E-commerce majors tighten purse strings, reduce incentives

Flipkart, Amazon & Paytm have raised commissions from sellers.

India’s leading e-commerce marketplaces such as Flipkart, Paytm and Amazon are moving towards standardised commissions charged from sellers for the sale of products on their platforms.

The move is in line with a sectoral push to cut losses and improve margins, which took a big hit due to deep discounting practices by all of them.

Flipkart has raised commissions for sellers across categories.

Owing to the diversity of products on its platform, the company does not have a fixed charge and commissions can vary.

The Economic Times reported on Monday that sellers could raise the prices of products sold on Flipkart by up to nine per cent, due to the changes in commission.

Flipkart has also scrapped a zero commission experiment it was running with a set of 350 reputed sellers, charging them nothing to sell products but instead monetising these by having them bid for advertising spots on its website and app. 

Another front for standardisation seems to be the period allowed on product returns.

“The revised structure across shipping, commission and returns will enable sellers to have predictability and better manage their online business. The standardisation has been designed to encourage sellers who offer superior customer experience and is thus a win-win for both our customers and our customer-oriented sellers. Our commission and fee structure remains competitive,” said a Flipkart spokesperson.

Amazon, which started a price war to take on Flipkart and Snapdeal, has also increased its commissions.

In 2015, Flipkart, Snapdeal and Amazon posted a combined loss of a little over Rs 7,000 crore (Rs 70 billion), most of which was attributed to the discounts they offered on products to win customers. 

An Amazon spokesperson could not be reached at the time of writing this report.

Paytm, backed by Chinese e-commerce giant Alibaba, also plans to change its commissions model; it would not comment on the issue.

Alibaba in China has a model of charging sellers low commissions and monetising through advertisements, with half its revenue earned through ads. 

Another front for standardisation seems to be the period allowed on product returns.

Flipkart has followed Amazon to reduce the period for returns to only 10 days on electronics, smartphones and books, down from the earlier 30 days.

Rival Snapdeal will entertain returns from customers for up to seven days.

A majority of returns on Flipkart’s platform happen within five days after the product has been delivered to a customer, thereby not affecting a large base of users.

The revised product return policy will help sellers get better clarity on their inventories.

While its hard to generalise on the rate of commissions charged, “if it is a commoditised product, e-commerce players are already offering it at a standardised rack rate”, says Sandeep Ladda, partner at Pricewaterhouse.

“But, for other types of services where there is a possibility of uniqueness, e-commerce players will be able to bargain with sellers for higher commissions. So, the forces of demand and supply between the buyer and seller of the service will determine the ultimate pricing of a product.”