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Ecommerce firm Flipkart faced threats from a group of merchants over its revised return policy. The merchants threatened to either exit or be inactive on the online marketplace, objecting to new conditions imposed on them.
On June 6, Flipkart had announced a revised return policy for buyers, where it stated that the customer would have to return products within 10 days, along with return shipping. This led to additional operational expenses for sellers. The company had decided to increase the sales commission it levies on merchants by up to 5% in some categories as well as charge them a shipping fee, a reverse shipping fee, and a collection fee on every product returned by customers, effective from June 20.
According to a report by ET, two trade associations, representing small groups of online vendors, said that several group of merchants have decided to stop selling on Flipkart because of what they call as “unilateral changes” in policy that would increase their cost of doing business.
Sanjay Thakur, spokesman for ESellerSuraksha, a group of about 1,000 online sellers, said in the report, “The changes on return shipping policy will impact sellers heavily.”
The groups also said that Flipkart used to charge a fee (less than 1% of the order value) from sellers if they were at fault. As per the new policy, Flipkart will now deduct shipping charges and collection fees from sellers (in case of returns), which will be huge since return percentage ranges from 8% to 10% (deliveries) in most of the categories.
According to industry estimates, handling returns amounts to 1.5 times delivery costs. Amazon India said it does not charge its sellers for handling product returns. ShopClues too does not charge its sellers for handling returns if there were no problems with their products.
According to the merchant associations, it’s not the higher commissions but the charges on product returns and frequent policy flip-flops that have got the vendors in a tizzy.
Sanjay said that, of the 300 members who participated in a survey conducted by ESellerSuraksha on Flipkart’s recent policy changes:
- 98% were of the opinion that the new rules would kill sellers
- about 57% said they would “rethink” selling on Flipkart
- More than 42% sellers said to hike their prices for customers by 15-20% to make up for the extra costs.
A senior member of the All India Online Vendors Association (AIOVA) said that about 300 of its 1,000 members have decided to quit Flipkart because of the company’s decision to pass on the burden of handling product returns to them.
According to Flipkart, its new policy will allow sellers more control over payments and offer predictability. It has advised vendors to ensure effective cataloguing and packaging, and prevent wrong shipments to avoid product returns.
Flipkart also said that these merchants are a tiny fraction of Flipkart’s 90,000 sellers and are unlikely to affect its business. However, the company is worried about its US competitor Amazon, which is ready to take on its rivals with an additional $3 Bn investment in India.
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