Affiliate marketing companies have played a major role in generating traffic for online marketplaces such as Flipkart, Amazon, and Snapdeal. The year 2015 was a great example of how couponing and affiliate marketing have contributed significantly to the Indian ecommerce industry’s growth.
Therefore Snapdeal’s decision to reduce commission on its highest selling category (mobile phones) hasn’t gone down well with affiliate marketers, and rightly so.
Affiliates are earning as low as 0.1% commission from Snapdeal
While Amazon India offers 4% commission on consumer electronics, Flipkart gives 2% for existing customers and 4% for sales via app with no cap on number of monthly transactions.
On the other hand Snapdeal’s commission in the mobiles & tablets category for existing customers is 1% (upto 2,500 transactions) and 0.1% for transactions above 2,500. The more orders the affiliates bring, the lesser the commission!
An unnamed company executive said, “A lot of the online shopping that happens in India only takes place because of discounts. If Snapdeal is going to cut the payoff by such a huge amount, then why does it make sense to drive their business? They’re a huge part of the ecosystem, so no one is openly talking about this, but all the top companies are hurting from Snapdeal’s decision, and we have been lobbying them for months now.”
Is this Snapdeal’s way to increase profits?
IOS had earlier discussed how popularity of coupons is preventing etailers from curbing deep discounts. Ecommerce leaders want to reach profitability as soon as they can and discount is one of the major hindrances.
So is this Snapdeal’s strategy to gradually phase out discounts by reducing affiliate commissions and increase profit margins?
Raj Ramaswamy, CEO and co-founder of ShopInSync doesn’t think so. He said, “Margin pressure is likely not behind this decision because there are much better ways to address that issue. There will be some strategic reasons behind this decision. But another thing to remember is that these are not blanket terms. Most people will have their own deals.”
Will Amazon and Flipkart gain from it?
Of course, they will!
We have already talked about couponing and affiliate marketing’s contribution to ecommerce sales. With the discount-centric ecommerce industry that we have, it will continue to be relevant at least for the next few years.
As of now owners of coupon sites are trying to amicably resolve the situation by talking, discussing and negotiating with Snapdeal. If talks fail, then affiliates won’t mind focusing their energies on Snapdeal’s arch rivals Flipkart and Amazon.