Flipkart and Amazon Engage in Fee War as Competition Intensifies

MUMBAI: Amazon and Flipkart are eliminating commissions for sellers on their platforms as online shopping gains traction in smaller cities and towns. This marks the second time since last year that both companies have waived fees for a variety of products priced under Rs 1,000, a segment that drives significant sales in these regions. Earlier this month, Flipkart also removed commissions for its fashion category.

The shift in strategy reflects a growing focus on non-metro markets, which have traditionally lagged behind major cities in e-commerce adoption. Ankur Bisen, partner at The Knowledge Company, noted that as e-commerce expands, companies must adapt their strategies to meet the distinct buying behaviors and price sensitivities of consumers in smaller towns.

Lower fees reduce operational costs for sellers, allowing them to offer more competitive prices to consumers. This approach also encourages local sellers to join the platforms, enhancing product variety in a market influenced by regional preferences. Both Amazon and Flipkart are increasingly attracting new users from non-metro areas, making success in these markets essential for their growth.

Recent data indicates a significant shift in online shopping habits: in 2016, just over 20% of consumers in non-metro areas engaged in online shopping, a figure projected to rise to nearly 33% by 2025, according to a report by Kantar and DB Corp. Satish Meena, founder of Datum Intelligence, emphasized that without low or zero commissions, sellers would struggle to achieve sales on these platforms, particularly for affordable products.

For Amazon, over 70% of new Prime sign-ups this year originated from tier two and three cities. Ashish Dhir, senior director at 1Lattice, acknowledged that while the commission waivers may impact short-term profitability, increased sales in the long run could enhance overall profitability. Flipkart’s vice president for fashion, Kapil Thirani, highlighted the company’s commitment to onboarding sellers from smaller towns, such as Azamgarh and Saharanpur, to boost online sales.

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