Amazon India Hikes Seller Commissions, To Impact D2C Startups

Hit by the ongoing macroeconomic headwinds, the India arm of ecommerce giant Amazon has hiked seller commissions across its multiple significant categories. The company has issued a revised seller commission policy and the new commission regime is set to come into effect on May 31, 2023.

Amazon has also restructured how it charges sellers commissions in some categories and reduced commissions in some subcategories. The restructured tiers might result in sellers paying more commission overall to the ecommerce platform.

The US-headquartered ecommerce giant has also increased commissions across some startup-relevant sectors, which might be another headache for India’s startup ecosystem as D2C startups continue to reel amid an ongoing funding winter.

According to the new regime, Amazon has hiked commissions in segments such as beauty, personal care appliances, smartwatches and baby products.

How It Will Impact Startups

The increase in commission in these categories might impact the likes of Mamaearth, Purplle, WOW Skin Science, mCaffeine, SUGAR Cosmetics, Bombay Shaving Company, boAt and Noise, among many other D2C startups.

For instance, under the previous regime, Amazon charged commission across two tiers in the makeup category – 3% for products under INR 500 and 6% for products over INR 500. The new commission implements a single-tier commission of 6%, regardless of the product’s listing price.

For companies selling products under INR 500, this means that they will have to effectively pay double the commission from May 31, 2023, to continue selling on Amazon. To be sure, the ecommerce platform is an important sales channel for many of India’s up-and-coming D2C startups.

The ecommerce giant has also increased shipping rates for cross-country shipments as the company continues to face pressure from Indian incumbents.

Amazon presently charges INR 15, 14 and 13 per kilogram for national shipments up to 99 kilograms, 100-499 kilograms and 500+ kilograms, respectively. Effective May 31, 2023, the ecommerce platform will charge INR 18, 17 and 16 for the respective weight categories, hiking shipping fees by as much as 20% for the lightest tier.

Hence, the D2C startups, who ship in the first weight category, are staring at a 20% hike in national shipping costs, over and above the category-based commission hikes.

Marketplaces & Their Whims

To recap, seller commissions are one of the most significant revenue streams for ecommerce marketplaces such as Amazon. Often, it becomes a bone of contention and a unique selling point. The likes of Meesho rose to prominence off the back of the promise of lower commissions than other ecommerce platforms.

Marketplaces have long dominated the Indian ecommerce funding landscape as well, with ecommerce marketplaces having raised $16.76 Bn between 2014 and April 2023, per Inc42 data, or 50.8% of the $32.94 Bn raised by all funded ecommerce startups during the same time.

However, the dominance of Flipkart and Amazon in India’s ecommerce landscape means that most sellers, including D2C startups, opt to sell there to gain access to a larger market and scale faster. This dependence has seen the two ecommerce giants arbitrarily hike or restructure seller commissions to improve their unit economics.

Amazon, in a bid to do the same, has fired thousands of employees across the world in multiple retrenchments starting November 2022, impacting 18,000 employees in the first go. The latest round of layoffs in January 2023 impacted another 9,000 employees.