Festive season is almost round the corner and e-commerce companies are doing everything to grab maximum advantage of it. So be it expanding logistics and warehouse network or introducing new changes to meet laws, there is an increase in activity among these companies.
Flipkart-owned Myntra has tied up with a new seller called Tech Connect Retail in order to comply with FDI regulations. So far seller entity yVector E-Commerce was the major seller on Myntra. However, a Livemint report said that it had completely disappeared from the website and app of Myntra by yesterday evening.
The report cited four people familiar with the matter and a set of documents. They revealed that Tech Retail now handled majority business of Vector E-commerce. They further said that the company has adopted a marketplace structure, at least on paper. It may also work with more sellers in future. For now, Tech Retail is selling maximum products on Myntra.
Until now, Myntra operated a mix of B2B and B2C models. Myntra Designs Pvt. ltd used to supply products to Vector Ecommerce which in turn sold them to customers. However, according to the latest FDI rules, no single seller can constitute more than 25% of sales on an e-commerce platform.
Continuing to operate on its previous model could lead Myntra to trouble with law enforcement authorities. Talking about the same, one of the persons mentioned above said,
(Myntra’s earlier) structure could have been easily challenged legally. The law clearly states that the two entities—one that had foreign direct investment and the one that sells to the consumers—need to keep an arm’s length distance.
The new FDI rules came into effect in April this year allowing 100% FDI in e-commerce marketplace with few conditions. They have led e-commerce companies, previously working on a mix of inventory and marketplace models, to make changes in their structures.
Recently, Jabong, now owned by Myntra itself, also moved to a marketplace model. For the purpose, it had created three new vendors namely Bren Trading, Ravenna Fashion, and Wearhouse Products Pvt. Ltd. Similarly, Flipkart also identified new sellers earlier this year in addition to its main seller entity WS Retail.
Former Bharti Airtel CEO Sanjay Kapoor and his wife own Tech Connect Retail. They had invested over 1 crore to acquire a majority stake in the company in February.
Previously, the company was known as Tech Connect and was in the business of manufacturing, importing, exporting, etc. Last year in December, it entered into online trading and marketing and changed its name to Tech Connect Retail before the Kapoors came on board.