From slashing seller commissions and incentives for meeting targets to loyalty bonuses, online marketplace giants Flipkart and Amazon are rolling out the red carpet to pacify irked independent vendors, some of whom have seen an almost 50 per cent drop in sales on the e-commerce platforms.
Last week, Flipkart in an email -- accessed by Business Standard -- to sellers said it was slashing commissions in the range of one per cent and six per cent. Amazon, according to sources, is also planning to follow suit.
With the rise of private labels of both Flipkart and Amazon in the last year and a half, many sellers have since exited the platform. To add insult to injury, vendor firms of these online majors are getting a lion's share of the online business.
While Amazon runs Cloudtail India and Appario Retail, possibly the largest vendors on its platform, Flipkart has other vendors, including RetailNet and Omnitech Retail.
"We continue to see tremendous growth in our seller ecosystem, including Tier-II and III states," said a Flipkart spokesperson. Amazon did not comment till the time of going to press.
The Kalyan Krishnamurthy-run and managed Flipkart is bullish on the growth of its six private labels, comprising 160-plus categories, and is planning to concentrate more on the sales of its private labels in 2019.
"Flipkart has started doing what Amazon is doing in the US. This happens in apparel. Let's say, I was manufacturing a certain bedsheet with a particular thread count and colour, which was popular. Flipkart and Amazon study what is popular and then get their own private label to sell it," said Shrutam Desai, founder, OnlyMobile, who was once a seller on Flipkart and has since delisted. Private labels sell the same type of product, albeit at a much cheaper price, he alleges.
"There are times when they will tweak the search results as well, so that their own brands show up higher than the external sellers," said Desai. He now plans to list on Google Shopping, which, he believes, is a more neutral platform.
This, the All India Online Vendors Association (AIOVA), believes is a loophole in the marketplace model. "Marketplaces must remain neutral. Unfair treatment and discrimination are rampant in the top marketplaces today. While a few countries in the European Union are intervening to check this practice, the Competition Commission of India is silent on this and has refused to intervene, while our government is wilfully neglecting these issues," said an AIOVA spokesperson.
On average, e-commerce portals charge between five per cent and 20 per cent commission per product sold on the platform. Flipkart has decided to bring it down to almost 14 per cent for the next few months. Executives from both Amazon and Flipkart are planning to organise more seller meets to reassure sellers they would be getting a major chunk of sales and not the vendor subsidiaries they own.
"This move is supposed to build confidence among sellers. While private labels and company-owned subsidiary vendors might help them bolster profits, they need sellers to show they are truly a marketplace," said a source close to Flipkart.