Online shopping is now the most preferred way of shopping today, which in itself is itself huge industry. Many small establishments and sellers sell their goods through online sites. Most of the time (almost ALL the time), the consumer is unaware of who the person selling the goods to them is. Consumers blindly order goods on these websites because they are trustworthy and are genuine. And yes, there haven’t been many cases of fraudulent selling either. But what if these online shopping websites were to release the entire backgrounds of those small businesses which sell their goods through them? How can it influence their sales? Let’s analyse that in this article.
Online Shopping: The Numbers
How about we start with an example?
Flipkart, the current leader of online shopping in India, has a huge number of sellers selling their goods through it. Ever tried to check the seller’s names carefully though?
Most of the time, you may come across a single name (just a few other names on the sellers’ end). The name is WS Retail.
Now who are these people at WS Retail running such a large business that every second Flipkart search result shows their products?
Here is a Quora Answer to the question, “What is the relationship between Flipkart and WS Retail?”
This is the Flipkart.com‘s story:
Due to the dogma and trauma we underwent under East India Company The laws in our country are created in such a way that the common people should not suffer time and again for the clutches of a company.
Now, Flipkart was incorporated in 2008 at Singapore; primary reason taxation policy as startups are always a gamble and everyone wants more profits and easy management, which is not possible in India.
a. Corporate taxation rate – Singapore has a corporate taxation rate of only 17%, whereas India has a rate of 34%.
b. Double taxation avoidance – Singapore has a one-tier corporate tax system whereby tax at the corporate level (i.e. any underlying tax) is the final tax.
- As Flipkart is a foreign company, they can only carry business in 2 ways either as Joint Venture or as Wholly Owned Subsidiary. Moreover the e-retail rules in India specifically prevents a company funded in part, or wholly by foreign entities, from selling a product to an Indian customer (though of course they could trade with other Indian businesses on a B2B model).
- The guys at Flipkart were fast to exploit this rule and spun off its retail and warehouse arm into a separate company WS Retail and sold this to an HNI. Technically WS Retail is wholly owned subsidiary of Flipkart. Hence, the two businesses are run as one.
- Now Flipkart isn’t selling to Indian customers anymore, it’s just a marketplace where vendors list their goods (75% of this inventory is stocked by WS Retail) and we as customers are buying from Indian vendors and not Flipkart.
- Genius right, but here’s more interesting facts: Most people would obviously wonder what happens to all that money which Flipkart raises. WS Retail can’t just take the money from Flipkart because it is still foreign investment and would end up making WS Retail illegal. So how do they raise money? From Flipkart! Flipkart doesn’t pay WS Retail the market price to procure an item rather they pay a lot more than that. So for a product which would only have a SP Rs. 10 will be sold for Rs. 15. This way WS Retail makes more profits. It’s the same money that Flipkart received to fund its operations. They took money out from one pocket and put it in the other without breaking a single law. Ingenious isn’t it?
The bottom line is that irrespective of the new laws by selling of WS Retail, Flipkart has built a model whereby it can legally continue its online shopping operations in India and finance itself through FDI and same is the case with the Amazon.com registered in the USA and operating in India through Cloudretail and many other online stores.
As you read, Flipkart and WS Retail are very close. Now to stop the business of other businesses, the only thing they need to do is release the sales database of others. In this way, those vendors may either withdraw their goods from the site or the customers may just not buy anything from them. Genius, right? No.
Online shopping ventures like Flipkart make huge profits through these small businesses. Hence they try their level best to keep the background details of these businesses hidden and in a blur of a lens as if the releasing of the data may result in the ultimate destruction of the company’s sales.
So they just follow the motto of “Hide their faults, enjoy the perks.”