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Amazon restructures sellers’ commission to offset cash burn

Amazon has increased logistics fee structures, raised charges for promoting lightning deals and introduced an item listing charge beyond 100,000 items per seller.

Apr 25, 2019 by The Passage Team
Amazon restructures sellers’ commission to offset cash burn

Amazon India is all set to revise its seller commission on categories including watches, luggage, shoes, beauty products, mobile phones, home furnishing, sports items, fashion jewelry, handbags and musical instruments, among others, effective from May 23.

The changes range between 0.5% and 2% across categories. Amazon charges a commission of anywhere between 3% and 25%, Economic Times reported. The move is aimed at reducing the cash burn rate of the Seattle-based giant in India.

However, the online market place will keep incentivising high-growth categories.

Amazon has increased logistics fee structures, raised charges for promoting lightning deals and introduced a product listing charge for sellers who list products more than 100,000.

"Business is not constant, business structure changes, margins change and keeping inflation into account while taking seller feedback, we are making these changes," Gopal Pillai, vice-president, seller services at Amazon India told ET.

Sellers pay a fixed fee per order, referral fee, and separately incur shipping costs, monthly warehousing fee and pick and pack fee depending on the mode of fulfillment.

“Because there is no legal statute to control this, we cannot call this illegal. However this is exploitative nature of Amazon along with the continued discrimination within the marketplace. We need protection. We need a framework. We need a hearing,” All India Online Vendors Association tweeted in response to the development.

Last year, AIOVA had brought a case against Amazon, alleging it favours merchants that it partly owns, such as Cloudtail and Appario.

In March, Amazon's rival Flipkart had also increased the commission charges from the vendors working in the apparel category to boost its revenue.

Amazon has raised weight-handling fee for its 'Fulfillment by Amazon' and 'Easy Ship' business.

The company has, however, made some cost deductions in its Easy Ship business and pick and pack fee for standard-size items on its Fulfillment by Amazon offering, and also offered zero fulfillment fee for items over 20,000.

"We hope to build on this as our sellers progress on the journey of growing their business by selling to millions of customers across India," Pillai told ET.

Meanwhile, Amazon’s B2B online marketplace, launched in India in September 2017, has seen 200% YoY growth in sales.

“The Amazon B2B marketplace merges the experience and convenience of shopping on Amazon.in, our B2C (Business to Consumer) marketplace, with features required specifically by businesses including business only pricing, quantity discounts on bulk orders and business invoices to claim GSTIN credit and tax deductions,” Peter George, Director, Amazon Business – India, told BusinessLine.

The 2.4 lakh sellers on the B2B marketplace are part of Amazon India’s over 4.5 lakh sellers offering over 170 million products.

Bloomberg recently did a story on how Amazon has started pushing sellers to lower prices, shorten delivery times and compete harder for every sale.

The Passage Team

The Passage is committed to creating in-depth content over technology industry across Asia with a focus on emerging startups in the technology, healthcare, education, food, tech, travel & mobility segments.

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