Flipkart found the way to address new FDI norms

To address the norms of the Indian government in the operation model in tightening of foreign investment rules in e-commerce industry, the law makers find the way for restructuring the model. With this Flipkart has appointed about half-a dozen companies as intermediaries between its wholesale unit and few preferred sellers on its platform to get around the 25% cap on direct purchases from entities related to marketplaces, with this the sales in the e-commerce has come to normal like before.

There are organisations including Sports Lifestyle, Premium Lifestyle & Fashion India and Wishberry Online Services are among the intermediaries that will purchase products from Flipkart wholesale and supply them to preferred sellers including SuperComNet, Omni-Tech Retail and RetailNet, which will then offer them on Flipkart.

To address restructuring, Flipkart’s has come out with their convenient operational model to meet the compliance on the foreign investment rules in e-commerce by Department of Industrial Policy & Promotion (DIPP), on the subject, which allows FDI only in marketplaces that offer platforms for other businesses and sellers and bars them from holding inventory and influencing prices.

The rules state a vendor will be considered “controlled” by an online marketplace operator if it sources more than 25% of its merchandise from an entity related to the e-commerce company. As per the previous published report, Flipkart was creating a layer of business-to-business entities to act as intermediaries between its wholesale arm and prominent sellers on its platform.

An expert familiar to this policy says, let’s wait and watch on how the department will come out with a clear cut policy for the e-commerce companies to save the future of the brick and mortar shops in the country .