Flipkart is making necessary changes in its structure to comply with the Foreign Direct Investment (FDI) rules. The Centre had issued a note that permitted 100% foreign investment in online commerce in India. It had also said that those companies with a marketplace model should not have a single seller whose earnings are more than 25%. The note said,
“An ecommerce entity will not permit more than 25% of the sales affected through its marketplace from one vendor or their group of companies.”
The note clearly differentiates between an inventory model and a marketplace model, and states that foreign investment is permitted only in the marketplace model.
“WS Retail has stopped purchasing stock for Flipkart. Different new sellers are buying it for selling through Flipkart.”
“Flipkart has to reduce its dependence on WS Retail to follow government guidelines. n accounting terms, there will be no impact, but if they fail to get multiple large vendors to source goods from, then their operations could be impacted.”
“It is kind of natural, but not desirable. In the past six months, from a managerial perspective, things have tightened up at Flipkart. Investors have really been pushing the company to get to profitability. A lot of people who were hired in a different environment, they may not be feeling in the best of spirits. So I think, it is part of a natural progression.”
“As is natural in any large organization, there have also been some who moved on to pursue opportunities outside the company.”
“There is a process of de-centralisation being followed by ATSPL which will help quick turnaround and a larger team for the logistics unit. The management exits are a part of the vision Amazon India has for its logistics network.”
Does a group exit point to a worrying situation? Flipkart is taking measures to play by the law, but March 31st is practically upon us. Stay tuned, and IOS will keep you informed on the developments at WS Retail.