JOIN USFlipkart’s lapses make accounting a nightmare for its sellers
When Covid-19 hit India in 2020, a Bengaluru-based home-appliance maker had to get out of his comfort zone.
After selling his ware solely in stores for 40 years, he signed up with e-commerce goliath Flipkart hoping to cash in on the pandemic-induced online shopping boom in the world's second-most populous nation.
Fast forward to 2022, he spends most of his time figuring out calculations and reconciling sales done on the platform, which has about 11 lakh sellers including those on Flipkart's social commerce site Shopsy.
"Today, when I do a sale on Flipkart, I have no guarantee that I will be making any profit from it," said the seller, who declined to be identified, fearing retaliation from the Walmart-owned e-commerce giant.
He is not alone.
Many small sellers DH spoke with have complained about how in numerous sales they made on Flipkart, the due receivables - which is the final settlement amount that the e-commerce giant pays after deducting the commission, delivery fee and other charges – end up being negative.
To make things worse, they often find out about this very late.
One of the most common issues faced by the sellers DH spoke with is unknown and delayed deductions to their accounts.
“I received a deduction in July this year related to a sale made in December 2021. How can we tally our balance sheet if we receive debits after closing our books of accounts for the financial year?” lamented the home-appliance maker.
Screenshots of the seller’s portal, which DH reviewed, showed the transaction history of certain orders against which deductions were made in August this year for sales done in January 2022.
These deductions are often unexplained and difficult to reconcile with the particular order against which it was charged, the seller said. Even in cases where such deductions were linked to a particular order, they were so delayed that it turned reconciliation into an accounting nightmare.
“Reconciliation on Flipkart is impossible,” said a Mumbai-based trader who does business with the e-commerce portal.
Experts found it puzzling as it was not common for e-commerce players to delay the deductions made to seller accounts.
"It is not an industry practice," said Shriram Subramanian, founder and managing director of InGovern Research Services.
Another trader, who has been selling electronic goods on Flipkart since 2018, faced a similar ordeal. He got a deduction of Rs 25,000 in March 2022 for sales he made two to three years ago. Initially, Flipkart explained the debit as a "technical issue". It then said the deduction was tied to the wrong labelling of a product’s weight, irking the trader, who denied any wrongdoing on his part.
“Accounting hassles have always been a problem,” a top official from a larger seller on Flipkart said on condition of anonymity. He confirmed reconciliation was required and happened only on intervention.
Flipkart did not comment specifically on the delayed deductions, but said it helped sellers through "easy settlements", "simplified costs", and "reduction in the operating costs".
“We can’t avoid Flipkart because there is no business with the retailers. But the e-tailers are not giving accountability and are non-accommodative of all manufacturers and wholesalers,” a seller quoted above said.
David v/s Goliath
And there’s not much the smaller sellers can do.
"Majority of sellers, today, are in a no-win situation. About 95% of the business is concentrated in the hands of just 5% of the sellers," said Arvind Singhal, managing director and chairman of retail consulting firm Technopak Advisors.
Flipkart, whose rivals in India range from veteran Amazon to newer entrant Meesho, told DH it provided a level-playing field to all its sellers.
Flipkart sellers’ woes don’t stop at delayed and unexplained deductions.
The e-commerce giant has changed the commission it charges its sellers multiple times after Meesho’s entry last year, three sellers told DH.
The frequent changes in commission forced the sellers to fiddle with their prices more often in a bid to save profits. That deterred potential buyers, they said.
“Problem started during Diwali last year when Meesho brought in zero-commission sales. Flipkart too switched to zero commission,” said another seller who spoke with DH. Zero-commission sales would mean a seller could sell on an e-commerce platform without paying any commission to the platform for letting them do business.
“A lot of competition came in after Meesho entered the market with zero commission to acquire customers. In response, FK (Flipkart) brought in Shopsy at zero commission and listed all the stock from Flipkart on Shopsy without asking the sellers," said the Mumbai-based trader quoted above.
While it meant better margins for sellers initially, Flipkart started charging them a commission for selling on Shopsy after just three to four months, the trader said.
Flipkart did not comment specifically on the changing commissions.
Experts found it counter-intuitive for an established e-commerce platform to be inconsistent with its policies amid heightened competition.
“Generally speaking, where competition intensifies, I would in fact expect any player to make it easier and more transparent for their seller-partners and not complicate it,” said Santosh Sreedhar, a partner at Avalon Consultancy.
Others, such as Technopak's Singhal, said the smaller sellers often ended up feeling a bigger pinch due to the volatile commissions and other charges demanded by the e-commerce firms.
Problems galore
Some sellers also complained about being automatically opted in for discounts and promotions at Flipkart’s discretion without their prior knowledge.
“Flipkart has the interest to give customers the best deal and, hence, if it decides to burn money on one fine day, a price war breaks out. But this doesn’t always happen,” according to the larger seller quoted earlier in the story.
Flipkart denied the accusation.
“As a marketplace platform, we do not set or change the prices of products. All the prices are determined solely by the respective seller. As such, any allegations to this effect will be false and malicious. We have democratic processes and systems in place which enable the sellers to decide participate in promotional programs," the e-commerce platform told DH via email.
Flipkart’s account managers often forced sellers to opt-in for promotions, thus blocking capital and leading to losses, a seller quoted above said.
Some of these sellers have started increasing the selling price of various products to overcome the losses due to the aforesaid issues and make up for the reconciliation process.
“Doing fewer sales is fine, but at least we will be able to track our performance and orders,” a seller quoted above told DH.