Affiliate sites too gain from competition between marketplaces

Remember Flipkart’s Big Billion Day last month? Of course you do, and hopefully you read the inner circle views on who gained how much from it. What you probably didn’t know was that while Flipkart was celebrating its Big Billion Day, Amazon conducted a special experiment involving affiliates to increase traffic to its site.

Who are these affiliates?

Besides marketplaces, there are other ancillary players in the ecommerce field. This includes discount coupon sellers, price comparison sites, cash-back sites and other affiliate networks. Some popular ones are couponduniya, cashkaro, freekamaal, flipit, couponzguru etc. These affiliates approach marketplaces establishments with a commission-based offer that all the traffic that lands on the affiliate site will be directed to the marketplace since customers would find the deals on offer attractive enough. Hence, customers win because they can avail discounts, marketplaces win because there is increase in sales, and affiliates earn commission on these sales.

Affiliates is a flourishing market in itself, and accounts for as much as 8% of all sales in Indian ecommerce.  For example, OMG India manages Jabong, HomeShop18 etc., Tyroo manages Myntra, FashionAndYou, Snapdeal etc., Ibibo ads network manages Zovi, YepMe, PepperFry etc. To sum up this many-to-many relationship, marketplaces have multiple affiliates driving traffic to them, and affiliates drive traffic to multiple marketplaces.

What was Amazon’s experiment?

While Flipkart promoted its one-day sale, Amazon teamed up with these affiliates to subtly promote itself. In general, Amazon is known to pay one of the highest commissions to its affiliates – anywhere between 5% and 15%. Two days before the Big Billion Day, Amazon hiked its commissions by almost 50%, and on October 6, which is when Flipkart’s Big Billion Day happened, Amazon doubled its commissions to 10% for electronics, and 30% for apparel. For the categories of books, toys, beauty and health, watches and jewelry, Amazon offered a 10% commission to dealsites on October 6.

You may ask: did this move help Amazon in any way? Wasn’t Flipkart’s Big Billion Day a Big Billion success? Executives at an affiliate disclose that the traffic routed to Flipkart and Snapdeal increased by 200%, while the traffic routed to Amazon increased by 250%. Freekamaal, a popular dealsite, said the traffic to Amazon increased four times during Diwali.

However, Amazon India insists this was a part of an experiment, and was not influenced by what their rivals were doing. “We were testing several commissioning rates during this period and to incentivizing (the affiliates) differently,” said Kishore Thota, head of digital marketing at Amazon India.

What do the affiliates think?

Affiliates say that the professionalism with which Amazon deals with them has helped improve their terms even with other marketplaces. Not only has it sped up the payment process from Amazon’s competitors knowing that Amazon is a prompt paymaster, but its US-based culture also ensures there is no mediator and that the marketplaces deal directly with the affiliates. Monetarily, too, Amazon seems to have improved things for affiliates. “Amazon started offering average commissions of about 10% when local rivals were paying less than 2%, prompting Flipkart and Snapdeal to raise their payments,” said Abhinav Choudhary, co-founder of online price comparison company Smartprix. The general sentiment is that Amazon paid attention to the marketing channel, as Sameer Parwani, CEO, CouponDunia says, “I wouldn’t say other e-commerce sites had totally ignored affiliate marketing or did a bad job. It’s just one channel that Amazon valued a lot so other companies woke up a little bit and said we have to stay competitive in whatever Amazon is doing with affiliates being one of those channels.”

What about Amazon’s rivals?              

Flipkart’s senior director Mausam Gadia said neither is Flipkart affected by what the competition is resorting to, nor does Flipkart believe in changing commissions based on what the rivals are up to. He added, “We tend to have a fairly consistent commission structure that we maintain over a period of time and our relations with affiliates have been built over those lines and over a longer period of time as opposed to seasonal spikes or periodic reactions to activities.”

Discounting Choudhary’s view, Snapdeal’s Senior Vice President Sandeep Komaravelly said, “We had our affiliate programme far before Amazon or anyone had come in. If someone is saying that Amazon came and everything changed, I don’t subscribe to that.”

How does this affect sellers and buyers?

If marketplaces give good commissions to affiliates, the affiliates are motivated to offer better discounts to consumers since their margins are higher. This results in buyers being able to afford more purchases, which finally means dear sellers, your products are moving faster, your brand is gaining exposure and you’re receiving more reviews, hopefully positive ones!

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