Flipkart to invest over $500 M in its logistics infrastructure
Flipkart will invest $500 million over the next four-five years to set up 80-100 so-called fulfilment centres, or warehouses, in all the states.
Mumbai, INDIA | Red Newswire. Sat, Oct 31 2015. 11:13 AM IST.
Flipkart Ltd, the country’s largest e-commerce company, is making its biggest investment push by far by investing about $2.5 billion over the next few years to establish a country-wide network of back-end infrastructure as it fortifies its position in the rapidly growing e-commerce market.
Setting up logistics support systems and establishing a chain of warehouses in all states will give Flipkart an edge over its rivals by enabling it to reach millions of people and deliver goods quicker to customers.
“Logistics network is the biggest differentiator,” Flipkart chief operating officer Binny Bansal said on Friday. A logistics network presents “strong competitive advantages”, which is why it will be the “biggest investment area” for the company, he said.
Flipkart will invest $500 million over the next four-five years to set up 80-100 so-called fulfilment centres, or warehouses, in all the states. Over half of the warehouses will come up in tier-2 and tier-3 towns, enabling it to service all the pincodes in the country, he said. The firm has invested $100 million so far in setting up 17 warehouses.
Bengaluru-based Flipkart, which raised $2.6 billion from private equity and financial institutions, is also making plans to expand its logistics network, which could cost a “couple of billion dollars”. Bansal said the company hasn’t arrived at a final figure yet but the network will be built over the next five-six years.
Flipkart would raise money for the logistics expansion from more external funding rounds and from the public. It hopes to turn profitable in two-three years, and will go for an IPO in two-five years, said Bansal.
Money for the warehouse expansion will come from equity capital that Flipkart has already raised, and from internal accruals. “The whole fulfilment centre network will be built out to cover the length and breadth of the country,” said Bansal, who co-founded the company with chief executive Sachin Bansal in 2007.
To be sure, the exact nature of the investment towards enhancing logistics capability is unclear. The company will invest in “fortifying logistical abilities by leveraging capabilities such as automation and many innovative devices”, Bansal was quoted as saying in a media statement.
On Friday, Flipkart formally opened its biggest warehouse, spanning 220,000 sq. ft, near Hyderabad. With a capacity to process 120,000 units a day, it is the company’s first automated fulfilment centre. The fulfilment centre will have automated sorters with the ability to separate shipments based on pincodes.