Flipkart Warns Of Serious Customer Disruption

Flipkart, Walmart Inc.’s online retailer in India, has told the Indian government that the company will be at risk of major customer disruption in case the implementation of the new curbs for e-commerce is not postponed for at least six months.

The new curbs on India; foreign investments which are supposed to be implemented by Feb 1, will prevent e-commerce companies from putting products for sale from firms that have an equity interest in. The ban will also prevent them from reaching into deals with sellers to offer products on only one platform.

Kalyan Krishnamurthy, Chief Executive of Flipkart, sent a letter to the country’s Industries department stating that the new curbs will require the company to asses all aspects of its business operations.  According to Krishnamurthy’s letter, redesigning the different elements of the business to ensure that the company can validate their compliance with the new rules will require significant resources. The new curbs were put forth by the Indian government on Dec 26th and are expected to be implemented by Feb 1.  Krishnamurthy also said in his letter that this would create major customer disruptions as services are interrupted if the deadline date for compliance is not extended by at least 6 months. The contents of the letter sent by Krishnamurthy have not been reported previously. The company declined to comment.

However, it is unlikely that the government will make changes to the policy’s implementation date according to Indian officials. A industries department has declined to comment.  The new policy move was a jolt to Walmart, which made a huge investment of $16 billion in Flipkart last year. Amazon had also committed $5.5 billion to its Indian counterpart.

Sources in the industry report state that the new policy will raise compliance costs and also force Flipkart and Amazon to review their business dealings in the country.  Amazon and Flipkart have already started approaching sellers on their platforms to make sure that the companies comply with the new curbs, even though they are seeking a deadline from the industries department.  Flipkart estimated that the process would take five to six months. The company is focusing on working with sellers at present and has placed the rest on the back burner for now.

Small traders in India had complained about how e-commerce giants were using their control over the inventory to make an unfair market place by offering deep discounts. According to the new policy, such arrangements will be banned.

Copyright © 2019. FinanceOrange. All Rights Reserved.