E is now mc2: The changing face of Indian ecommerce

flipkartThis is a slightly different column from the ones that I usually write, given that it has no hard core economics in it for a change.
In February earlier this year I was in Bangalore at a literature festival, moderating a discussion titled old retail versus new retail. And this discussion along with some recent family experiences and reading leads me to believe that some interesting things are happening in the Indian ecommerce space.
I first discovered ecommerce when I started ordering books on Rediff.com(of all the places) sometime in 2007 or 2008 (I don’t remember when). I found the process very convenient and ended up finding a large number of books which weren’t available in book stores. During those days the discount phenomenon hadn’t really caught on.
While ordering yet another book on Rediff I discovered a small advertisement (if my memory serves me right) of a website which offered discounts on books. I had never heard of the website before and was sceptical ordering from it.
But the discount finally did the trick and I placed a order. The book was delivered a few days later. And that’s how I discovered Flipkart.com. In the days to come I discovered other book websites like Infibeam.com, Uread.com and so on.
All my book shopping moved online and I stopped going to bookstores like Oxford(at Churchgate in Mumbai), Landmark(at Phoenix Mill in Mumbai) and Crossword(at Kemps Corner in Mumbai). This is how things stayed in the years to come.
My tryst with Indian ecommerce was limited to buying books. Nevertheless, the Indian ecommerce scene has changed dramatically over the last six years. The kind of goods that are now available (and are being bought) online, was absolutely unthinkable six years back. I came to realize this after I saw my mother buying everything from towels to cup-plates-spoons from e-commerce sites, using the cash on delivery option. This gave me the confidence to buy a water filter online, which was delivered within 24 hours. I even ordered a pair of spectacles online recently. The process was extremely convenient.
Everything from furniture to electronics to shoes to clothes, is now available online. The feeling prevailing in 2008 was that people needed to touch and feel a lot of things before buying them. Hence, ecommerce would never move beyond selling books and a few other goods. But that is not how it has turned out.
So, the question is why are people now comfortable buying those goods online which nobody thought they would six years back? I feel there are two major reasons for the same. The first is of course price. Professor Rajiv Lal of Harvard Business School who has studied the retail business all over the world explained this to me in an interview when he said: “Basically the margins that are build up because some of our retail chain are inefficient. Think about the amount of inventory that is being held in the Indian apparel business. It is humongous. Stores are full of inventory and most of them don’t even know how much inventory they are holding. All that stuff is being reflected in the prices that we pay.”
The e-commerce companies don’t have to maintain huge inventories. If they manage to build up an efficient supply chain network, they can keep ordering goods as they go along. Hence, they do not to have maintain a large inventory like the offline players. This helps keeps costs down.
Also, like offline players they do not need to maintain a huge physical infrastructure like showrooms, godowns etc., to sell their goods. They can also buy goods directly from companies producing them and get a better deal in the process. These goods can be then directly sold to prospective consumers without having to go through an elaborate distribution channel.
As Lal told me: “even situations that we think that it doesn’t make sense for people to buy things on the internet because of the inefficiencies in the Indian retail system, the price is so appealing that people are willing to compromise on other things.”
Further, the second reason for the success of ecommerce companies in India is that they follow a very flexible return policy. This allows consumers to touch and feel the product that they want to order. Let’s say a consumer wants to order a pair of shoes. Instead of ordering just one pair, he can order four pairs, see which one fits and looks the best, keep that, and return the other three.
While this is a logistical nightmare for ecommerce companies it has become an important part of the business model that has evolved, allowing the consumers to touch and feel the product.
Ecommerce companies can reach all parts of India even where old retail does not. A friend of mine narrated an interesting story about ordering diapers online for his newly born child. The ones that he wanted were not available in the small town that he lives in.
In Bangalore while moderating the discussion, the CEO of an ecommerce company which specializes in women’s inner wear told me that they deliver to all pincodes in India. It wouldn’t be possible for an old retail company to have that kind of reach through physical stores.
Also, as people get used to ordering stuff online, the ticket sizes of what they order are going up. “The biggest solitaire we have sold was priced at Rs 20 lakh,” the CEO of an ecommerce company which sells jewellery online told me in Bangalore.
Interestingly, Indian ecommerce now needs to be rechristened as mcommerce. Akhilesh Tilotia of Kotak Institutional Equities makes this point in a recent research note titled
e is now mc2: “India’s new internet users [are] coming primarily via mobiles…Flipkart said that ~70% of its transactions take place on mobiles across all categories (from electronics to fashion) and freecharge indicated that this number was ~90%.”
And in case you wondered why every ecommerce(oops I should be saying mcommerce) company keeps advertising their mobile apps, you now know the reason.
In fact, ecommerce companies now even want to set up physical stores. I came to know about this at Bangalore. Tilotia suggests the same in his note: “Online channel players (especially in high-value or experiential verticals such as furniture, jewelry, and beauty products) pointed out the challenges that they face in bringing the correct and complete experience to the customer. Issues such as the need to touch and feel a product, trust, dispute resolution, and handholding and demonstration need a physical outlet. Companies that started as online-only portals are now developing an omni-channel strategy.” Such stores should take care of the need of a consumer to touch and feel a product to some extent.
But that’s the good part. What nobody seems to be talking about is whether the ecommerce companies are actually making any money? Or when will they start making money? Right now, with money available at low interest rates in the developed world, private equity and venture capital firms are falling over one another to invest in Indian ecommerce. The question is for how long will that continue?

