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Flipkart Won’t Deliver Orders More than 10K to Uttar Pradesh

The online retailer Flipkart has, it seems, decided to stop delivering goods to the state of Uttar Pradesh above Rs. 10,000, including the National Capital Regions of Ghaziabad and Noida, says TOI.

While Flipkart said the decision was “purely business oriented”, insiders said there were numerous instances of customers ordering expensive goods on the cash on delivery scheme and refusing to accept their orders. There have also been cases of fraud in which lost or stolen credit cards were used to book orders online.

The portal’s shipment delivery staff in Lucknow, however, gave insight, saying there were incidents in which customers ordered expensive goods and then refused to accept them. Sources said many people logged on to Flipkart and ordered “just for fun”.

“It takes a minimum of 10 days to ship a product to a customer and back to the company if it’s not purchased. It causes loss to sellers, selling through Flipkart, as their products get blocked in transit,” a senior Flipkart executive told TOI.

You know I’m the skeptical sort, so the questions that plague me are:

Why wouldn’t they just ban cash-on-delivery in UP? Sure, you can make prank calls with a cash-on-delivery order and then refuse to accept the package with nothing lost – but to remove all orders sounds a little harsh. If I’ve already paid – with, say, netbanking, I might not be a risk at all. I don’t buy the “stolen credit card” line either – because you can delay shipping for two-three days on credit card orders (by that time a card will be reported stolen or lost). And if stolen, there is enough information within Flipkart to perhaps nail the perpetrators.

Related Links:

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Why are prank calls only a problem with UP? In India nearly everyone must be privy to the concept, and I’m fairly sure their prank call situation occurs all over the country.

One reason could simply be that there is a competitor who’s burning them. This is not unheard of as a strategy. In one story, a large soft drink manufacturer put a competitor out of business by buying out his entire stock of bottled drinks and destroying them – the cost of manufacturing the glass bottles is recouped by recycling them many times, and the newcomer ran out of capital to manufacture more bottles.

Even if that were the case, banning deliveries to the whole state is not a solution. And the competitor can order things worth 9,000 rupees multiple times.

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Why Noida and Ghaziabad? Even if I understood why UP is a problem, the cost of delivery or return is not a problem in Noida and Ghaziabad (any more than it is in Gurgaon and Faridabad where there are no restrictions). These cities are literally next to Delhi – the Delhi Metro runs to Noida, for instance.

The only answer that might make some sense is there some sort of political angle to this – that the powers to be in UP have something to do with it. That would answer all my above questions – however, then why would they even delivery up to Rs. 10,000 in the state?

Update: While it may not be political the issue may be specific state regulations. Commenter Anon says:

UP has atrocious sales tax regulation. Each of the goods for sale to UP has to have a Form -38 issued for it by a very corrupt sales department. Each Form – 38 costs money. I guess the physical sellers just bear this cost but to an e-commerce company the margins get hit drastically on each shipment and even more when the goods can’t be delivered.

This observation fills all the gaps – any shipment to an individual needs a Form 39 (and to registered dealers, a Form 38), and this form has to be signed by the commercial tax department. These rules are different from state to state (see Blue Dart Courier’s list!) and it could just be that Flipkart doesn’t get refunded for the VAT it has to pay for unfulfilled orders, and they decided to take that risk upto Rs. 10,000 per order.

Flipkart is in the news recently for having cut many product categories including Flyte (their online music download store) and for having fired many employees. In the light of difficult FDI regulations, the conversion to a marketplace instead of owning inventory, and an increasingly itchy investor set, this news just adds fuel to the “E-Commerce is in trouble” story.

Related Links:

Flipkart now Moves into Offline Retail Space

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  • Sachin says:

    I am a victim of this. Although I am an old customer of Flipkart and always bought using a Credit card. Have bought items worth more than Rs. 1 lakh ( Laptop etc too). But last month I was not able to buy a Laptop and a Mobile from them. I tried every pin code (Noida, Ghaziabad and Meerut) I could try for Delivery but it didn’t accept. Later I had to order the Laptop from Snapdeal.
    This move is very bad from Flipkart, they could have just stopped accepting COD orders from UP, but no, they are not in correct state of mind, I guess.

