Amazon’s seller fee cut may see rivals playing catch-up | The Financial Express

Amazon’s seller fee cut may see rivals playing catch-up

Analysts also pointed out that if the other players in the space do not offer commission relaxations to lure new sellers, they are bound to lose out on potential sellers and eventually even customers.

Amazon’s seller fee cut may see rivals playing catch-up
Amazon also said the decision to encourage new sellers was to make sure there is enough supply which betters customer experience during the sale events and later.

Amazon’s recent decision to halve the fee for new sellers joining its platform will encourage more sellers to adopt a multi-platform approach, where they sell on more than just one e-commerce marketplace. It is also likely to push competitors in the space to provide similar incentives to attract new sellers, according to analysts.

So far, Flipkart – Amazon‘s main competitor in the country – is yet to chalk out plans to incentivise new sellers, according to a company source. But the firm informed sellers that it would charge a one-time fee of `5 on orders received during the pre-Big Billion Days sale. The company would, however, waive off that fee for sellers who later participate in the flagship event from September 23-30.

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Amazon’s decision to reduce seller fee by 50% is going to have implications for everyone. In some capacity, you should expect others to follow suit. So you will see some state of reductions across other platforms. It is hard for someone in this competitive market space not to compete on prices, so they’ll have to find some arrangement here. Now, whether it is a straight commission reduction, a cut in logistics costs or other ways of reducing commissions, time will tell, but it will happen,” Ankur Pahwa, partner and leader, e-commerce and consumer internet, EY India, told FE.

Pahwa added that while the move will help the US e-tailer giant ensure increased supply, offer more competitive and discounted prices during the “very significant” sale period, it is a decision taken for the long term.

“The longer game play here will be that if the seller wasn’t on Amazon in the past and now they join Amazon to leverage the fee discount. And like the experience, it will encourage a cross-pollination of sellers. Amazon and Flipkart both have dedicated seller networks of their own. What this is going to do is encourage sellers to sign up on other platforms and sell on more than just one marketplace. That way, Amazon’s seller base will increase and help it offer a more competitive pricing,” he said.

Amazon also said the decision to encourage new sellers was to make sure there is enough supply which betters customer experience during the sale events and later.

“The idea of the fee discount is to get new sellers onto our platform. We’ve never done this in the past, so it is difficult to assess the incremental business we’ll get from this decision yet,” Noorulamin Patel, vice-president, Amazon India, told FE.

“We currently have 11 lakh sellers on our platform — of which 5.5 lakh were added just in the last two years — and about 20% of them are local stores. The idea is to grow the local ecosystem of sellers across the length and breath of the country. We do not want sellers to come a particular metro, town or region, the idea is to have a large number of sellers but also have local sellers participate in this journey,” Patel added.

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Analysts also pointed out that if the other players in the space do not offer commission relaxations to lure new sellers, they are bound to lose out on potential sellers and eventually even customers.

Ashutosh Sharma, head of research at Forrester, said: “Flipkart, with the penalty imposition, has taken the stick approach, whereas Amazon, with the waiver, has taken the carrot approach, but the common idea is to get more sellers to participate in their festive season sale. But without any concrete incentives to new sellers, a Flipkart would stand to lose business because any new seller who is ready to sell online for the first time during the sale will choose to go onto Amazon and leverage the discounted seller fee, instead of signing up with competitors. A reduced take rate will also mean existing sellers will have to offer discounts accordingly and be able to match with the new sellers.”

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