Thursday 7 February 2019

Flipkart in talks to list offline players as sellers on platform

Flipkart in talks to list offline players as sellers on platformFlipkart is in talks with a host of offline retailers as well as distributors of Samsung, Xiaomi and FMCG products to enrol them as sellers on its platform, to push sales while staying within the new regulations for foreign owned online marketplaces, people in the know said.

Amendments to the foreign investment rules in ecommerce, that India announced on December 26, prevent such companies and entities associated with them from having any control over the inventories sold on their platforms.

While they cannot have a stake in the seller firms, any entity that makes a quarter or more of its sales by selling goods purchased from companies owned or controlled by a foreignfunded platform will be deemed to be controlled by the marketplace and barred from selling on it. The rules have hobbled Walmart-owned Flipkart and the Indian unit of Amazon, as they need major overhauling of business models to stay compliant.

“Flipkart is ideally looking for companies with revenue of Rs 1,000-2,000 crore that have little or no online presence so that Flipkart could push its products worth Rs 250-500 crore through each of them,” said a person familiar with the matter. Such companies may even sell goods that are not from their line of business, as long as their sales from the platform stays below the prescribed 25% limit.

If a Samsung dealer is not able to sell products from competitions, it could be used to funnel fashion, home or other general merchandise, the person said. “Such new vendors will be used to sell anything that is not just restricted to their own line of businesses,” he said.

A Flipkart spokesperson declined to comment.

Both Amazon and Flipkart have so far had direct or indirect control over a sizeable part of their inventories. They also have arrangements with vendors for selling products exclusively on their platforms.

Sources said the company’s mission is to overcome the 25% cap of buying from Flipkart India, the wholesale entity of the Flipkart Group, which was acquired in May last year by US-based retailer Walmart for $16 billion.

Head of a local company said he was approached to act as an intermediary between Flipkart’s wholesale unit and sellers on its marketplace.

“They are creating a layer between Flipkart wholesale and the resellers on the platform,” he said, asking not to be named.

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