  • dj says:

    Guess I looked for some stealth, conspiracy theory or more of it here in this Flipkart story. Nice post!

  • Chetan says:

    Most of the electronic and mobile stores hate Flipkart and HS18, their prices and offers are better than that of local stores. So UP traders started some spoil sport. This is just starting of new set of problems for E Com sites.

  • Anonymous says:

    UP has atrocious sales tax regulation. Each of the goods for sale to UP has to have a Form -38 issued for it by a very corrupt sales department. Each Form – 38 costs money. I guess the physical sellers just bear this cost but to an e-commerce company the margins get hit drastically on each shipment and even more when the goods can’t be delivered.

    • Kaka says:

      I ordered a Kindle from Amazon to a location in UP and the courier told me they can’t deliver until i get the form 38 which supposedly had to give me a clearance from paying state sales tax by stating that it was a personal item.
      It was amazing going to the state sales tax office to get that form. It was like entering a parallel world stuck in the dark ages. I’m not even sure if the people I ran into qualify as human beings. The guy who had to sign the form didn’t show up on the first day. Showed up the second day 2 hours late and then said that they were on strike for something. I escalated the issue on both days to as high as I could go, without any luck. Not knowing who/how to bribe, I had to return with a stupid letter on stamp paper and a filled up form 38 which went into the garbage bin and the Kindle was returned to Amazon. Note, all that was required was a signature and a stamp. I did not actually have to pay taxes on it. It was all just so ridiculous. I suppose there is a channel to get it done by paying a few bucks, but it was fun trying to do it myself. And, I had to run up and down 5 flights of stairs something like 5-6 times for various things.
      Even while living in UP, I support any such ban because it might actually get people agitated enough to ask their state gov offices to be staffed with human beings as opposed to zombies.

  • Sujoy says:

    Apart from the Form 38 problems in UP (which FK used to earlier deal with through fulfilment from a Noida warehouse), it’s been ages since a lot of areas have been off limits to expensive goods – due to their tendency to get stolen while in transit there.

  • mangoman2012 says:

    Today I read one of the most idiotic article in the main stream media. The credit goes to renowned economic writer mentioned in the title of this article.
    He suggested/supported to sell all the buffer stock kept in government godowns. In fact he suggested to export this food stock. What is comical is this…
    He said India needs 32 million tonnes every year as on July 1 in stocks. Even with proposed food security bill India may not need more than 42 million tonnes. But currently India has stock about 76 million tonnes. So he suggesting to export atleast around 25 million tonnes. What is intriguing is that he said by selling 25 million tonnes we will get around 10 billion US$ and he thinks it will bridge the current account deficit.
    Dear sir, our current account deficit is in the tune of 60 – 70 billion$ and this 10 billion$ is peanuts and will go into the drain in a jiffy. But the food stock if used properly or given to people can last for another year. You may have born in a upper middle class brahmin family and may not know what is food security is….
    However, I never read this guy talking sense in any of his article. He never advised government to increase interest rate so that all the rotten idiots in the indian crony capitalist system comes to ground. Never. he never did that. He always supported government’s idiotic moves. Gives reasons for them. Give justification for governments anti-people move.
    Dear sir,,problem lies in Interest rates….
    Raise interest rates by atleast 2%. This will solve all our problems. Then we need not undergo the painful process of reading your half baked,self fulfilling articles.

  • apoorv says:

    Like I said,
    “dear there are many intelligent ways to reduce fraud. Blanket ban is just not one of those.”
    They could have stopped CoD like you suggested. Or they could have decided no cod for first 5 orders to every new customer or something like that. I’ve ordered all kinds of stuff from them, including high value goods such as a mobile phone and TV. Anyways, there are other sites and hopefully they will not follow flipkart.

  • Umesh Pandit says:

    I am also not able to buy items on mumbai Pincode 400093 and UP kanpur Pincode 208007, Normal I live in Mumbai and I send items to my friends and parents over online via this site, now i am not able to buy …

  • Rajesh says:

    Now they have also stopped COD in uttarakhand, which is a very sad news. 🙁