A small but growing tribe of disgruntled merchants on Flipkart are threatening to exit or be inactive on the online marketplace, objecting to a host of new conditions the company has imposed on them.
Two trade associations, representing small groups of online vendors said several hundred members, have decided to stop selling on Flipkart because of what they say are “unilateral changes” in policy that would increase their cost of doing business.
These merchants make for a tiny fraction of Flipkart’s 90,000 sellers and are unlikely to dent sales. But what could be worrying for Flipkart is that their dissent comes at a time when Amazon India is fast bearing down on it with an additional $3-billion investment from its US parent. Flipkart recently decided, among other measures, to increase the sales commission it levies on merchants, by up to 5% in some categories, as well as charge them a shipping fee, a reverse shipping fee, and a collection fee on every product returned by customers, effective June 20.
It’s not so much the higher commissions as the charges on product returns and frequent policy flip-flops that have got the vendors in a tizzy, according to the merchant associations. Amazon, too, has recently increased commissions.
“The changes on return shipping policy will impact sellers heavily,” said Sanjay Thakur, spokesman for ESellerSuraksha, a group of about 1,000 online sellers. “Flipkart used to charge a fee from sellers only if we were at fault, which would be less than 1% of the order (value). Now, Flipkart will deduct shipping charges and collection fees from sellers (in case of returns), which will be huge since return percentage ranges from 8% to 10% (deliveries) in most of the categories.”
Handling product returns amounts to 1.5 times delivery costs, according to industry estimates. Amazon India said it does not charge its sellers for handling product returns. ShopClues said it does not charge its sellers for handling returns if there were no problems with their products.
“It is not really the increase in commission that has upset sellers but the frequent policy changes done by Flipkart without consulting us,” said a merchant selling lifestyle products on Flipkart, declining to be identified.
Thakur said of the 300 members who participated in a survey conducted by ESellerSuraksha on Flipkart’s recent policy changes, 98% were of the opinion that the new rules would “kill sellers,” and about 57% said they would “rethink” selling on Flipkart. More than 42% of the respondents said they would hike their prices for customers by 15-20% to make up for the extra costs, he said.
A senior member of another merchant grouping, the All India Online Vendors Association (AIOVA), said about 300 of its 1,000 members had decided to quit Flipkart because of the company’s decision to pass on the burden of handling product returns to them. “Due to the new policy, sellers are now forced to increase prices by around 10% and will also charge shipping fees to customers,” he said.
It wasn’t clear if any of the dissenting merchants are among the top 100 sellers Flipkart is looking to nurture as part of its new seller strategy.
Flipkart said its new policy will make it simpler for sellers by offering predictability and control over payments. It has advised vendors to ensure effective cataloguing and packaging, and prevent mis-shipments to avoid product returns.
“Our returns policy and process continues to be the best and the easiest in the industry,” a spokeswoman for Flipkart said. Pointing to Flipkart’s recent decision to reduce the number of days customers have to return products, she said it was “aimed at ensuring a more seamless experience for both sellers and customers to ensure quicker arrangement of products and timely replacement.” Jason McCourty JerseyShare This