India's largest e-commerce company Flipkart.com is seeking to distance itself by more than an arm's length from largest supplier WS Retail, which currently accounts for more than 80% of the platform's total sales.
The move to emulate Alibaba.com's Tmall will allow Flipkart to focus better on the marketplace model. In the past few weeks, the site has told several companies and brands, which sell on the site through WS Retail, to sell directly to consumers through its marketplace in the coming months.
WS Retail was originally part-owned by Flipkart founders Sachin Bansal and Binny Bansal, who're unrelated. The Bansals sold their stakes in the latter to a group of Indian investors and resigned from its board in 2012.
Shortly after, the Enforcement Directorate (ED) initiated an investigation into whether Flipkart, which has overseas funding, was indirectly involved in retailing products to consumers directly through WS Retail. Indian laws don't allow foreign investment in e-commerce companies that sell directly to customers.
They, however, allow such companies to set up online marketplaces, the model that Amazon India and later Flipkart adopted. WS Retail currently acts as a sort of clearing house for most of the goods sold on Flipkart, sourcing the bulk of the merchandise from vendors. The latest move will allow Flipkart to concentrate on the marketplace business.
"They are changing their strategy completely — Alibaba is on the same lines," said the head of a fashion brand that currently sells its products through WS Retail.
"These guys have realized that they have to keep increasing the number of warehouses and team members to follow this model. Why take that headache?" Several large vendors told ET that Flipkart told them to switch their sales to the marketplace from its WS Retail inventory-led model.
Another person with Flipkart's latest move said this was part of the Bengaluru-based e-commerce company's bid to prepare itself for an initial public offering in the coming years. "WSR (WS Retail) is just one of the large sellers on Flipkart.
We are always encouraging brands/sellers to increase their selection directly and indirectly on our platform — and the brands/sellers are free to make their business decisions based on commercial prudence," a Flipkart spokesperson said in an e-mailed reply, without answering specific questions on reducing the reliance on WS Retail.
Flipkart has sought to position itself as the Alibaba.com of India and the Chinese e-commerce giant's Tmall and Taobao sites function purely as marketplaces.
As part of its new strategy, Flipkart has told companies that it will no longer hold their inventories in its warehouses and its logistics operators will pick up merchandise from sellers to deliver to end-consumers. The ED is currently investigating whether Flipkart violated India's foreign exchange laws by selling products through WS Retail. Flipkart denies any wrongdoing. Flipkart changed its model to become a marketplace in February 2013.
WS Retail's revenue more than doubled to Rs 3,135.3 crore in 2013-14 from the previous financial year. Earlier this year, ET had reported that WS Retail is looking to spin off its logistical arm Ekart into a fully-owned subsidiary. A senior executive associated with the cellphone trade said WS Retail still accounts for 70-75% of sales on Flipkart and it wants to reduce this over time.
WS Retail will continue to be the seller for Flipkart exclusives such as the Motorola and Xiaomi handsets. For other smartphone brands like Sony, Samsung, and Apple, deals will be offered through other sellers. "It's a strategy which Flipkart will adopt for other categories too," the executive said. Smartphones form the largest category of e-commerce in India
The move to emulate Alibaba.com's Tmall will allow Flipkart to focus better on the marketplace model. In the past few weeks, the site has told several companies and brands, which sell on the site through WS Retail, to sell directly to consumers through its marketplace in the coming months.
WS Retail was originally part-owned by Flipkart founders Sachin Bansal and Binny Bansal, who're unrelated. The Bansals sold their stakes in the latter to a group of Indian investors and resigned from its board in 2012.
Shortly after, the Enforcement Directorate (ED) initiated an investigation into whether Flipkart, which has overseas funding, was indirectly involved in retailing products to consumers directly through WS Retail. Indian laws don't allow foreign investment in e-commerce companies that sell directly to customers.
They, however, allow such companies to set up online marketplaces, the model that Amazon India and later Flipkart adopted. WS Retail currently acts as a sort of clearing house for most of the goods sold on Flipkart, sourcing the bulk of the merchandise from vendors. The latest move will allow Flipkart to concentrate on the marketplace business.
"They are changing their strategy completely — Alibaba is on the same lines," said the head of a fashion brand that currently sells its products through WS Retail.
"These guys have realized that they have to keep increasing the number of warehouses and team members to follow this model. Why take that headache?" Several large vendors told ET that Flipkart told them to switch their sales to the marketplace from its WS Retail inventory-led model.
Another person with Flipkart's latest move said this was part of the Bengaluru-based e-commerce company's bid to prepare itself for an initial public offering in the coming years. "WSR (WS Retail) is just one of the large sellers on Flipkart.
We are always encouraging brands/sellers to increase their selection directly and indirectly on our platform — and the brands/sellers are free to make their business decisions based on commercial prudence," a Flipkart spokesperson said in an e-mailed reply, without answering specific questions on reducing the reliance on WS Retail.
Flipkart has sought to position itself as the Alibaba.com of India and the Chinese e-commerce giant's Tmall and Taobao sites function purely as marketplaces.
As part of its new strategy, Flipkart has told companies that it will no longer hold their inventories in its warehouses and its logistics operators will pick up merchandise from sellers to deliver to end-consumers. The ED is currently investigating whether Flipkart violated India's foreign exchange laws by selling products through WS Retail. Flipkart denies any wrongdoing. Flipkart changed its model to become a marketplace in February 2013.
WS Retail's revenue more than doubled to Rs 3,135.3 crore in 2013-14 from the previous financial year. Earlier this year, ET had reported that WS Retail is looking to spin off its logistical arm Ekart into a fully-owned subsidiary. A senior executive associated with the cellphone trade said WS Retail still accounts for 70-75% of sales on Flipkart and it wants to reduce this over time.
WS Retail will continue to be the seller for Flipkart exclusives such as the Motorola and Xiaomi handsets. For other smartphone brands like Sony, Samsung, and Apple, deals will be offered through other sellers. "It's a strategy which Flipkart will adopt for other categories too," the executive said. Smartphones form the largest category of e-commerce in India
Post a Comment