 "Flipkart remains defiant as sellers protest over new norms")
Sellers on India’s largest e-commerce platform, Flipkart, are listing their products as out-of-stock for a day, to protest against the firm’s move to increase its commissions and charge them a fee for customer returns. The new policy came into effect on Monday, days after rival Amazon reduced commissions on electronic goods, a segment which contributes a third of the revenue.
Amazon, which is investing $5 billion (Rs 33,500 crore) in India has been aggressively taking on local rivals Snapdeal and Flipkart. Both of them are cutting losses, improving efficiency and chasing new revenue sources. eSellerSuraksha, a lobby group for online merchants, says this would make selling of goods more expensive. It is running a campaign named #OnlineDharna on social networking sites to urge sellers to list their products as out of stock.
“Flipkart has not been able to tell us any benefits of the new policy to sellers. They are saying we’ve been running on losses and are focusing on profitability,” said Sanjay Thakur, president of eSellerSuraksha.
He said Flipkart has agreed to talk with members of the group after June 20.
Flipkart has maintained these sellers form a small group of over 90,000 on its platform.
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"The number of active listings from our sellers and units sold has seen an increase today (Monday). We have received a positive response to our new policy from a majority of our 90,000 sellers," a Flipkart spokesperson said.
"We are confident this would not only help sellers to boost their business but also empower them to improve quality and grow a loyal base of customers. We are working with our sellers to ensure a smooth transition," Flipkart said.
Analysts say the protests could escalate further, if the issue is not addressed.
"I think this would have limited impact in the short term. No large seller is likely to abandon Flipkart since sellers want to maximise sales. However, on a longer term shows development of friction over commissions, returns and discounts which may impact customer experience at Flipkart," said Haresh Chawla, partner, India Value Fund Advisors.
Flipkart's spending binge in the last two years on hiring Silicon Valley engineers, renting new offices has contributed to cost overruns. Binny Bansal, who took charge as the chief executive officer wants to cut costs, improve efficiency and new avenues for revenue such as increasing commission from sellers, charging them for returns and making them advertise on the platform.
"The challenge for the VC-funded marketplaces is to drive down overheads so they can drive down seller commissions and not the other way round. Overheads would have to be reduced to thrive in our market," said Chawla.
Flipkart said with the new seller policy sellers can easily keep track of inventories. Further, charging them for returns would incentivise them to improve customer service.
As Amazon is snapping at Flipkart's heels, Tiger Global, a major investor in Flipkart, has sent back its veteran Kalyan Krishnamurthy to help Bansal steer the firm back into shape.
Krishnamurthy, was part of Flipkart leadership team from early 2013 to November 2014, even serving as the interim CEO before moving back to the Singapore office of Tiger Global.
Amazon cutting commissions makes products such as smartphones cheaper on its platform, by bypassing the new foreign direct investment norms for e-commerce marketplaces.