Two of India’s dominant e-commerce companies- Amazon & Walmart-owned Flipkart have slashed the commissions they earn from sellers on their platform, amidst rising competition in the space, people familiar with the development told Moneycontrol.
While Flipkart has promised sellers zero commissions for products priced below Rs 300, Amazon is offering flat 2% commissions for products in that range.
Certain products in the range of Rs 500 for Flipkart and Rs 1,000 for Amazon are also included under this offering. The categories covered are mostly clothes, home, fashion, jewellery and toys.As it happened, the two companies launched this soon after the festive sale got over a month ago, during which younger rival, SoftBank-backed Meesho, witnessed a rise in volumes in the unbranded fashion category.
According to a report by consultancy firm Redseer Consulting, Meesho grew its share in fashion during the festive season sales on the back of affordable and value offerings.During the first week of the sale in October, the fashion category contributed to almost 17% of overall gross merchandise value (GMV). While Flipkart and Amazon got 70% share in fashion, 30% of the sales were driven by vertical apparel platforms. Of this Meesho grabbed 39% share, according to the report.
While Meesho started out with a thrust on social commerce, its share of direct sales has been going up, pitting it against Flipkart and Amazon. It now derives 75 percent of its business directly from customers who come on its platform, while 25 percent comes from resellers.
According to the sellers, given that Meesho wasn’t charging any commission from them, it gave them enough margins to further pass on the price benefits to consumers.
As a result, the same product was being sold across Amazon, Flipkart and Meesho for different prices with Meesho being much cheaper as compared to the other two. The move to slash commissions is aimed at stemming the flow of price-sensitive shoppers to Meesho.
While the commissions vary from one category to another, Amazon and Flipkart typically can charge anywhere from 12-35% from sellers for different items.
“Even if I was selling a product for Rs 249, I was easily able to pocket Rs 200. The same product we use to sell for Rs 400 on other websites,” said a seller requesting anonymity.
“It (Meesho) has some issues — slight delay in payments or reconciliations but the zero commission model has been a huge benefit for small sellers like us,” he added.
The commissions have been strategically reduced by Amazon and Flipkart only across low ticket products which comprises unbranded items. Meesho heavily focuses on this specific non branded, value for money product categories.
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According to experts categories like apparel and home are the first few that a customer indulges into before getting completely comfortable with the online commerce platforms. It is therefore all the more important for the market leaders to be aggressive in this domain.
“These are the categories which brings new buyers to the platforms. A new buyer starts purchasing fashion or these kinds of things and once he is confident he increases his spending or buys more categories,” said Sateesh Meena, independent e-commerce analyst.
Last month Moneycontrol reported that Flipkart had set up a war room to keep an eye on six year old Meesho, following its rapid expansion and execution.
In an interview with Moneycontrol, earlier this month, Meeho’s founder and chief executive officer Vidit Aatrey said that Meesho had a “very strong” relationship with third party logistic firms because of which he was not perturbed by the competitors’ strategies.
“People will try to do whatever they want to do to hurt our growth. To some extent, a lot of people are threatened by our growth, which is quite expected,” he said.
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“In order to enable growth and success of lakhs of small businesses, we endeavor to keep fees on Amazon competitive for sellers. All our decisions are driven by what’s right for sellers and our customers,” an Amazon India spokesperson told Moneycontrol without getting into the details of the change in the commission rates.
Flipkart did not respond to the queries for this story.
According to industry sources Flipkart and Amazon register around 2.5 million orders on a daily basis while Meesho clocks 2 million. However Aatrey in the interview claimed that Meesho was averaging 3 million orders per day.
