Flipkart, Amazon accused of undercutting sellers by vendors’ group AIOVA

Editor | Sep 09, 2020

The war between sellers and online marketplaces is making news, yet again. Sellers’ lobby group All India Online Vendors’ Association (AIOVA) decided to write to Competition Commission of India (CCI) to protest against ecommerce biggies Flipkart and Amazon’s predatory pricing methods.

AIOVA has accused the marketplaces of undercutting sellers listed on their platforms and creating an unfair selling environment by favouring its in-house brands/seller entities.

In its letter to CCI (shared with Indian Online Seller), AIOVA writes,

“We write to you today to highlight example of unfair competition created for a marketplace seller by parties known in public as Flipkart and Amazon working through Flipkart Internet Pvt Ltd and Amazon Internet Pvt Ltd along with them lot of other network of interrelated companies. We hope this commission takes appropriate suo moto action against this pseudo-private organisations.”

Unfair competition – Why sellers say that?

The issues have been brewing for a while and it is not the first time that sellers have reached out to the Indian government demanding intervention.

AIOVA listed down 10 issues in its letter that has created an uneven platform for sellers. Right from giving better visibility to reserving the cream of services for own sellers/labels, third-party vendors are miffed with online marketplaces.

Few of the issues stated by AIOVA are (as specified in the letter):

  • Marketplaces have certain companies enrolled as seller on the platform like Amazon – Cloudtail India Pvt Ltd, Flipkart -WS Retail Pvt Ltd, Retail Net
  • Sellers of private labels of marketplaces’ such as Amazon Basics, Flipkart Smartbuy get special benefits which are not disclosed publicly
  • Above parties contribute approximately 70-80% of total sales on the platform
  • Products are being retailed at rock bottom prices. Example, fixed minimum fees of business on Amazon is Rs. 120 regardless of product, but Cloudtail manages to sell FMCG products like body oil, shampoo at lower price
  • All premium advertisement spots are reserved for above mentioned companies. Marketplace sellers have to either stand in queue or pay premium
  • Slots in warehouses under FA and FBA scheme are reserved for these companies, due to which marketplace sellers have to stand in queue. The warehouse agreements with these companies are also not publicly available
  • These companies and brands’ presence is limited only to their particular marketplace. Example- WS Retail does not sell on Amazon; Cloudtail does not sell on Flipkart. Both do no sell offline in malls or general trade

Marketplaces’ response to these accusations

Nature of business is such that investing in alternate sources of income becomes imperative after a point. For marketplaces, private labels, warehousing service, and advertising service are alternate channels to increase sales revenue. Sellers understand the need to increase revenue but they also want transparency in the way ecommerce companies conduct their businesses. They want the government bodies to mediate and ensure a fair & level-playing selling platform for all.

When asked about sellers’ accusations, Flipkart’s spokesperson said,

“Flipkart has always conducted its business with transparency, integrity and in full compliance of all applicable laws. Our private label, Smart-Buy, has enjoyed rapid success primarily due to the superior quality of products. We’ve shared the success of the brand and empowered sellers by licensing it to them but only after they meet our rigorous quality checks. The popularity of SmartBuy and the increased business has led to tremendous gains for sellers.”

Speaking on the same issue, Amazon India’s representative asserted,

“We are completely compliant with Indian laws and policies. Prices for products on the Amazon.in marketplace are determined by the sellers. We work hard and continually innovate to offer services such as FBA (Fulfilment by Amazon) and Easy Ship to sellers on our platform, that enables them to significantly lower their cost of selling and reducing defects, as they sell to a nationwide customer base. Sellers pass on these savings as lower prices on the platform.”

We have heard what the sellers have to say and what ecommerce leaders like Flipkart and Amazon think. Let’s wait to see how CCI and other government bodies’ handle this situation.

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