Flipkart, which adopted an online marketplace model in letter a year ago, has now set into motion actions to embrace it in spirit too.
Even after it technically became an online marketplace last year, a bulk of the goods sold on its site were through a former subsidiary, WS Retail. But India’s largest online retailer wants to change that and is taking steps through an internal restructuring to make its marketplace that serves as a platform for other merchants to sell their wares more effective.
This conscious embrace of the marketplace model will make it easier for the Bangalore-based company to achieve its target of having at least 10 times more merchants on its platform within a year. Flipkart had about 4,500 merchants earlier this year, much less than its rivals Snapdeal or Amazon.
“They want to make the marketplace more competitive and hence are giving it more teeth,” said one person who is directly involved with the process.
Flipkart did not respond to emailed queries. The company had started out as a direct retailer of products, but as regulations made it mandatory ecommerce firms with foreign ownership to operate a marketplace model, it opened up its platform to third-party sellers last year.
Flipkart had registered Flipkart Marketplace Pvt Ltd in 2012, but internally the marketplace team was just another vertical. Now that is set to change.
“A completely new structure is being created for marketplace and a team is being built for this. New hires for this will run into a few hundreds,” said another person, who works with Flipkart in an advisory capacity.
The company, which has about 14,000 employees, has earlier declared its intention to increase its headcount to over 25,000. Its marketplace head Ankit Nagori was promoted to senior vice president this year.
Experts said the move to be more aggressive on the marketplace front is a step in the right direction. “A stronger marketplace focus can give e-tailers an opportunity to attract more customers and a larger product base allows platforms to up sell and cross sell,” said Harish HV, partner at financial advisory firm Grant Thornton India.
One of the sources said “there is a de risking aspect as well,” in the move. “WS Retail is now completely owned by a different set of people and Flipkart has no legal control over it, so it makes sense to start leveraging other merchants on its platform,” said the person.
WS Retail accounts for as much as 80 per cent of Flipkart’s sales, according to multiple sources with knowledge of the company’s sales. Flipkart is targeting $3 billion (Rs 18,500 crore) in overall sales this fiscal, but has not revealed how much of this will come from WS Retail. Most of the products sold exclusively, such as Moto G phones, are also through WS Retail.
Flipkart has created a maze of complex legal structures for regulatory purposes, said a legal advisor, who spoke on the condition of anonymity.
“It has a wholesale arm, a marketplace and has spun out what was earlier its subsidiary business-to-consumer company (WS Retail) into a completely different legal entity.”
Under Indian regulations, an online company with foreign investment cannot retail directly and can only offer a platform.
The article appeared in the Economic Times. The article can be found here.