Flipkart is looking to exit wholesale business to toe the government's line, says report
FlipkartIndia is curtailing its wholesale business to comply with new ecommercenorms.
- It has almost stopped dealing in direct buying of products from companies.
- The online shopping platform has asked suppliers to directly connect with sellers on its ‘Alpha’ and ‘Beta’ intermediary platforms.
- This move has come amid massive changes in e-commerce norms especially for foreingn companies under
foreign direct investment.
This came after the new e-commerce regulations put in place by the government, late last year. The law now bars online retailers from clinching exclusive deals with product sellers thereby affecting market dynamics.
The rules also said that online marketplaces cannot control or possess their own inventories. Sellers who source more than 25% of goods from affiliates, will be considered as ‘owned’ by Flipkart.
At arm’s length
In response, the Walmart-owned company is changing its role in sourcing. It will now act as a platform for its suppliers where they can directly choose their best sellers.
Flipkart had earlier developed two intermediary platforms codenamed ‘Alpha’ sellers and ‘Beta’ sellers for wholesale purposes. Yet, this is not a long-term solution, not after the regulations.
And, the e-commerce giant is taking the first step of exiting wholesale business all-together. This will help them maintain an arm’s length distance for regulatory purposes, while keeping the supply going.
It is also known that the company had started this exercise in April this year.