The column originally appeared on The Daily Reckoning on Mar 10, 2015  

A bit rich: Why is discount king Kishore Biyani ranting against Flipkart sale?

Kishore_Biyani
Vivek Kaul

If you shout loud enough someone is bound to hear.
Over the last couple of days the offline retail players led by the likes of Kishore Biyani have been shouting from the rooftops about Flipkart and othe retail players indulging in predatory pricing and selling products below cost.
As a very patriotic sounding Biyani told The Economic Times “How can someone sell products below its manufacturing price? This is legally not allowed in the country. Someone can do such undercutting only to destroy competition. Just because they have foreign funding, they can’t kill local trade like that.”
He hasn’t been the only one whining against the discounts offered by the ecommerce companies like Flipkart. Praveen Khandelwal of Confederation of All India Traders (CAIT) said that the association has already approached the Ministry of Commerce. “We do not understand how online retailers gave 60-70% discounts. The prices at which they sold merchandise are lower than our purchase prices. This is a clear case of predatory pricing.”
These noises have reached the government. “We have received many inputs regarding Flipkart episode. Lot of concern have been expressed and we will look into it. Now there are many complaints. We will study the matter… Whether there is a need for a separate policy or some kind of clarification is needed, we will make it clear soon” Commerce and Industry Minister Nirmala Sitharaman said yesterday.
The first question is why should the government look into what is basically finally some healthy competition in the retail sector. Henry Hazlitt explains this beautifully in his book
Economics in One Lesson. As he writes “The persistent tendency of men [is] to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups.”
The offline retailers have managed to attract the attention of the government and now the government wants to look into the matter of discounts offered by ecommerce companies. Chances are that the government in the process of looking into the matter will fall victim to what Hazlitt calls the broken window fallacy.
So what exactly is the broken window fallacy? Hazlitt explains this through an example. A young hoodlum throws a stone and breaks a shop window. By the time the shopkeeper comes out, the boy has manage to disappear. A crowd starts to gather and a discussion starts. In sometime, the crowd decides rather philosophically that what happened was for the good.
As Hazlitt writes “After a while the crowd feels the need for philosophic reflection…It will make business for some glazier….After all, if windows were never broken, what would happen to the glass business?” The glazier will have more money to spend. And this will benefit other merchants. “The smashed window will go on providing money and employment in ever-widening circles. The logical conclusion from all this would be…that the little hoodlum who threw the stone, far from being a public menace, was a public benefactor,” writes Hazlitt.
On the face of it this sounds perfectly normal. But what it does not take into account is the fact that the shopkeeper will have to spend money in order to get the window repaired. And this money he could have spent on something else. In the example that Hazlitt has in his book the shopkeeper wanted to buy a suit. Now he can’t possibly buy the suit because the money has been spent on getting the window repaired.
As Hazlitt writes “The people in the crowd were thinking only of two parties to the transaction, [the shopkeeper] and the glazer. They had forgotten the potential third party involved, the tailor [who would have made the suit]. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye…It is the fallacy of overlooking secondary consequences.”
A similar thing seems to be playing out now in the battle between the ecommerce companies and the offline retailers. In the process the government, like the crowd in Hazlitt’s example, is likely to forget about the third party in the transaction i.e. the end consumer.
As I had explained in a piece yesterday, the end consumer has benefited from the discounts on offer by the ecommerce companies. While, there may have been problems with Flipkart’s recent Big Billion Day Sale, the discounts on offer on most days are genuine. And this benefits the consumers.
Ecommerce companies can offer these discounts because they do not require to maintain the massive physical infrastructure that offline retailers need to do. Over and above this, they do not need to maintain massive physical inventory and at the same time can cut through the distribution chain. These things help keep costs low, which in turn leads to discounts.
