International retail giant Walmart has reportedly started a country-wide investigation into Flipkart’s India units over charges of corruption in setting up of Flipkart fulfilment centres.
According to a Hindu BusinessLine report, Walmart realised that Flipkart warehouses do not have the necessary permits, and in some cases, government officials have been paid off to get them. The investigation is also reportedly the reason for the delay in the launch of Flipkart’s 100-acre state-of-the-art logistics park in Bengaluru, which was announced in March 2018.
“This will make them liable under the FCPA (Foreign Corrupt Practices Act). Until these issues are sorted out, the logistics park project will be put on the back-burner and no new warehouses will be announced,” the report added.
However, a Flipkart spokesperson denied the report and said in a statement to Inc42, “There is no investigation whatsoever being done with regards to fulfilment centres. We’re proceeding as per the plan and satisfied with the progress on the site selection process. In fact we’re advancing well on our other large logistics hubs too in West Bengal as well in NCR. The infrastructure that we’re building across the country through these warehouses and logistics park will help us bring next 200 Mn customers to experience ecommerce and also support thousands of new sellers across the country.”
Flipkart’s Logistics Strategy
According to a World Bank report, the logistics cost in India is among the highest in the world. Logistics in India account for 14% of the total value of goods compared to 6-8% in developed economies.
At the time of the Bengaluru logistics park announcement, the company had claimed that it would house several Flipkart fulfilment centres, improve supply chain efficiency and reduce costs through mechanised warehousing. It is meant to act as a freight aggregation and distribution hub, and will have intelligent transport and logistics systems.
Soon after announcing the Bengaluru park, Flipkart had also announced an 80-acre logistics centre in Kolkata to fulfill its deliveries in eastern and north eastern India.
These logistic parks were said to be a part of the company’s new strategy of smaller fulfillment centres inside huge logistics parks. Further, these hubs are predicted to save 20% on the company’s logistics cost.
Flipkart rival Amazon has opened 67 fulfilment centres till now, across the 13 Indian states with a storage space of 20 Mn cubic feet.