Amazon Deploys a Smart Move, Cuts Seller Fee to Attract More Shoppers

Amazon has applied a smart move to attract more shoppers on to its platform. The e-commerce giant has been cutting a number of seller fees, which should result in lower product prices, so shopping there might be less expensive. Because the firm is eliminating referral fees and commissions paid to sellers for products in a variety of categories priced under INR 300, shoppers with lower budgets stand to gain the most. For every product sold, sellers on e-commerce sites like Amazon and Flipkart are required to pay a commission to the platforms.

Main Focus is on Middle Class

According to Amit Nanda, director of selling partner services at Amazon India, a significant portion of households' consumption baskets are made up of goods priced around INR 300. Some price reductions can allow the middle class, which has been worst hit by high inflation, to spend a little more. Speaking to a well-known media outlet, Nanda said that Amazon's trial with lowering seller fees in September of last year was a great success. The company recently took it to the next level. More companies will be able to join Amazon, increasing sales for the present group of sellers who may decide to share part of the gains with their customers.

Slashing the Shipping Fees

In addition to lowering weight handling fees somewhat, Amazon has also reduced shipping costs (which apply to all products) for all sellers, reducing them down from INR 77 to INR 65 (beginning rate). The company anticipates that the modifications, which take effect on April 7, will strengthen the network of sellers on the site. According to analysts, rapid commerce, which has already swept a sizable portion of the food sector from e-commerce and is now spreading to other categories, is a contributing factor in the move. According to market experts, variety and cost are now the only ways Amazon can compete with rapid commerce. It is attempting to maintain and expand its seller base, for whom the fast commerce channel is increasingly crucial, by altering rates and providing more advantages to smaller sellers. Amazon has introduced its own fast commerce service, but it is now only available in some areas of Bengaluru. Additionally, the company has been slow to enter the fast delivery industry, which is dominated by Zepto, Swiggy, Instamart, and Blinkit from Zomato. According to Amazon, this is the biggest seller fee cut ever made in India.

Rapid Commerce Conflict

The rapid commerce industry has evolved into a high-cash-burn sector, with companies allocating billions towards expansion and client acquisition. Industry estimates indicate that the aggregate monthly cash burn of rapid commerce entities, including new entrants, ranges between INR 1,300 and 1,500 crore—more than double in recent months.

Despite nearing operational breakeven in Q2 FY25, Blinkit’s losses escalated in Q3 FY25, with operating losses rising to INR 103 crore from INR 8 crore in the preceding quarter. Swiggy reported a net loss of INR 799 crore, while Instamart had an adjusted EBITDA loss of INR 578 crore in Q3, compared to INR 358 crore in Q2. Zomato's ability to continue investing in Blinkit stems from its financial stability. In November 2024, Zomato secured INR 8,500 crore in a qualified institutional placement (QIP) to enhance its balance sheet and finance its rapid commerce operations. As of December 31, 2024, Zomato possessed cash reserves amounting to INR 19,235 crore, providing adequate liquidity to support Blinkit's expansion.