The end consumer benefits through discounts. He also now has more choice. Take the case of books. I am a big fan of crime fiction in general and Scandinavian crime fiction (translated into English) in particular. I can now buy almost all the Scandinavian crime fiction that has been translated into English from websites selling books. At the same time the choice of crime fiction available at a book store is fairly limited.
Let’s take another example shared by a friend who lives in a small town and has recently had a baby. The supply of quality diapers in his town is rather patchy. He now simply orders them online.
Further, the consumer also has more choice now when it comes to spending his money. If a consumer buys a product that costs Rs 1,000 offline at Rs 800 online, he is left with Rs 200. That money he can spend somewhere else. This will also benefit some business at the end of the day. The trouble of course is that no one knows where the consumer will end up spending the Rs 200 that he saves by buying online. Hence, a coherent argument in favour of the consumer cannot be made.
So, the likes of Biyani and his ilk may be complaining but the end consumer has benefited from the ecommerce revolution that is taking place. Another argument being offered is that ecommerce companies are taking over the business of offline retailers. As a retailer told 
The Hindu Business Line “The consuming class in India is in the age group of 18-30. Incidentally, they are also the ones who are driving up sales in the online space. This may erode our customer base.”
The next level of this argument will be that if this continues, then the offline retailers will have to start firing people. Hence, many people will end up losing jobs. The problem with this argument is that it again does not take the consumer into account.
Take the case of mobile phone retailers who are facing a tough time because of the discounts offered on mobile phones by ecommerce companies. The question is how many mobile phone consumers does this country have in comparison to mobile phone retailers. The number of mobile phone users is many many times the number of mobile phone retailers. So yes, mobile phone retailers are having a tough time, but the mobile phone users are benefiting (or have the potential to benefit) from the discounts being offered by the ecommerce companies and this cannot be ignored.
Further, the offline retailers have accused ecommerce companies of dumping their goods as well as predatory pricing. Sunil Jain demolishes these arguments in today’s edition of The Financial Express.
The question that Jain asks is that does Flipkart have the market power to dump goods? The entire e-retail sector in this country is selling goods worth around $4 billion, as per data from consulting firm Technopack. This is not even 1% of the $500 billion consumer market. And Flipkart is a fraction of that 1%. So, it doesn’t really have the market power to dump goods?
Further, Flipkart and other websites have been accused to selling things below cost. As Jain writes “Biyani and the others making this case will have to prove it. Just because a sale is taking place below the maximum retail price (MRP) doesn’t make it below-cost. Let’s say an article costs Rs 100 but has an MRP of Rs 200—that’s a pretty standard thing for most goods. The difference between the two is what comprises trade margins, shared between wholesalers and retailers. So as long as Flipkart is selling at over Rs 100, it is difficult to make a case for it selling below-cost—though…that is also permissible till such time that Flipkart is a dominant player.”
Also, if the selling below cost argument is taken to its logical conclusion then the “loss-leader” concept in retail chains will also have to come to an end. Investopedia defines this as a strategy
in which a business offers a product or service at a price that is not profitable for the sake of offering another product/service at a greater profit or to attract new customers.” Airline seats being sold on a discount at the last minute will also have to stop.
It is worth remembering here that technical progress always throws people out of jobs and puts the incumbents in tough situations. Ecommerce is doing precisely that with offline retail. So does that mean there should be no ecommerce?
Hazlitt explains it best when he writes: “The technophobes, if they were logical and consistent, would have to dismiss all this progress and ingenuity as not only useless but vicious. Why should freight be carried from Chicago to New York by railroad when we could employ enormously more men, for example, to carry it all on their backs?”

