With new FDI rules, going gets tougher for e-vendor WS Retail

Priyanka Pani Mumbai | Updated on January 03, 2019 Published on January 03, 2019

Sales at WS Retail Services Pvt Ltd, the largest seller on Flipkart’s marketplace, have been declining ever since the Centre came out with FDI rules in 2016 that prohibited any one seller from contributing more than 25 per cent of overall sales of a marketplace.

According to data sourced from business information platform Tofler, WS Retail posted revenues of ₹4,543 crore in FY18, a 1.8 per cent decline from ₹4,628.1 crore in FY17. In FY16, before the enforcement of new FDI rules, its revenue had stood at a whopping ₹13,921.2 crore.

After the policy change, Flipkart’s dependence on WS Retail has declined, hurting the vendor’s overall sales.

According to the latest financials, however, WS Retail has been able to successfully cut its losses by half at ₹11.34 crore in FY18, from ₹24.31 crore in the previous fiscal. It had posted a profit of ₹5.2 crore in FY16.

The Bengaluru-based company, started in 2012, saw its expenses decline marginally to ₹4,548 crore in FY18, compared to ₹4,643 crore in the year-ago period. The expenses, which cover discounts and promotions, almost equalled the sales for the last two years.

According to documents available with the Registrar of Companies, WS Retail was founded by Flipkart founders Sachin Bansal and Binny Bansal, who later sold the company to investors to comply with the FDI rules as Flipkart moved from an inventory-led model to a marketplace model.

The current directors at WS Retail are Tapas Jagadeesh Rudrapatna (who was also a founding member), Sanjay Dhingra and Pia Ahmed Bunglowala.

Fresh trouble

Meanwhile, the Centre has come out with fresh norms for FDI in e-commerce, which could make the going even tougher for WS Retail. Under the new rules, a vendor’s inventory will be deemed to be controlled by the e-commerce player if more than 25 per cent of the vendor’s purchases are from the latter or related firms.

The rules, which come into effect next month, give ammunition to trader organisations like the All India Online Vendors Association (AIOVA), which have been protesting against companies such as Flipkart and Amazon for favouring ‘their’ respective vendors, WS Retail and Cloudtail.

Published on January 03, 2019
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