Why Amazon and Flipkart are slashing seller fees
What's the story
Amazon and Flipkart are slashing or waiving commissions on a wide range of products. The move is aimed at expanding their footprint in India's smaller cities and towns, where online shopping is booming. The strategy is designed to attract more sellers and provide affordable products for consumers. Lowering commissions helps merchants cut down on operating costs, which allows them to offer competitive prices for buyers.
Strategy details
Fee cuts have been implemented twice since last year
The fee cuts have been implemented twice since last year for products priced under ₹1,000 across several categories.
This is because lower-priced products make up a large chunk of purchases in tier two and smaller markets.
The strategy helps platforms drive higher sales volumes.
Earlier this month, Flipkart even waived commissions entirely for sellers in the fashion category.
Market expansion
E-commerce's push into smaller cities and towns
The move by Amazon and Flipkart comes as e-commerce companies increasingly look beyond India's top metropolitan markets.
Industry experts say that cracking smaller cities requires a different strategy as consumer preferences, shopping behavior, and price sensitivities are different from metros.
Ankur Bisen, partner at The Knowledge Company, told TOI, "So far, e-commerce was largely a top 10-city play."
Impact on merchants
What does this mean for consumers and platforms?
Lower seller commissions cut down on operating costs for merchants, allowing them to offer products at more competitive prices.
The policy also incentivizes smaller and local businesses to join online marketplaces, thereby expanding product selection for consumers in regions where buying preferences vary across geographies.
For Amazon and Flipkart, strengthening their presence in these regions has become central to future growth.
Market trends
Changing dynamics of online shopping in non-metro cities
The shift in strategy is reflected in changing consumer behavior.
A joint report by Kantar and DB Corp cited by TOI found that just over one-fifth of consumers in non-metro cities shopped online in 2016. By 2025, that figure had risen to nearly one-third.
Datum Intelligence founder Satish Meena told TOI, "If the commission is not low or zero, sellers will not be able to get sales on these platforms."
Financial implications
Short-term hits for platforms, long-term gains
Industry analysts have said that the fee reductions could affect profitability in the short term but are expected to support long-term growth by increasing transaction volumes.
Ashish Dhir, senior director, consumer and retail at 1Lattice, said, "It is a balance between sales and profitability. In the short-term, Amazon and Flipkart's profitability will take a hit due to the commission waivers but in the long term, as sales grow, profitability should improve."