Flipkart goes for Alibaba model to retain sellers

Flipkart, the largest e-commerce marketplace in the country, is consolidating its seller base as it looks to shift to a model pioneered by Chinese giant Alibaba, where around 20 per cent of sellers contribute 80 per cent of sales.

Flipkart, which claims to have more than 90,000 sellers on its platform at present, will work more closely with a group of 50-60 sellers who will contribute a major chunk of its sales. The company will also work with these sellers to arrange working capital loans through banks, with the monthly repayment (EMI) routed through the company.

Alibaba, the largest e-tailer in China, has millions of sellers across its many platforms that function in both wholesale and retail spaces. The firm has also invested in Flipkart’s rival Snapdeal and owns about 40 per cent stake in Paytm, apart from exploring its independent entry into the country in the near future.

CONSOLIDATING SELLER BASE

• Flipkart claims to have more than 90,000 sellers on its platform
   
• It will work with 50-60 sellers, who will contribute a chunk of its sales
   
• It will work with these sellers to arrange working capital loans through banks
   
• The firm continues to grow its seller base at a rate of about 3,000 a week

Flipkart’s focus on consolidation of its seller base is part of co-founder and Chief Executive Officer Binny Bansal’s efforts to streamline the organisation by cutting costs, reduce customer complaints and returns, and improve profitability. It has increased commission from sellers and is charging them for returns even as rivals Amazon and Alibaba-backed Snapdeal reduce commissions across key categories.

The long tail of smaller sellers will remain to be a part of the platform, but will compete for a very small pie of sales. Flipkart says it continues to grow its base of sellers at a rate of about 3,000 a week, while weeding out bad sellers who do not meet their strict quality standards.

Business Standard had reported on July 7 that Flipkart was stepping up its drive to boot sellers off its platform in order to improve customer experience. The company has started a Master Seller programme to promote a few large sellers who can sell products across categories and from whom it charges lower commission rates.

On Monday, the Mint reported that Flipkart was looking at adding four new sellers onto its platform, which will allow it to function as a sort of hybrid marketplace.

Two of them, Health & Happiness and Consulting Rooms, have applied to become sellers on the platform.

Flipkart confirmed the applications of two firms. “All our sellers including these two prospective sellers are independent entities with no other relationship with Flipkart beyond the working partnership between a seller and  a platform,” a company spokesperson added.

WS Retail, which the company spun off as an independent entity in order to remain compliant with Indian laws, continues to be the single largest seller on its platform. However, the company says it is compliant with the new FDI norms that restrict a single seller from making up more than 25 per cent of the sales on any online marketplace.

Flipkart is looking to attract large format retail sellers that are looking at an Omni channel (online and offline) route to reach customers. The firm also wants these large sellers to participate in its Flipkart Advantage programme, where sellers park stocks at the company’s warehouses for faster and easier shipping.