PS: The irony is that Kishore Biyani who built a good part of his business by offering huge discounts over long weekends and thus created troubles for many a kirana shop, is now having problems with the same strategy.
The article originally appeared on www.FirstBiz.com on Oct 9,2014

 (Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek)

Flipkart vs offline retailers: Kishore Biyani ko gussa kyon aata hai

Kishore_Biyani

Vivek Kaul 

Raghuram Rajan and Luigi Zingales in the introduction to their fantastic book Saving Capitalism from the Capitalists write “Those in power—the incumbents—prefer to stay in power. They feel threatened by the free markets.”
So who are these incumbents? “
The identity of the most dangerous incumbents depends on the country and the time period, but the part has been played at various times by the landed aristocracy, the owners and managers of large corporations, their financiers, and organised labour,” Rajan and Zingales write.
Something along these lines is currently playing out in the Indian retail sector. The incumbents (or what we can now call the offline players) are feeling threatened by the e-commerce companies, the new kids on the blocks. E-commerce companies like Flipkart, Snapdeal and Amazon have changed the rules of the game.
The e-commerce companies are gradually taking business away from incumbent offline players by offering huge discounts on products that they sell. One reason for the same is the fact that the ecommerce companies have managed to get around the inefficiencies built into the Indian retail system.
Professor Rajiv Lal of Harvard Business School explained this in an interview with
Forbes India. As he put it “Basically the margins that are build up because some of our retail chain are inefficient. Think about the amount of inventory that is being held in the Indian apparel business. It is humongous. Stores are full of inventory and most of them don’t even know how much inventory they are holding. All that stuff is being reflected in the prices that we pay.”
The e-commerce companies don’t have to maintain huge inventories. If they manage to build up an efficient supply chain network, they can keep ordering goods as they go along. Hence, they do not to have maintain a large inventory like the offline players. This helps keeps costs down.
Also, like offline players they do not need to maintain a huge physical infrastructure like showrooms, godowns etc., to sell their goods. They can also buy goods directly from companies producing them and get a better deal in the process. These goods can be then directly sold to prospective consumers without having to go through an elaborate distribution channel.
Take the example of books being sold online. One reason why 30% discount on books being sold online is normal because the bookstore’s margin has been taken out of the equation totally.
Given these reasons, the costs of ecommerce companies are significantly lower than offline players, leading to them being able to offer products at a discount to the maximum retail price.
In fact, people have even started ordering goods like clothes and shoes, online. :Until a few years back nobody thought such products could be sold online. One reason for this is the attractive price. As Lal puts it “even situations that we think that it doesn’t make sense for people to buy things on the internet because of the inefficiencies in the Indian retail system, the price is so appealing that people are willing to compromise on other things.”
There are other reasons as well. Online companies allow buyers to return the product under a certain time period. This has given confidence to people to order products like clothes and shoes.
All this has pushed offline players into a corner. As a retailer told The Hindu Business Line “The consuming class in India is in the age group of 18-30. Incidentally, they are also the ones who are driving up sales in the online space. This may erode our customer base.” Given this, it is but logical that these retailers now questioning the basic business model of ecommerce companies.
As Kishore Biyani told
Firstbiz yesterday “Laws in this country do not allow sales below cost price. This is anti-competitive. We (at Big Bazaar and other retail brands) never sell below cost price.” He did not clarify whether his company would be approaching the Competition Commission of India.
