Amazon India takes the fight to Flipkart by cutting seller fees

As the competition for the top spot in India’s e-commerce market heats up, Amazon India is throwing caution to the wind and slashing commissions in order to increase sales in certain categories.

As of 15 July, Amazon will cut the fees it charges from sellers across 22 product segments such as furniture - a potential growth driver - as well as watches, luggage, eyeglasses and undergarments.

The fees charged to sellers include a referral fee, which is a fixed percentage of the total price of the item, as well as shipping and handling fees.

Amazon has come under fire in recent years, not only in India but in the US as well, for the high discounts it offers on products, thereby resulting in lower returns for sellers. The move to reduce selling costs will result in improved margins for suppliers and help attract more of them to Amazon’s platform.

Second reduction this year

This is the second time that Amazon has modified its referral fee structure this year. In April, it reduced fees for around 32 categories of products - including the popular apparel and grocery categories - but increased fees for 24 other segments like footwear. The fee structure for electronic devices remained the same. Flipkart countered the move soon after with a reduction in fixed fees on all products that were less than ₹500.

Amazon’s latest move follows Walmart’s decision to acquire a 77% stake in Indian e-commerce leader Flipkart. As competition between the two entities heats up, they will try and lure more customers with heavier discounts and suppliers with lower seller charges.

According to Browntape, an online sales service, on an average, sellers actually receive the highest value for their products on Amazon, earning 81% of the selling price of a product compared to 72% for both Flipkart and Paytm Mall. This is mainly due to the fact that Amazon charges one the lowest marketplace commission rates.

The latest round of reductions will be effective at the tail end of Amazon’s upcoming Prime Day Sale, which will take place between 7 and 15 July across all countries that it operates in. Over the course of the Prime Day Sale, Amazon offers lavish discounts to all its Prime subscribers.
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