Homegrown ecommerce giant Flipkart.com is likely to part ways with leading supplier WS Retail, which currently accounts for more than 80% of the portal’s total sales. Besides, it is focussing to strengthen its mobile advertising platform.
In a bid to emulate the business model of Alibaba, Flipkart is all set to focus on its marketplace model.
Further, WS Retail will be coming up with its own website in a couple of months, this is one of the reason s why Flipkart is parting ways with its biggest supplier.
Offlate, the site has informed several companies and brands, which sell on the site through India’s largest online commerce player .
WS Retail was originally partowned by Flipkart founders Sachin Bansal and Binny Bansal.
The Bansals sold their stakes in the latter to a group of Indian investors and resigned from its board in 2012. Shortly after, the Enforcement Directorate (ED) initiated an investigation into whether Flipkart, which has overseas funding, was indirectly involved in retailing products to consumers directly through WS Retail. Indian laws don't allow foreign investment in e-commerce companies that sell directly to customers.
They, however, allow such companies to set up online marketplaces, the model that Amazon India and later Flipkart adopted. WS Retail currently acts as a sort of clearing house for most of the goods sold on Flipkart, sourcing the bulk of the merchandise from vendors.
The latest move will allow Flipkart to concentrate on the marketplace business. "They are changing their strategy completely Alibaba is on the same lines," said the head of a fashion brand that currently sells its products through WS Retail.
"These guys have realised that they have to keep increasing the number of warehouses and team members to follow this model. Why take that headache?" Several large vendors told ET that Flipkart told them to switch their sales to the marketplace from its WS Retail inventory-led model. Another person with Flipkart's latest move said this was part of the Bengaluru-based e-commerce company's bid to prepare itself for an initial public offering in the coming years. "WSR (WS Retail) is just one of the large sellers on Flipkart.
We are always encouraging brands/sellers to increase their selection directly and indirectly on our platform and the brands/sellers are free to make their business decisions based on commercial prudence," a Flipkart spokesperson said in an e-mailed reply, without answering specific questions on reducing the reliance on WS Retail.
Flipkart has sought to position itself as the Alibaba.com of India and the Chinese e-commerce giant's Tmall and Taobao sites function purely as marketplaces.
As part of its new strategy, Flipkart has told companies that it will no longer hold their inventories in its warehouses and its logistics operators will pick up merchandise from sellers to deliver to end-consumers.
The ED is currently investigating whether Flipkart violated India's foreign exchange laws by selling products through WS Retail. Flipkart denies any wrongdoing. Flipkart changed its model to become a marketplace in
However,WS Retail will continue to be the seller for Flipkart exclusives such as the Motorola and Xiaomi handsets. For other smartphone brands like Sony, Samsung, and Apple, deals will be offered through other sellers.
Sachin Bansal, co-founder & CEO of Flipkart, told TOI in an exclusive chat that the e-commerce company, which acquired AdIQuity Technologies recently, will build a 200-people strong team in a year for its ad business as mobile becomes its focus area for investments going forward.
Accepting that desktops weren't giving the same returns on investments anymore compared to a few years ago, Bansal said Flipkart will keep an eye out for more acquisitions in the mobile space and look to fill the gaps on tech and talent front.
"I believe it (mobile advertising) can be a big business for us," said Bansal, who is spearheading the ad business for Flipkart post a reorganization at the seven-year-old company which started off as an online bookstore.
Search giant Google and social networking site Facebook dominate the online and mobile advertising space, globally and in India, but e-commerce majors who boast of large consumer traffic and data are now looking to target shoppers on their platforms, prompted by their growing seller base and high adoption of smartphones.
The e-tailer, valued at over $11 billion, first started dabbling with advertising a year ago with a few banner ads but put its weight behind the vertical only in the last six months. "Sellers and brands really needed this platform as they wanted to have more control over their sales, we learnt this from our initial experiment. That's when we thought we needed a company which had expertise in the mobile ad space," Bansal said. With its massive data insights on consumers, Flipkart is a great platform as marketing dollars move towards data-driven advertising, said Anurag Dod, founder of AdIQuity, who was Bansal's senior at IIT-Delhi. AdIQuity, which started off in 2006, exactly a year prior to Flipkart, as a search engine under the name Guruji, is likely to help Flipkart with mobile-specific ad technology.