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Price war in ecommerce? Amazon cuts its referral fee by 1-7% on few categories
Amazon India has cut the fee it charges sellers using its platform on select items by up to 7% just three days before rival Flipkart is to implement an increase in its seller commission, possibly triggering a fresh round of price war in the country’s ecommerce space.
Amazon has cut its referral fee by 1-7% on some categories including personal computers, mobile devices and tablets, electronics, movies, music, video games, video game consoles, non-educational and educational software, musical instruments and personal care appliances with effect from June 17, the company told its sellers in an email late on Wednesday.
Sellers on Amazon’s platform are expected to pass on the benefits of reduced cost to the consumers. The move comes at a time when several sellers on Flipkart have threatened to quit or become inactive on the platform due to the hike in commission on several products with effect from June 20. “Yes, we lowered the rates for certain categories. We think these revised rates can significantly help sellers to perform even better and succeed in their business,” said an Amazon India spokesperson.
Flipkart did not respond to an email with queries as of press time Thursday. Ecommerce companies have different fee structures. While Amazon has two components called referral fee and fixed fee, Flipkart has three – commission, fixed fee and collection fee. This is besides logistics or shipping charges, which vary depending on different warehouse and logistics services used by a seller. Amazon’s latest move is partly a rollback as it had recently increased referral fees on several categories.
It, however, has not reduced the fee on apparel, fashion, lifestyle, home improvement and some other categories that had seen a fee increase. The development is expected to help Amazon undercut rivals such as Flipkart and Snapdeal, as most home grown ecommerce platforms are under pressure from investors to reduce their cash burn rate and work towards profitability.
Amazon is under no such pressure. In fact, its founder Jeff Bezos recently announced a further $3 billion investment in India. “The market is getting tough now. While one is looking at growth, the other is aiming profitability. Snapdeal and Flipkart have investor pressure to make money while Amazon isn’t. They are still after getting more market share,” said Harminder Sahni, founder of Wazir Advisors.
“The metrics is different for Indian and international players.” Sellers have welcomed Amazon’s decision to cut commissions. “Amazon has taken a big call in reducing commissions, which has gone down by 25% on average. They have reduced commissions for all high GMV products,” said Sanjay Thakur, president of eSellerSuraksha, a group of online sellers.
A spokesperson of All India Vendors’ Association (AIOVA), which is a group of 1,000 medium to large sellers on several online platforms, said, “Amazon first increased commissions, now they are revising. This could have been avoided if they would have taken sellers advice before taking any such steps. Marketplaces should understand that we need to coexist in order to survive.” Jay Bouwmeester Authentic Jersey
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