Trick or trade: Amazon and Flipkart pushing their own retailers over other sellers

We had recently carried an article about how Amazon and Flipkart are aggressively competing with each other to become the Ecommerce King in India. Their recent strategy that is subtle yet sharp is to encourage sale of products from Cloudtail and WS Retail, which are owned by Amazon and Flipkart respectively.

According to records, sales for Cloudtail on Amazon India for a little over 8% of products sold on the portal since it became operational in August last year. One of the executives also revealed that this retailer is one of the “five large sellers” on the portal. Though this seems like a strategy by Amazon India to improve its profit margins, it is quite feeble when compare to the figures that Flipkart has released.

Flipkart has a pool of 4,000 registered sellers on its portal, but WS Retail has accounted for about 85% of products sold on its portal in the last three years since its launch. This very evidently makes WS Retail the only dominant seller on Flipkart.

Trick or trade

Do these statistics reek of a peculiar profit strategy being run by these giant ecommerce companies? Is it possible that though these online marketplaces portray themselves as a platform where several people can buy and sell goods- is that just a ploy to cover its inventory-led model that it actually is? How else can an astounding 85% of goods on Flipkart be sold through WS Retail?

However, this strategy is decoded by some industry experts. According to Anindya Ghose, professor of IT and marketing at New York University’s Leonard Stern School of Business, “The big benefit (of having one dominant seller) is that it enables them to fund discounts and dictate pricing policies in a very clever way. They (WS Retail and Cloudtail) can suggest the discount amounts to the sellers and in fact compensate the sellers for the actual discounts given, either directly (via debit notes) or indirectly (by waiving listing fees or commissions).”

Cloudtail is also offering the same justification. An executive explains, “footwear and fashion merchandise sold through Cloudtail on Amazon India comes with more discounts than the same products sold by other sellers on the site. The sellers sell their goods through Cloudtail as it helps their sales because in any case the discounts get compensated by the company (Amazon).”

All is well, as long as all online sellers and online shoppers can also celebrate and share in the success of Indian ecommerce!