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Intermediaries Save The Day For Flipkart Under New FDI Ecommerce Rules

Intermediaries Save The Day For Flipkart Under New FDI Ecommerce Rules

FDI ecommerce policy prohibits marketplaces from controlling over 25% stake in sellers

Flipkart has appointed alpha intermediaries

It recently increased seller commissions on apparel products

Following the changes notified by the government in the FDI policy for ecommerce, the Walmart-owned ecommerce company Flipkart has been examining its plans to comply with the new rules.

Notified on December 26, the changes in ecommerce FDI policy target deep discounts being offered by large online marketplaces as putting a stop to ecommerce marketplaces dealing with exclusive vendor-partners. The circular came into effect from February 1, 2019 after DPIIT refused to extend the deadline.

The rules state a vendor will be considered “controlled” by an online marketplace operator if it sources more than 25% of its merchandise from an entity related to the ecommerce marketplace.

Since then, leading players Amazon and Flipkart have been examining ways to outgrow the rules to continue the deep discounts and partnerships with vendor partners. Amazon and Flipkart have been in the spotlight as they both operate as online marketplaces partnering with large online vendors such as Cloud Retail, Appario and WS Retail.

The ecommerce companies used to purchase goods in bulk at cheap rates from manufacturers through their wholesale entities — Amazon Wholesale and Flipkart India Pvt Ltd — and sell them on the marketplaces through preferred sellers.

The latest reported effort by Flipkart is appointing half-a-dozen companies as intermediaries between its wholesale unit and some preferred sellers on its platform to get around the 25% cap on direct purchases from entities related to marketplaces.

A media report cited people familiar with the development as saying that Sports Lifestyle, Premium Lifestyle & Fashion India and Wishberry Online Services are among the intermediaries.

These will reportedly purchase products from Flipkart wholesale and supply them to preferred sellers including SuperComNet, Omni-Tech Retail and RetailNet, which will then offer them on Flipkart

This comes after reports surfaced that Flipkart is building a layer of B2B entities code-named Alpha Sellers, who will act as intermediaries between its wholesale arm, Flipkart India and its prominent online sellers in order to comply with the norms.

Effective from March 1, the ecommerce company had notified the sellers that the commission on western wear, kurtis, innerwear, smartwatches, blazers and waistcoats has been hiked.

[The development was reported by ET.]