Here is the hilarious part, all they do is code. They are not doing anything innovative. Zomato scanned restaurant menus and uploaded it on their website for over 7 years and then saw sales plummet or rather cash reserves deplete and this resulted in 250 employees receiving the pink slip in 2015. Paying people lakhs per month to scan restaurant menu cards? That is indeed innovative. An innovative way to burn money.
PayTM gave 200 of its 4500 employees a hike of 100% in 2016. These are things they can afford now but they cannot once their VC funding runs out or stops. $500 million in funding from Alibaba is best spent on employees who do coding and escape innovation.
The opposite is there in education, universities spend on acres of land building a basketball court or a swimming pool and hardly spend on training its teachers who are the real source of revenue for any educational institution. Ever noticed not a single university; Amity, Sharada, Lovely Professional or any other institution advertises about the quality of teachers they have?
It makes sense when you spend on your employees when they give good returns. Take for example, JK Shah Academy which is known for its excellence in coaching students who want to pursue Chartered Accountancy. Every student of JK Shah knows the quality of faculty there are the best and the only reason why so many students join there is for the quality of faculty. The academy rewards its teachers for this because they know very well that it is the teachers who are the real reason why admissions happen in the 1000s for every batch. In short, it makes sense to pay your employees so much if they bring in a lot of revenue.