Amazon slashes sellers' fees to take on Flipkart

Flipkart and Snapdeal will feel the pressure of matching Amazon’s rates.

Amazon has slashed seller commissions on smartphones and software, following rival Flipkart’s decision to increase fees, while also passing on the cost of shipping and returns to sellers.

A seller’s group has threatened to stop selling on Flipkart.

Electronics, mainly smartphones, make up a third of all online sales in India. Amazon has reduced commissions on smartphones and tablets to 3 per cent from 5 per cent of the cost of the device.

For movies and educational content, it has reduced the commission to 5 per cent from 12 per cent.

Amazon’s decision to cut commissions from Friday allows sellers to offer products at a lower cost, effectively bypassing foreign direct investment norms for e-commerce marketplaces that ban such players from offering discounts.

Flipkart and Snapdeal will feel the pressure of matching Amazon’s rates.

The three players had combined losses of about Rs 7,000 crore (Rs 70 billion) in 2014-15.

In the US, too, Amazon has reduced shipping costs for small items such as phone accessories, a segment dominated by Chinese e-commerce giant Alibaba and US-based eBay.

“We think these revised rates can help sellers to perform even better," Amazon India said in a statement.

“We hope sellers will take advantage of these revised rates.”

Amazon said it had increased its seller base to 85,000, growing annually by 250 per cent. Three years ago, when Amazon set up shop in India, it had around 100 sellers.

“Amazon has taken a big call in reducing commissions,” said Sanjay Thakur, president of eSellerSuraksha, a lobby group for sellers on online platforms.

“Flipkart, on the other hand, is charging more than the industry.”

eSellerSuraksha claims a membership of 1,000 sellers, a fifth of Flipkart’s active seller base. It has asked its members to mark their products as “out of stock” on Flipkart for a day on June 20 to protest against the e-commerce firm’s new policy on returns.

Amazon has, however, increased the commission on non-core segments like mobile accessories, luggage and pet products by 2-9 per cent.

WOOING THE RETAILER

• Amazon has reduced commissions on smartphones and tablets to 3% from 5% of the cost of the device
• For movies and educational content, it has reduced the commission to 5% from 12%
• Amazon’s decision to cut commissions from June 17 allows sellers to offer products at a lower cost, effectively bypassing FDI norms for e-commerce marketplaces
• Flipkart and Snapdeal will feel the pressure of matching Amazon’s rates
• Amazon recently committed a $3-billion investment in its India unit to take on Flipkart and Snapdeal
• eSellerSuraksha, a forum of online sellers, has asked its members to mark their products as 'out of stock' on Flipkart for a day on June 20 to protest against the latter's new policy on returns

Image: A worker packs a box at Amazon's logistics centre in Graben near Augsburg. Photograph: Michaela Rehle/Reuters