Flipkart is looking to exit wholesale business to toe the government's line, says report

• Flipkart India is curtailing its wholesale business to comply with new ecommerce norms.
  
• It has almost stopped dealing in direct buying of products from companies.
  
• The online shopping platform has asked suppliers to directly connect with sellers on its ‘Alpha’ and ‘Beta’ intermediary platforms.
• This move has come amid massive changes in e-commerce norms especially for foreingn companies under foreign direct investment.
  

Flipkart is looking to stop buying products directly from companies, in a move to wind up its wholesale business. It is now taking the long route of asking their suppliers to connect with its preferred sellers instead.

This came after the new e-commerce regulations put in place by the government, late last year. The law now bars online retailers from clinching exclusive deals with product sellers thereby affecting market dynamics.

The rules also said that online marketplaces cannot control or possess their own inventories. Sellers who source more than 25% of goods from affiliates, will be considered as ‘owned’ by Flipkart.

At arm’s length

In response, the Walmart-owned company is changing its role in sourcing. It will now act as a platform for its suppliers where they can directly choose their best sellers.

Flipkart had earlier developed two intermediary platforms codenamed ‘Alpha’ sellers and ‘Beta’ sellers for wholesale purposes. Yet, this is not a long-term solution, not after the regulations.

And, the e-commerce giant is taking the first step of exiting wholesale business all-together. This will help them maintain an arm’s length distance for regulatory purposes, while keeping the supply going.

“The Walmart owned company is yet to decide whether to completely fold Flipkart India, the wholesale entity, or scale it down to service only small sellers or brick-and-mortar channels,” company executives selling products at Flipkart told Economic Times.

It is also known that the company had started this exercise in April this year.

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