Flipkart could shut down its wholesale business
The e-commerce business Flipkart is considering completely shutting down its wholesale operations in part as a response to foreign direct investment regulations that have necessitated a change of business practices at the firm.
Flipkart has began to stop buying products directly from manufacturing businesses to sell on its e-commerce platform as a prelude to shutting down its wholesale operations, sources told the Economic Times. The business has directed its suppliers to start selling directly to the Flipkart preferred sellers instead of to Flipkart itself in order to comply with the FDI regulations that came into effect in February. The business also works with wholesalers that it created as separate entities to comply with the FDI regulations.
“Ultimately, they will have to close the wholesale business,” said one of the sources. “It is not a permanent solution… The process has started.”
The sources said that Flipkart must choose whether to completely shut its wholesale business or just scale it down considerably. If the business chooses to scale it down, it would only service the small sellers that use the platform and offline retailers, the sources said.
“Flipkart is curtailing supply of products from its wholesale entity to top sellers such as RetailNet and OmniTechRetail and instead wants these sellers to source directly from the brands to ensure the marketplace has an arm’s length distance for compliance,” said the sources.
The latest FDI regulations do not allow for FDI businesses to sell private labels on their multi-brand e-commerce platforms. As Flipkart ran a large number of private labels, especially in the fashion category, it had to change its supply chain to comply.
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