Power of nil: Why zero commissions are valuable to Cred, Shopee

Power of nil: Why zero commissions are valuable to Cred, Shopee

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Aditi Shrivastava

104 reads
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Aditi Shrivastava

104 reads

Young platforms are dropping or slashing various fees, a strategy they have picked up from Alibaba-owned Taobao to build a large seller base and grow quickly. But is the Indian market deep enough for these players to create an alternative moneymaking business like ads on top?

February 01, 2022

8 Min Read

Newer commerce platforms such as Cred Store, Meesho, Shopee India and Shopsy are bending over backwards to onboard sellers as they chase fast growth. Their main pitch, drawn from the playbook of Alibaba’s Taobao marketplace, is that they will make it cost-effective to list products online and won’t charge any commission on orders.

The zero-commission policy is enticing for sellers who have remonstrated for years about the high take rates demanded by incumbents Flipkart and Amazon. 

“It’s a classic way to grow the business. In India, Amazon and Flipkart made similar or bigger concessions in their early days (2012-14). The economics changed as they drove more and more transactions,” said the founder of a direct-to-consumer brand, which has been selling online for the past seven years. 

The approach is also expected to help the younger players scale up rapidly as more and more people shop online. The competition for market share is so intense that Amazon and Flipkart are trying to improve their relationship with sellers.

Amazon started charging a flat 2% commission on products priced below Rs 300 in select categories last October and later expanded the scheme to clothing, home, fashion jewellery and toys costing up to Rs 1,000. Earlier, the commissions ranged from 3% to 10%.

Flipkart revised its policy roughly around the same time, ending commissions on certain items sold for less than Rs 500. Its reseller platform, Shopsy, already had this concession across the board.

“If one platform goes with zero commission, others inevitably follow suit to compete,” said the founder of another D2C brand.

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