Flipkart Sellers Suffer Losses Due to New System Change

Karan Uppal, the owner of Shoe Island, a Delhi-based footwear business, is a Flipkart seller with an annual turnaround of Rs 30 to 40 lakh on the e-commerce platform. But since May 18, he has allegedly incurred a loss of approximately Rs 15 lakh on the platform.

“Flipkart's recent adjustments to its rate card system, which were supposed to benefit sellers, have negatively affected my business,” Uppal told The Core.

On May 10, Flipkart, India's homegrown e-commerce marketplace, announced a new 'simplified' rate card policy which it said was to enhance the seller experience. This became effective May 18.

Unfortunately, Flipkart sellers say that this change has become a nightmare leading them to mark their products as 'Out of Stock' on the website.

"We were forced to mark our products as out of stock due to very low settlement amounts, making it unsustainable. If I am buying a product for Rs 120 and selling it for Rs 125 on Flipkart, how does that yield any profit?" said Uppal.

Surat E-commerce Association has been receiving constant complaints from sellers about the instability in their businesses with Flipkart.

“The marketplace (Flipkart) has been making changes to its commission system every two to three months, disrupting the business flow from production to stock line. Sellers are frustrated with this ongoing instability,” Sudhir Bhuva, owner of Purvaja and president of the Surat E-commerce Association told The Core.

What Is the New Policy?

The rate card system helps sellers determine the pricing of their products by calculating profit margins.

Previously, sellers had the freedom to choose the price at which they wanted to sell their products, and the rate card system would calculate their earnings accordingly.

With the new changes, Flipkart has restricted this system. Now, instead of entering the product prices, sellers must input the profit or commission they wish to earn.

According to Flipkart's announcement, this change aims to enhance transparency in settlements, enabling sellers to concentrate on their core business. Additionally, the Fulfilment by Flipkart (FBF) service intends to provide more competitive rates, making it easier for sellers to scale their operations.

Another change is simplified shipping costs to ensure transparency and fairness, with no additional charges for shipping items under 500g within local and zonal areas, though surcharges apply for national shipping and heavier items. The transparent fee structures promote equitable growth, empowering sellers to expand their businesses.

“Some aspects of the new policy are beneficial, but it also restricts us from setting our product prices, which is unacceptable,” said Bhuva.

With the rate card change, small to medium businesses are significantly impacted leaving them confused and unsure of how to sustain themselves on the platform.

"I have spoken to several small businesses, and profitability has been significantly hampered. The trust in large e-commerce companies is deteriorating, turning into a sense of repression. These businesses feel unheard regarding their daily challenges, with no one to raise their concerns or find workable solutions," Abhishek Kumar, president of The Entrepreneur Association of India told The Core.

FDI Policy

According to the policy of Foreign Direct Investment (FDI) in e-commerce, the marketplaces ‘should not’ control product prices or discriminate against sellers. Services like shipping, storage, advertising, payments, and loans should be offered fairly to all sellers. Cashback offers must also be unbiased.

“If a marketplace gives special deals to one seller but not others in similar situations, it's unfair and discriminatory,” said Uppal. “They shouldn't control our prices. It undermines trust,” he added.

It’s been more than a month and Uppal's best-selling products are still out of stock, resulting in losses.

“They (Flipkart) reduced and locked the selling prices, promising the same settlement through a reward program. However, the rewards are unreliable and often unavailable. For instance, on May 25, all rewards were auto-opted out,” Uppal explained.

Why Did The Change Backfire?

Flipkart introduced another change where the platform now determines the prices that sellers can set, generating a new profit amount based on these prices. This shift has led many sellers to withdraw their products due to minimal profit margins.

"I have around 100 products listed on Flipkart, but they changed the rates for my top 10 best-selling items, leaving me with only Rs 5-10 profit per product. I had no choice but to take down my products," said Uppal.

The Surat-based seller on the condition of anonymity said that his business on the platform has declined by 20% to 40%.

"With the rate card change, Flipkart also decided to remove older designs from the website, which still generated some business for us. This change will further reduce our sales," he added.

Kumar also said that e-commerce platforms make numerous promises when onboarding sellers, but fail to respond when support is needed.

“I've been part of Flipkart and Amazon's small business program, where they claim to offer online mentoring and promise hand-holding support However, when help is needed, there is often no response. It's now the role of associations like ours to raise these concerns with the ministry,” Kumar added.

Why Did Flipkart Make Such Changes?

“Flipkart is experimenting with new changes before the Big Billion Days sale begins,” said Uppal.

Flipkart’s Big Billion Days sale is said to be one of the largest annual shopping events with discounts and deals across various product categories like electronics, home appliances, fashion and more. The sale typically occurs in October, aligning with the festive season like Navratri and Diwali.

In response to the issue, Flipkart did not directly address the concern. Instead, they highlighted their efforts to drive growth for the sellers in the marketplace. They also mentioned that such initiatives, including the revamped rate card, are designed to align with the evolving needs of the seller community.

“The policy was introduced recently, and we are working closely with our sellers to drive a better understanding of the new policy and make necessary improvements. Since implementing the changes in the last couple of weeks, we’ve seen an increase in business transactions and a rise in active sellers, said a Flipkart spokesperson.

Sanjay Sojitra, secretary of the Surat E-commerce Association said that due to low profit rates, they had to increase the product price which has affected many businesses.

“Many sellers have reached out to me with their concerns on the new change because their businesses have been affected by around 40% to 60% in June as compared to April-May,” said Sojitra.

When Will This Be Resolved?

Sellers are uncertain about when their business will stabilise on the e-commerce platform.

“It's been over a month, and we still have no clear response from Flipkart on when this will be resolved,” said the Surat-based seller.

Uppal mentioned that Flipkart has repeatedly promised to resolve the issue within a week, but each week brings new excuses and extensions.

In a press release, Rakesh Krishnan, vice president and head of marketplace at Flipkart, stated that these changes reflect ongoing dialogue with sellers. However, sellers have a different perspective.

“I had a word with the Flipkart VP before the changes were implemented, but I was unaware of the rate card changes and the restrictions on setting our prices,” said the Surat-based seller.