MUMBAI: As online shopping increasingly becomes the norm in smaller cities and towns, Amazon and Flipkart are mounting a fee war-they are doing away with commissions or fees charged to sellers for transacting on the platforms. The companies have done it twice since last year for a wide range of products across categories priced within Rs 1,000-lower price points tend to drive a large part of the sales in these regions, pushing up overall volumes for firms.Earlier this month, Flipkart also removed commission altogether for the fashion category. Sellers selling on Amazon and Flipkart typically pay a fee to the companies for every product sold through their websites.So far, e-commerce was largely a top 10-city play. As it spreads its wings, firms will have to strategise differently because the way things are bought, shopped as well as the price points that work in smaller cities are distinct from metros, said Ankur Bisen, partner at The Knowledge Company.
Reducing fees translates into lower cost of business for sellers and they pass on that benefit to consumers through lower pricing. Besides, the move also incentivises smaller, often local sellers to come on board, widening selection for consumers in a market where regional nuances shape buying habits. For Amazon and Flipkart which have been getting a larger share of new users from non-metros, winning in smaller cities is key to building on growth.The numbers speak for themselves: in 2016, just over 1/5th of consumers residing in the non-metros shopped online. By 2025, this share has grown to nearly 1/3rd, showed a joint report by Kantar and DB Corp published on Thursday.“If the commission is not low or zero, sellers will not be able to get sales on these platforms. And to capture consumers looking at affordable products, items at low prices are needed,” said Satish Meena, founder at Datum Intelligence.For Amazon, for instance, more than 70% of new Prime sign-ups this year came from tier two and three cities. “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,” said Ashish Dhir, senior director, consumer and retail at 1Lattice.“The kind of places we are going to today are very different from the places we used to go to. We are onboarding sellers from places like Azamgarh, Saharanpur, Bhilwara. We are focusing a lot on ensuring that sellers from tier two cities start selling online,” Kapil Thirani, vice president at Flipkart Fashion told TOI.