Praveen Khandelwal of Confederation of All India Traders (CAIT) said that the association has already approached the Ministry of Commerce.
“We do not understand how online retailers gave 60-70% discounts. The prices at which they sold merchandise are lower than our purchase prices. This is a clear case of predatory pricing,” he went onto add.
It needs to be clarified here that not all products sold by online retailers are sold at 60-70% discount. This is the case only for special sales that they organise. Take the case of Flipkart’s recent
The Big Billion Day sale. Products were given away at throw away prices when the sale opened at 8 am. But the website ran out of these products very soon. Amazon had also recently been selling books at a discount of 60%, though they did it in a very low profile way. But not all products are sold at such huge discounts all the time.
The offline retailers are reacting in a way that existing businesses react whenever their business model is threatened by a new business model or innovation. The first salvo has been fired and they have questioned the basic business model of the e-commerce companies.
I wouldn’t be surprised if this argument is repeated over and over again in the days to come. Henry Hazlitt explains this technique in
Economics in One Lesson “The public hears the argument so often repeated…that it is soon taken in.”
In fact, the small and medium telecom retailers are trying to get telecom brands to stop supplying mobile phones to e-commerce companies. Aam Aadmi Party’s Adarsh Shastri is leading this effort.
As a recent news report in The Economic Times pointed out “It was at one such meeting mediated by Shastri last month that Samsung executives announced to the trade that it will go all out to limit or stop distribution to online sellers who are discounting products. More such meetings are lined up with other brands.”
The report quotes Shastri as saying “
Nokia has been cooperating on this. Some brands are more disruptive than the others, like Samsung and even Apple, to an extent. But Nokia, Motorola and HTC have been reasonably open to the idea of price parity between online and retail channels.”
Shastri also said that “”wherever the common retailer is being bullied by a large brand or by the large muscle of online retail, we (AAP) will step in. If it is required tomorrow to take up issues of small retailers, the party will absolutely do it.”
The idea here is to ensure that small and medium telecom retailers continue to stay relevant and are not wiped out by e-commerce companies. While this sounds fair, the trouble with this idea is that it just takes into account one side i.e. the offline retailers. But what about the end consumer?
The question is why is nobody talking about the consumer? First and foremost the consumer is getting a better deal. Doesn’t that amount to something? Further, he has more choice now when it comes to spending his money. If a consumer buys a product that costs Rs 1000 offline at Rs 800 online, he is left with Rs 200. That money he can spend somewhere else. This will also benefit some business at the end of the day.
The trouble of course is that no one knows where the consumer will end up spending the Rs 200 that he saves by buying online. Hence, a coherent argument in favour of the consumer cannot be made. This explains why people like Shastri end up representing only one side of the argument.
Getting back to Biyani, he obviously understands the power of ecommerce and hence is hedging himself both ways. While in public he has been questioning the discounting practises of e-commerce companies, he may also be in the process of tying up with Amazon. As a recent report in the Business Standard points out “Biyani is in talks with Amazon to sell his private labels and sharing back-end facilities.”
To conclude, it is worth remembering that when an existing way of doing things is under threat, the incumbents are bound to react aggressively. This is what is happening right now with the retail sector in India. Nevertheless as Lal of Harvard put it “Why haven’t people asked the question, that should we have introduced auto-rickshaws and taxis because the
rickshawallahs would have lost jobs?”
The article originally appeared on www.FirstBiz.com on Oct 8,2014 

