Daybreak - Walmart's tightening grip and IPO dreams are pushing Flipkart staffers to the edge

Episode Date: May 6, 2024

A few years ago, Flipkart CEO Kalyan Krishnamurthy had set a target of 40% growth across all categories for Flipkart. But in 2023, it was still stuck at 20%. So the company is now on a mission. It wants to push growth, gain market share, and turn a profit.So in January this year, Flipkarts top execs along with the CEO came together for a meeting to outline a roadmap for 2024. Krishnamurthy wanted Flipkart to introduce a loyalty programme for top spenders, give out more incentives to ensure customer loyalty, push up transaction numbers and average order sizes, and also focus on brands.In the same meeting he also admitted that the company had faced quite a few hurdles the previous year but he was sure they’d make a comeback and hit profitability before the IPO.But here’s the thing, prepping for an IPO often has long term effects on a company’s culture. And the cracks are already beginning to appear inside Flipkart.Tune in.Also listen to: What Swiggy's IPO prep means for its employeesDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

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When a company decides to carry out layoffs, usually employees get to hear about it internally, through the great point. But at Flipcott, the Walmart-owned e-commerce giant, for the first time in its history, things did not quite play out like that. The company has routine layoffs almost, annually, so there is nothing new there.

But what was different this time was how employees got to know about it. They heard it from the media first. Now, this comes at a time when the company is preparing for an IPO. Not this year, but next year. So for the last two years or so, Flipcott has been working to reduce its costs under the leadership of CEO Kalyan Krishmurti, who is known to be a tough taskmaster. A Flipcott employee told us that he is the kind of boss who wants things done yesterday.

The Ken also spoke to a senior category manager who works at Flipkart and he said they had a meeting with 80 employees from a specific category sometime in November last year and there was no mention of layoffs. In fact, the category in charge assured them that there wouldn't be any job cuts. And then in January, Money Control broke the news that Flipkart was all set to lay off around 5% of its total workforce, which is about 1,000 employees. And this is just a small part of what is happening to Flipkart employees

as they chase CEO Krishna-Murte's profitability goal. Their work is relentless with long hours and also no salary hikes. Flipkart has become like a pressure cooker. So today, I will give you a sneak peek into what is going on inside. Welcome to Daybreak. a business podcast from the Ken.

I'm your host, Nick Da Sharma, and I don't chase the new cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time.

By the way, daybreak episodes also drop on Tuesdays now featuring my new colleague Rahil Filippos. Today is Monday, the 6th of May. A couple of years ago, CEO Krishna Murthy

had set a target of 40% growth across all categories for Flipcard. But in 2023, it was still stuck at 20%. Which is why the company is now on a mission. It wants to push growth, gain market share and turn

a profit. And also at the same time, compete with its rivals like Amazon and Misho. So in January this year, Flipkart's top executives, along with the CEO, came together for a meeting to outline a roadmap for 2024. In the

meeting, Krishna Murthy rolled out an agenda. He wanted Flipkart to introduce a loyalty program for top spenders, give out more incentives to ensure customer loyalty, push up transaction numbers and average order sizes, and also focus on brands. In the same meeting, Krishna Murdi also admitted that the company had faced quite a few hurdles the previous year, but he was sure that they'd make a comeback and hit profitability before the IPO. But here's the thing. Preping for an IPO often has long-term effects on the company's culture.

I told you about something similar that was happening at Swiggy a few weeks ago on daybreak. Do you remember? Swiggy used to be an innovation first company. But with dreams of going public, things changed. Just like how innovation got Swiggy to where it is today, FlipCard was known for its culture of autonomy, and a fail-fast mindset. But now, it is starting to resemble a corporate company more and more.

Stay tuned. A senior Flipkart manager told us how back in the day, the good old days, Flipkart used to give out raises not once or twice, but three times in a year. But now, mid- and senior-level staffers have gone for two whole years without salary hikes. Multiple employees confirmed this to my colleague the Kenraport. She spoke to more than 25 current and former mid to senior level employees across diverse categories at Flipcott, from fashion electronics and mobile to tech product and business development. And everything they told her pointed to the fact that Flipcott as a workplace is undergoing

turbulence. Take Flipcott's town halls, for example. Once upon a time, they used to be interactive. Now they have turned into leadership monologues. A senior category manager told the Ken that before the pandemic, the meetings were less presentations and more verbal conversations. But now it was all about putting numbers on slides. Under CEO Krishna-Mutti, the organisation has become way more target-driven, which many employees told us that is not a bad thing. But it's just the way that things are being done that is bothering flurts.

court employees. For instance, Krishna Murti engages with business unit heads every week, usually on Tuesdays, and holds quarterly meetings with category team managers. One such manager told us that these meetings are like drilling sessions where the questions are relentless. Why isn't the business growing? And how do you plan to fix it? And if they are not armed with the right answers, there was a high chance that they would be replaced. The manager said that everybody says that the CEO is not happy and is trying to push targets. In fact, they said that there was one point where they were only preparing for reviews throughout the whole week. Now, all of this

also had an impact on working hours, of course. Since February 2021, work hours at Flipcott have stretched. Employees now stay at work until their bosses call it a day. Before the pandemic, the norm was to leave by 7pm. But after 2021, they have to stay as late as 9 or 10 p.m. In fact, a senior category manager even made a slightly dark joke about it while talking to us. He said that they'd often laugh at how there were only two kinds of people at Flipcott, those who are either unmarried or have no plans to marry and those who are divorced. But when we asked a senior director about this pressure cooker of a work environment,

he said, and I'm quoting him, it is not a current Johor film where Jaya Batchen welcomes you when you arrive to work. It is the largest e-commerce company in India. What were employees expecting? Well, what do you say to that even? But a former category manager told us that Flipkart was the dream workplace back in 2019. But now it's as though a war is brewing. They say everything is fair in love and war.

But when you go into war, you only come back after winning it. So what is this war? that he's talking about. I will tell you in the next segment. With an 80% stake in Flipcard, it is actually Walmart that is calling all the shots. But here's the thing. Since Walmart took over,

Flipkart's valuation has been dropping. From nearly $40 billion, it is now valued at somewhere around $35 billion. So Walmart has been pumping money into Flipkart since the last six years. Like in December 2023, Walmart said that it would infuse $600 million into Flipkart in a fresh fundraise. But a former product manager told again that Flipkart needs an additional billion in funding every year from Walmart just to sustain the business. And as of 2023, its burn rate was close to a billion and a half dollars.

So it is no wonder why Walmart wants to see results now. It wants Flipkart to become profitable as soon as possible. And even though Walmart is still infusing money into the e-commerce platform so far, it does not mean it is going to do that forever. Which is why Flipkart needs to go public soon and take the burden off Walmart. That is all for today. Thank you for tuning in. And if you like this podcast, please do hit the follow button on whatever platform you're listening to us on.

Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-undi offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. To subscribe, head to the ken.com and click on the red subscribe button on top of the Ken website. Today's episode was hosted by Snigda Sharma and edited by Rajiv Siyadh.