CAIT Calls Amazon India’s Referral Fee Cut an ‘Eyewash’

CAIT Calls Amazon India’s Referral Fee Cut an ‘Eyewash’

  • 25.03.2025 08:43
  • medianama.com
  • Keywords: Amazon, Flipkart

CAIT criticized Amazon India's referral fee cut as a superficial move to appear pro-seller while maintaining exploitative practices. Despite reducing fees for certain categories and lowering shipping costs, concerns persist over algorithmic bias, unfair policies, and market manipulation affecting small sellers.

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Amazon

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The article discusses Amazon India's decision to cut referral fees, which is criticized by CAIT as a deceptive move to maintain dominance rather than empower small sellers. Amazon's actions include reducing referral fees for certain product categories and lowering shipping rates, but these are seen as insufficient to address deeper issues like algorithmic bias, unfair seller policies, and monopolistic practices.

Flipkart

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Analyst rating: N/A

Flipkart has also faced criticism similar to Amazon. The article mentions that Flipkart reduced commissions for certain categories but only offered this to big merchants, termed 'alpha sellers,' which is seen as preferential treatment and not beneficial for small sellers.

Context

Analysis: Amazon India’s Referral Fee Cut and Market Implications

Key Changes by Amazon India

  • Referral fee elimination: Effective April 7, 2025, for products below Rs 300 in categories like apparel, jewelry, grocery, etc.
  • Shipping rate reduction: From Rs 77 to Rs 65 for external fulfillment channels (Easy Ship and Seller Flex).
  • Weight handling fee cut: Reduced by Rs 17 for items under one kg.
  • Example fee impact: Earrings priced at Rs 299 saw fees drop from Rs 133 to Rs 70 post changes.

Concerns Raised by CAIT

  • Criticism of fee reduction: Described as a "calculated tactic" to maintain dominance, not empower small sellers.
  • Hidden costs: Sellers still burdened with closing fees, shipping costs, and reliance on Amazon’s logistics (FBA).
  • Algorithmic bias: Independent sellers forced to rely on expensive advertising for visibility.
  • Arbitrary suspensions: Lack of fair recourse for seller account bans or suspensions.
  • Monopolistic practices: Amazon uses sales data to launch private-label products at lower prices, undercutting third-party sellers.

Competitive Dynamics

  • Flipkart’s move: Reduced commissions for certain categories, allegedly favoring big merchants (alpha sellers).
  • Blinkit’s strategy: Hiked commission fees in some categories.
  • Market experiment: E-commerce companies adjusting seller fee structures to attract or retain vendors.

Regulatory and Strategic Considerations

  • Antitrust concerns: CAIT and other associations have previously accused Amazon of predatory pricing and preferential treatment.
  • Regulatory scrutiny: India’s Competition Commission of India (CCI) and Commerce Minister have raised questions about Amazon’s pricing strategies.
  • Potential impact: Fee changes may not offset costs if other fees like warehousing or advertising increase.

Long-Term Effects and Market Implications

  • Seller profitability: Unclear if fee reductions will significantly improve margins for small businesses.
  • Market dominance: Amazon’s moves could strengthen its position in India’s e-commerce sector.
  • Consumer impact: Potential for lower prices due to increased competition, but risks of reduced product variety if smaller sellers exit the platform.
  • Regulatory response: Ongoing antitrust investigations and scrutiny may influence future business strategies.

Strategic Considerations

  • Public perception: Amazon’s fee cuts aim to project a pro-seller image, but critics argue deeper structural issues remain unresolved.
  • Data leverage: Amazon’s access to seller data could continue to give it an unfair competitive advantage.
  • Global trends: Similar concerns about platform dominance and seller treatment are emerging globally, with regulatory bodies increasing scrutiny.

Conclusion

Amazon India’s referral fee cut is a strategic move to enhance its market position, but its long-term impact on sellers and competition remains uncertain. Regulatory oversight and industry dynamics will play crucial roles in determining the sustainability of these changes.