(Vivek Kaul is the author of the Easy Money trilogy. He tweets @kaul_vivek) 

Why Flipkart’s Flyte is shutting down and Apple’s iTunes won’t

flipkart-flyte
Vivek Kaul 
Flipkart is shutting down its digital music store Flyte. The company announced this in an email to its customers on May 29, 2013. For music lovers, Flyte was a one stop shop for almost all kinds of music. From Runa Laila singing Bangla folk to Ilaiyaraaja’s soulful Tamil melodies from the 70s and the 80s. And of course it also had the most obscure Hindi film songs (This writer even managed to locate songs of a film called Shabash Daddy, made by Kishore Kumar, which has some really soulful songs sung by his son Amit Kumar). It did not just cater to connoisseurs. All the latest music was available as well.
At a price ranging from Rs 6 to Rs 15 per song, a lot of good music was available at one place. A winning proposition one would have thought. But things did not turn out as they would have been originally envisaged. And the digital music store is being shut down nearly 15 months after it was launched.
Several questions crop up here. Why did Flipkart shut down Flyte so quickly? How does Flyte compare to Apple iTunes which is more than a decade old and still going strong?
The quick answer is that Flipkart is shutting down Flyte because it was a loss making proposition. And it was a loss making proposition because Indians do not like to pay for their music anymore. Everyone wants to download music for free. Or buy pirated stuff which comes very cheap.
As Nikhil Pahwa writes on www.medianama.com “Flyte Music had struck deals for India based music downloads on web and app by paying music labels an aggregate minimum guarantee (MG) of around $1 million (Rs 5.5-6 crores) for the year, multiple sources told MediaNama. Given the advent of music streaming services like Gaana*, Saavn and Dhingana, where users could stream music for free, but more importantly, the prevalence of piracy, the number of users willing to pay for a-la-carte music was fairly limited. Revenues from song downloads were fairly low – not even 50% of the minimum guarantee amount (only around Rs 2-3 crore is what we heard).”
And if this wasn’t enough the revenues from this business were not growing as fast as from other businesses that Flipkart runs. “More importantly, revenues from Flyte Music grew in a linear manner, unlike Flipkart’s physical goods business, which was growing exponentially, month-on-month. Flyte, with low revenues and low growth,” writes Pahwa.
Then there were other issues. Many people now listen to music on their phones. And a lot of new phones came with songs inbuilt into them. 
As a report in The Times of India points out “A service like Flyte also faces challenge from companies like Nokia and Sony that allow people who buy their smartphones to download millions of songs for free or at very nominal cost. Though these songs can be played only on specific devices.”
So this was the quick answer to why Flipkart shut down Flyte. Now to answer the second question as to how does Flyte compare to Apple iTunes. Why has iTunes been a viable proposition and Flyte was not? The easy answer here is that Apple is a great company and whatever they do has to turn out to be successful. But this answer is basically unfair to Flipkart, which has literally changed the way Indians shop. We need to get into little more detail.
The need for Apple iTunes came up after Apple iPod was launched in Ocotober 2001. The iPod had two godfathers: the Sony Walkman and the Napster website.
As John Mullins and Randy Komisar write in 
Getting to Plan B – Breaking Through To a Better Business Model “For Apple, there were some analogues to light the way, starting with Sony’s Walkman… Further, some 26 million Napster users worldwide, sitting around in their jeans and t-shirts sharing their music files, made it clear that individual songs were just as much, if not more, appealing to music consumers than complete albums.”
Napster was a peer to peer website from which music could be downloaded for free. It soon ran into copyright infringement as music companies got their act together and sued Napster and it had to shutdown.
So the Apple iPod had a problem. Like Napster, it could also get into trouble if the music companies decided to sue it, for encouraging the proliferation of pirated music. As Mullins and Komisar write “Apple had officially entered the consumer electronics industry. But to complete the picture, Jobs (then Apple CEO Steve Jobs) needed a way to sell music as well. Let’s use Gillette as an analogue: Apple was already selling razors (the iPod), but Jobs wanted to sell the razor blades (music), too.”
