Here is why Mukesh Bansal quitting Flipkart is not really the news

Myntra’s Mukesh Bansal’s exit from Flipkart has shaken the ecommerce turf. This is similar to what happened when Flipkart acquired online fashion retailer Myntra in 2014. “This acquisition helps us grab a bigger market share and compete better,” said Binny Bansal then, co-founder, Flipkart.

Incidentally, the Bansals of Flipkart – Sachin, Binny and Mukesh are not related.

Here is why Mukesh Bansal quitting Flipkart is not really the news

Mukesh Bansal. IBNLive

So, has Mukesh Bansal outlived his utility and efficiency at Myntra?  Exactly a month ago, on January 11, Flipkart announced that it had flipped its CEO with Binny Bansal, co-founder, taking the hot seat and Sachin Bansal moving up as executive chairman.

Mukesh Bansal was given an additional role of running Flipkart’s advertising business which was overseen by Sachin Bansal until then. Under the new restructure, he was to report to Binny Bansal.

What happened in a month’s time? Was it a pre-planned move? Was the news announced a month later so that there would not be 'too much news too soon' in a single day?

The e-commerce space is dominated by the giants – Flipkart, Snapdeal and Amazon, not necessarily in that order. Amazon is rapidly extending its scope and usurping rapidly the space that the other two had monopoly over for some time. Competition is is widespread and though bleeding, the discount and the sale bargains continue.

With consolidation becoming the rule of the game, perhaps Flipkart has decided to focus on its bottom line and get its act together by moving its co-founders (or its investors have decided) within the organization to more effective roles to speed up the pace at which it is evolving and to positively impact its balance sheet.

“Mukesh Bansal quitting Flipkart is not news. To me, the Bansals of Flipkart quitting would be news,” says Ankur Bisen, in a laughter-laced tone. Bisen is the vice-president, Technopak Advisors, a Delhi-based management consulting firm.

Bisen points out that in any developing and developed countries, there are only two players dominating the e-commerce space. Like Alibaba and in China, Amazon and eBay in the US. In India, there are too many fighting for that space.

Another reason is that the marketplace makes money by charging on commercial transactions currently at 14 percent. This is not enough to cover costs, points out Bisen.

Some feel that the move to let Mukesh leave Myntra a month later was planned exactly in that manner. “The Bansals at Flipkart did not want to put out all the news on the same day – their restructured positions and Mukesh Bansal quitting,” says a venture capitalist speaking on condition of anonymity.

Perhaps, he says, Mukesh’s role was at Flipkart to oversee the integration of Myntra. Once that was accomplished, he was shunted out. “You don’t expect the Bansals to say we asked Mukesh to exit,” he says.

Flipkart is owned 90 percent by its investors. So this could be a decision driven by investors, says Harish V, Partner, India Leadership Team, Grant Thornton, an accounting and consulting firm. It is quite common for organisations to restructure their top management, he says.

The move is not sudden, feels Paula Mariwala, executive director at Seedfund, an early-stage venture capital fund. “Having three founders at Flipkart makes the management overcrowded." She rules out that there could have been an ego clash. "I  feel the Bansals of Flipkart have put the business interests in the fore and with consolidation the name of the game, it is but natural that someone has to move out. But Mukesh is a shareholder still,” she points out.

There could have been some nervousness with Amazon snapping at Flipkart’s heels. With its focus getting frayed fobbing off the competition, it was time to consolidate and focus on the bottomline.

The Bansals are extremely reticent and talk only when they have something to announce. This change in the business with regard to the exit of Mukesh Bansal was announced by way of a press release by the Bansals.

Pinakiranjan Mishra, Partner and national leader, Ernst & Young, says that there is pressure on the e-commerce sector with regard to efficiency and profitability. The way the industry is evolving is changing rapidly. Hence companies change their plans depending on the needs and challenges at each phase. Sometimes, says Mishra, these changes are dictated by capital and at others by skill sets.

The news may be surprising to the media, say analysts, but it is a planned move well-orchestrated by Flipkart and its investors. Just a well-thought plan, they aver.

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Updated Date: Feb 12, 2016 10:32:56 IST