Amazon goes all out to take on Flipkart, undercuts seller fee

It's a sort of cat and mouse game that Amazon is playing with Flipkart.

In May, the global giant's Indian arm had increased the referral rates it charges on sellers on its platform to 9 percent, prompting Flipkart too to announced similar steps.

Until then, Flipkart, the largest e-commerce platform in India was not charging any payment fees to its seller. However, when it announced payment fees, it was reported to be slightly higher than its competitors at Rs 15-Rs 30 per order depending on price of goods of sellers, reported Times of India. 

 Amazon goes all out to take on Flipkart, undercuts seller fee


The increase in sellers charges on Flipkart, after Amazon's move earlier, was to be effective three days from now. Snapdeal, the other major e-commerce player, had then in fact cut its commission to sellers in a bid to buoy up its sales.

Amazon, however, has now gone ahead and slashed its sellers fees on smartphones and software by up to 7 percent. This would be effective from today (June 17) and would be applicable to a few categories such as electronics, personal computers, mobile devices, tablets, video games, video games consoles, music, musical instruments, educational and non-educational software, personal appliances, music. This was conveyed in an email to its sellers, reported the Economic Times.

What this reduction in sellers fees means is that sellers will now be able to pass on the reduced fees to consumers, thus benefiting the latter.

Amazon has not reduced the commission on lifestyle, apparel, fashion, home improvement and a few other categories.

Feeling the heat of the dominance of Chinese e-commerce giant Alibaba and US-based eBay on small items such as phone acccessories, Amazon had reduced its shipping costs on these items in the US, reported Business Standard.

What will happen next?

Flipkart, Snapdeal and Amazon are the largest players in the e-commerce space and compete closely with each other though Amazon leads the pack. In 2014-15, all three players had reported a combined loss of Rs 7,000 crore.

Amazon is rapidly extending its scope and usurping rapidly the space that the other two had.

Flipkart and Snapdeal, though numero unos as home-grown players in the e-commerce market are not at all profitable. Also, with the investors tightening their purse strings and funding narrowing down, they are on a tight leash.

Meanwhile, Amazon India is getting funds from its US parent, with its chief Jeff Bezos announcing this month he has earmarked $3 billion more for operations here. Including the incremental amount, the company's total investment in the country will be $5 billion.

"...The investment will go towards enhancing our customer and seller experience, as we have done over the past three years," Amazon India managing director Amit Agarwal had said in an interview.

With this latest move, Amazon expects its business in India to be its leading market overtaking its other foreign markets like Japan, Germany and UK.

Where will that leave Flipkart and Snapdeal? More importantly, will Flipkart be forced to roll back its intended payment fees on sellers due three days from now?

Interesting times indeed in the Indian e-commerce.

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

Updated Date: Jun 17, 2016 11:40:44 IST