Amazon and Flipkart Lower Down Seller Commission in Selected Categories

The major eCommerce companies, Amazon and Flipkart, have announced to slash the commission they earn from sellers on their platform to take the thriving competition one notch-up in the space, revealing sources. Reportedly, Flipkart has promised zero commissions for products less than Rs. 300, whereas Amazon has announced to offer flat 2% commissions for products in that range.

According to the sources, Amazon has targeted categories including clothing, fashion, home, jewelry, and toys under the new slashed commission rates. They have included certain products in the range of Rs 1,000. Flipkart has also included some of the products in the price range of Rs. 500. The offer was launched as soon as the festive sale, inciting a new virtual price between the two; during this time, Meesho, backed by SoftBank, experienced a rise in volumes in the unbranded fashion category.

Redseer Consulting, a consulting firm, reports that Meesho grew its shares in fashion in the festive season sales for its affordable and value offerings. It is said that the first week of the sale in October, the fashion category has contributed almost 17% of overall Gross Merchandise Value (GMV). It is believed that Flipkart and Amazon have a 70% share in fashion, out of which vertical apparel platforms performed 30% of the sales. Among these, Meesho occupied about 39% of shares.

The success behind Meesho is the popularity and usage of social commerce as the direct sales platform, which performed well against the Flipkart and Amazon websites. The website derives about 75 percent of its business directly from customers' reach to its platform, while 25 percent comes from resellers.

The sellers conveyed that Meesho isn't charging any commission from them, and the website is giving enough margins to further pass on the price benefits to consumers. A sample product is sold across Flipkart, Amazon, and Meesho at different prices when Meesho remains the cheapest. The announcement of cutting commissions encourages price-sensitive shoppers to browse through Flipkart and Amazon websites.

In addition, the commissions differ from category to category, where Amazon and Flipkart usually charge anywhere from 12-35% from sellers for different items.

An anonymous seller said, "For a product selling a product for Rs. 249, it was easy to get Rs 200. However, the same product is sold for Rs. 400 on other websites. Sometimes, there could be a little delay in payments or reconciliations, but the zero commission model is a huge benefit for small sellers." Meesho heavily focused on the specific non-branded items that assured it more value for money product categories. 

Even experts believe that categories like apparel and homes are the first places customers land before getting completely comfortable with the online commerce platforms.

Sateesh Meena, the independent eCommerce analyst, said," Categories such as fashion, clothing, and toys bring new buyers on its platform. Once the customer gets the confidence in getting value from these categories, they tend to explore other types."

As a result, Flipkart has established a war room that monitors the activities of six-year-old Meesho as the website keeps rapidly expanding across the global eCommerce stage.

Vidit Aatrey, Founder of Meesho, said, "The company has a very strong relationship with the third party logistics firms which makes it ahead of its competitors. People can try anything to break the company's growth spree, but it shows how Meesho's growth story threatens people."

"To offer assured success and growth to small businesses, the company retains competitive advantages from its sellers. The company's decisions benefit the sellers and customers," said Amazon India spokesperson.