Since the much talked about Big Billion Day on October 6th last year, Flipkart has had a spate of incidents spelling out bad luck and more bad luck for the ecommerce biggie. In addition to customer complaints and dissatisfaction on various instances, it came under the government scanner multiple times too.
While we can’t say if it’s these instances that have made Flipkart pull up its socks, but looks like the company has dloefinitely become more cautious. The latest we hear is that WS Retail’s logistics arm, ekart is on the way to becoming a wholly owned subsidiary in order to comply with varying regulations of different states.
Apparently, this change could happen before the likely IPO next year. Since inception in 2010 by Sachin Bansal and Binny Bansal, they sold off their stake in the company subsequently in 2012 and employees now own about 46%.
“WS Retail will spin off their logistics arm as a separate entity and then do pretty much what US companies do, collect a fee for delivery,” said a source on the condition of anonymity. “This is expected to happen before Flipkart files for IPO (initial public offering),” the person added. “WSR (WS Retail) is a seller and Ekart is a brand for logistics. Why it is becoming challenging is that states have separate rules for registration as a transportation agency or a courier company. But WSR is a not a transportation agency. So that’s where we are facing the problem,” explained the second executive.
According to experts, this spin-off is in continuation to the trends that emerged in the ecommerce space in the last two years. Jabong’s logistics wing GoJavas was made into a separate entity in 2013, following which the ecommerce player was able to concentrate on the growth of the core business.
“It can be more efficient and effective to separate the management and operation of the two businesses so that one can focus on providing the best service to end customers and getting end other can focus on building relationships with suppliers and gaining market share on the supply side,” said Jaideep Prabhu, Jawaharlal Nehru professor of business and enterprise at University of Cambridge’s Judge Business School. “In the UK, for instance, the Royal Mail has just decoupled its customer serving component, namely post offices, from its back-office logistics operation.”
Looks like it! With WS Retail and e-kart as separate entities, Flipkart is able to show more transparency in its dealings with third-party operators.
In addition to transparency, Flipkart will also be able to focus more on improving the business in terms of keeping customers happy and consistency is selling quality products.
After dwindling with her family business, into travel and hospitality, for more than 3 years, Pooja Vishant found her true love in writing. Happy-go-lucky and cheerful, she loves pink; so pink is the way to go if you want to get into her good books. The Associate Editor keeps track of even a leaf that has moved in the ecommerce world!
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