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HARD SELL

If Flipkart is launching a tablet, it’s a strategy fraught with risk

By Sruthijith KK
Published Last updated This article is more than 2 years old.

We don’t know if Flipkart, India’s largest shopping website, is serious about launching a tablet. It hasn’t said so, but like hot, well-funded startups everywhere, that won’t stop anyone from speculating. We have heard before that Flipkart is launching cellphones under its in-house Digiflip label. Now, it is apparently working on an Android tablet under the same label.

If it is true, it is a strategy fraught with risk.

Content monetization strategy?

First, Amazon’s tablet strategy brings its truckloads of revenue because of its vast marketplace of digital content. Unless Flipkart has a strategy to monetize content, there isn’t money to be made there. Rival Infibeam has been selling its own e-book reader and Android tablet at least since 2011. It has hardly taken the market by storm.

Positioning will be a challenge

What will be the positioning of the tablet? If it is a premium play that aims to compete with offerings from Apple or Samsung, how can Flipkart compete on the brand? If the strategy is to sell a tablet with great specs at a competitive price, there are numerous brands that already do that. This category includes players like Micromax and Karbonn, which by now have brand equity in the market, thanks to years of retailing high-spec phones and tablets at low prices. All of them retail on Flipkart already.

Besides, Flipkart will find it very hard to compete on price with a full-fledged low-cost manufacturer who enjoys all manner of economies of scale and has gained expertise in managing inventory risk in a rapidly changing market.

It will turn partners into rivals

Third, by launching its own product in the hyper-competitive and slowing tablet market, Flipkart will start directly competing with the brands it sells. These companies will suspect, regardless of the truth, that Flipkart is promoting its own product at the cost of theirs. It’s one thing to sell low-margin products like headphones and USB drives. Quite another to start competing in a big-ticket category like phones or tablets. It will be a poor move to alienate popular brands in the largest e-commerce category in India—electronics.

Costs outweigh the benefits

If the idea is to just be present in the category and soak up residual sales, it is not going to be a major driver of revenue or margins. But it will complicate the site’s ties with other phone makers. It is true that Kindle users tend to spend more money on Amazon, but that is an experience the retailer perfected over years and billions in R&D. Launching a generic Android tablet is not about to win customer loyalty. And Flipkart already has a good shopping app that works on any Android device. There is little to be gained, and much to lose.

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