And unlike Napster, Apple needed to do this legally. It needed to create some sort of a digital service, from which those who bought the iPod could download their music legally.
Jobs personally called individual artists… to persuade them to make their music available on the service. Apple was the first to negotiate and reach agreement with five record companies, allowing Apple to sell hundreds of thousands of songs from artists… In a revolutionary move Apple worked out a deal to sell (not rent) each song for 99 cents. Once they shelled out the cash, Apple’s customers could keep their songs indefinitely, share them on as many as three Macintosh computers, burn them to an unlimited number of CDs, and transfer them to any number of iPod portable music players,” write Mullins and Komistar.
The iTunes website launched in April 2003, caught the fancy of people, and on its first day, sold a million downloads. But it barely contributed to the revenues of Apple. On a standalone basis iTunes wasn’t probably worth the effort. As the authors write, “Of course, no one was really going to fill an iPod with thousands of songs at 99 cents each. Sure enough, by 2007, only about 3% of music on iPods was downloaded or copied from the iTunes music store. The rest was downloaded from other places and was therefore, unprotected and playable on any device. But Apple didn’t care.”
So on its own Apple iTunes did not probably make sense but Apple still persisted with it due to various other reasons. “The iTunes music store completed the user experience, and as long as the critical mass of people bought at least some of their music from iTunes site, Apple could keep itself out of trouble with the Recording Industry Association of America (RIAA). Shrewdly, Apple had turned the traditional “razor and razor blades model” on its head: Apple could make its money selling razors — the growing assortment of iPods — even if customers continued to steal most of the blades,” write Mullins and Komistar.
Cut to 2013, how do things look for iTunes now?. 
For the period of three months ending March 30, 2013, Apple posted a revenue of $43.6 billion. Of this nearly $4.1 billion or almost 9.4% came from iTunes and other software services. So the share of iTunes in the total revenue posted by Apple has gone up from 3% in 2007 to nearly 9.4% now. If we look at the period of three months ending March 30, 2012, Apple posted a revenue of $39.1 billion. Of this nearly $3.2 billion or around 8.2% of the revenue came from iTunes and other software services.
The contribution of iTunes in the overall Apple business has gone up in the decade since it was launched. What does this tell us? Well people are still listening to a lot of pirated music but a whole lot of people are buying music as well. This may be due to the convenience of finding different kinds of music at one place. Also while downloading from iTunes one is assured of the quality of the song and there are no risks that one might face on peer to peer networks or websites that let users download music for free. Or for the fact that people genuinely want to pay because if they don’t, how are those creating music expected to make a living. If people can pay for books, why can’t they pay for music as well?
Apple iTunes took nearly a decade to start making a substantial contribution to the total revenues of Apple. But during that period it supported the other business streams of Apple. And even though it may not have made sense for Apple to run the business on a standalone basis, it did save them a whole lot of trouble they could have otherwise faced from the music industry. Flipkart’s Flyte did not have the same kind of luck. Neither could it supported by the other divisions.
Also, all new concepts don’t catch on automatically. Some concepts take time to mature. And during that time need to be supported by the company. Of course, that is easier said than done. In case of Apple iTunes that had been possible, but in case of Flipkart’s Flyte it was not. Flyte had to be revenue spinner on its own and if not that at least show some growth potential, which it did not.
Having said that, if Flipkart had found some way of keeping Flyte going, it could have been a potential money spinner in the years to come. Because Flyte is an idea, whose time will come.
The article originally appeared on www.firstpost.com on May 31, 2013

(Vivek Kaul is a writer. He tweets @kaul_vivek)