Flipkart’s CEO Kalyan Krishnamurthy has strongly asserted that it is fully complying with India’s newly announced FDI rules and is open for an audit to steer away any doubts on this front. The Walmart owned company came under cloud of suspicion for flouting FDI rules following last month’s meeting between the Commerce & Industry minister Piyush Goyal and top executives of e-commerce companies.
According to reports, Goyal was visibly unhappy with Flipkart’s lack of intent in complying with new FDI e-commerce guidelines and asked the company to prove its compliance. Goyal’s displeasure came amid reports that Flipkart has hired intermediaries between its wholesale unit and preferred sellers. The online retailer has reportedly done this to take advantage of existing loopholes in the new FDI rules.
Indian government unveiled new FDI e-commerce rules in December last year in an attempt to clampdown on the practice of deep discounting as it was badly hurting the small retailers. Millions of small offline retailers had always accused that Flipkart and Amazon’s lure of deep discounting was thwarting the level playing field in the market.
As per the new FDI rules, any seller will be considered as ‘controlled’ by the online marketplace operator if the latter sources more than 25% of merchandise from the seller. These new rules are evidently aimed at controlling the monopoly of preferred sellers on online marketplaces that in-turn encourages deep discounting practices.
In the past, handful of preferred sellers like Cloud Retail, Appario and WS Retail alone accounted for almost three-fourths of all the merchandise sold on Flipkart and Amazon. These big vendors were able to offer big discounts due to partisan rules practiced by India’s two biggest e-commerce players.
Experts believe that with chorus against Amazon and Flipkart’s deep discounting growing louder, the days of deep discounting are likely to be well behind us. This obviously doesn’t spell good news for millions of customers who have become habituated to deep discounts.