Can Flipkart lure premium users to Voot, Tinder, Zomato, and Practo with its 100% money back offer?

“Why pay for your new smartphone? Get 100% money back…” Reads the ad copy of Flipkart’s latest offering ‘SmartPack’. The offer allows users to buy (read subscribe to) new smartphones by paying for a subscription bundle of premium content and service providers for 12 or 18 months.

Users also have to pay the full price of the phone while purchasing it. But they can return the phone once the subscription tenure ends and claim the original price of the device from Flipkart.

The bundle includes subscriptions to premium OTT platforms, like SonyLiv, Zee5, Gaana, Voot Select and services like Zomato Pro, Cult.fit Live and Practo Plus. The service (money back) gets cancelled if the user drops out in the middle of the tenure.

The offering from the ecommerce player is available across smartphone OEMs, like realme, POCO, Samsung, Redmi, Motorola, Infinix, OPPO, vivo, in the Rs 6,000 to Rs 17,000 price range. The charges and available services vary depending on the choice of plans (gold, bronze and silver), and the phone’s price. The ‘money back’ amount also depends on the chosen plan and duration.

The increased demand for smartphone-based services across categories, alongside the spike in consumption of OTT content due to COVID, explains the bundle. The smartphone price segment of affordable to mid-premium also happens to be the one with the most amount of traction.

But who benefits and how?

As a platform, Flipkart gets yet another way of monetising its reach. Also, alongside the possibility of driving smartphone sales, Flipkart becomes the point of contact for a host of other popular brands.

Flipkart’s partners get to taste the e-commerce platform’s reach. Flipkart is among the most evolved e-commerce startups, which has built its reach across geographies over the last several years. It’s not just a brand, but a potent representative of the e-commerce category.

Newer platforms, especially for their paid/premium offerings/services which have a small paying user base, get a go at Flipkart’s large base of 300 million customers. In a country which mostly consumes content on small screens, a platform which drives a significant share of smartphone sales, seems like the perfect spot.

“We are providing service partners with access to a host of new customers, many of whom might be first-time users. For OEMs, we are creating not only a partnership with all the right players, but also a relevant consumer offering on the devices, which make them a more valuable purchase to the users,” says Aditya Soni, senior director, mobiles - Flipkart.

Speaking on the choice of the platforms in the pack, which includes various facets like health, children’s entertainment, food delivery, etc., Soni says that the service packages were curated to make them relevant to the entire household.

Over that, the move could drive the penetration of recurring payments and subscriptions. As Flipkart mentions, ‘SmartPack’ services are offered at the same or lower price, as the monthly packs offered by the service providers on their platforms (exclusive of discounts).

The model could be India’s second go at contract-based usage of smartphones, albeit via the content/services route. Traditionally, in the contract model, telecom service providers sell phones alongside connections.

The cost of the phone is broken down and clubbed with the monthly tariffs over the contract period. The model didn’t really pick up pace in India for a host of reasons, including low telecom ARPU (average revenue per user), inclination towards prepaid, etc.

But will Flipkart crack it?

Mahesh Uppal, telecom consultant and owner of ComFirst, is sceptical about the large-scale success of the plan considering the upfront cost involved.

“In most of cases, the real deterrent in buying a new phone is the upfront cost. Unfortunately, this offer requires the buyer to pay the full price upfront, besides the cost of subscription to diverse content.”

Uppal says that the model could have worked well if there was little or no upfront cost. “That could be attractive, since, a lot of people have cash flow problems and find it difficult to set aside the full price in one go,” he adds.

Uppal’s view point stands firm since a consumer buying a phone worth Rs 17,000, would end up paying around Rs 18,569 in the first month (additional Rs 1,569 for the pack). At the end of the 18 months (tenure), the customer would have paid Rs 28,242 only in subscription charges. The final cost amounts to Rs 45,241, without factoring in the telecom connection charges.

While the target phone segment is the affordable to mid-premium range, the package is premium. It also lacks flexibility in terms of choosing services from the bundle. Earlier, in a major shift in the online sale of phones, Flipkart itself had solved the ‘upfront cost’ issue by introducing ‘no cost EMI’ options. However, the EMI option is also available on SmartPack purchases.

Uppal says that the plan (‘SmartPack’) could appeal to big and frequent users of content, who also pay a significant amount for premium content.

“It is true that due to COVID, people are spending more time on their devices and are also likely to be interested in premium content. The new model could make it cheaper and more convenient for such users. In absolute terms, I think it will appeal to a limited number of people,” he adds.

Faisal Kawoosa, founder and chief analyst, techARC, says that the benefit for the end user is marginal and the value isn’t going to drive volume. “It’s not exactly a ‘wow’ proposition, or a substantial giveaway sort of a scenario. It’s not that the consumers couldn’t sell their phones after they’ve used it for some time.”

“There has always been a second-hand market. Again, such initiatives aren’t generally platform exclusive. Not considering the efficacy, a rival e-commerce platform could soon be offering something similar tomorrow."

Kawoosa also points out to the flexibility aspect. The freedom of the consumers to decide if they actually need the service, and if they do, then the duration they need it for. “Most platforms provide these memberships for shorter durations. Zomato Pro (for instance) has a three-month membership,” he signs off.