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Amazon hikes commissions charged on electronics items

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05 November 2016

Amazon India has increased its commission charges from sellers in consumer electronics, including smartphones, in order to offset losses that dragged down its international earnings in the September quarter.

However, for upcoming and high-value categories such as furniture and large appliances, which local rival Flipkart has been able to monopolise, Amazon has cut commissions to drive down the cost of such products on its platform.

The company claims it is the only marketplace that continues to offer free delivery of goods priced above Rs20,000.

"We have reduced fees and shipping rates on some popular categories, while increasing fees on certain others. This fee revision is part of our periodic process that we undertake to encourage seller performance and growth so as to serve customers better," said an Amazon spokesperson.

Amazon had slashed margins across the board in June to bypass India's Foreign Direct Investment norms for ecommerce marketplaces that disallow players to offer discounts. At the same time, Flipkart had increased commissions charges in some of its major categories on the platform, while also revising its return policy.

In the September quarter, Amazon's losses from international businesses shot up to $541 million from $208 million in the corresponding quarter last year. This was largely due to its investments in India. Since mid-2014, Amazon has pledged to invest $5 billion into the country, with the aim of overtaking Flipkart and becoming the country's largest ecommerce marketplace.

"By far the biggest individual thing is investment in India that we continue to make and are very excited about," Brian T Olsavsky, chief financial officer at Amazon, said last month.

The bulk of those investments have gone into setting up warehouses and buying Bollywood rights for its upcoming Prime video streaming service. A large amount has been pumped in to undercut the cost of products sold on its platform. While the company has managed to achieve significant scale in the three years it has been in India, Flipkart has turned out to be a formidable opponent.

Flipkart, which began rationalising its costs late last year in order to move towards profitability, was able to edge out Amazon in the recent festive sales with a greater focus on customer experience. With products such as no-cost EMI and other attractive options, the company sold 15.5 million units during its five-day-long Big Billion sale, higher than what Amazon was able to bag.

The company has so far raised $3.15 billion in venture capital funding, which is among the highest globally, and is utilising it to compete in India's fast growing e-commerce space. The firm is reportedly in talks to raise another $1 billion from Amazon's US rival WalMart, which is eyeing a strategic investment in India.





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