Flipkart to Say No to Commission and Yes to Paid Ads

Flipkart is firming plans to phase out the commissions it charges merchants for selling on its online marketplace, hoping to enlist more of them, according to four people aware of the matter. It will instead urge sellers to advertise on its platform, for a fee.“The focus will be to push sellers to advertise on the platform and not compete on commissions,“ a top Flipkart executive directly aware of the plan told ET. “The selling commission will become zero now,“ a Flipkart executive in its seller management team said.

Flipkart charges a marketplace fee -a percentage of the selling price of a product inclusive of a selling commission, a closing fee and shipping charges, which it will continue to levy. The selling commission, however, can be as low as 4% for a coat to as much as 25% for a home decor set. By giving this up to instead recruit more merchants, Flipkart will be hoping the sellers will have to rely on its advertising platform to be visible to buyers.

While all leading online marketplaces, including Snapdeal and Amazon, are rushing to add merchants, Flipkart is also focused on growing its new advertising unit, a high-margin, fee-based business that it expects could shore up its bottomline. Cofounder and CEO Sachin Bansal directly oversees this unit. The firm aims to have 1-lakh merchants by the end of the year, up from 30,000 now.

Flipkart did not answer ET’s email query if it planned to revise its marketplace commissions to zero. Instead, a company spokesper son replied: “Our seller policies are created as per industry standards -ensuring sellers a seamless experience. Commission for sellers vary across categories, and this is determined based on channel margins and other category specific costs.The commission structure has been designed to benefit every seller whilst offering them the best online selling experience.“

A few merchants responded favourably to Flipkart’s zero-com missions plan. “When sellers are pumping in more money to bring visibility to their products with ads, Flipkart might become more sustainable and it’s good in the long run for sellers like us,“ said Mohamed Arif, a merchant who sells more than 15,000 Zwart branded bags on Flipkart every month.

Flipkart, founded in 2007, record . 2,937.7 crore in revenue in 2013ed ` 14 on selling goods worth about $1 billion, and a loss of `. 916 crore, according to regulatory filings and statements by the company. In June, Flipkart said it was aiming to sell a total $10 billion worth of goods on its marketplace.

The company started its advertising business earlier this year as part of its diversification into highmargin businesses that could accelerate it to profitability ahead of a potential public listing.

Source: The Economic Times



Neeraj; an entrepreneur & a visionary in the field of Railway, Defense & Automobiles, is a graduate in commerce and a Harvard Business School Alumni. He’s an expert in govt. liasoning & contracting and has an exceptional network & connections at both local as well as global level. He’s an expert in Market Strategy & Planning and has served number of overseas companies as an advisor/consultant. He takes a profound interest in upcoming startups & is very receptive towards ground-breaking ideas & innovations. He likes to brainstorm those ideas and if the values & philosophies matches; he is even ready to invest his resources, serve as a mentor or act as an incubator to futuristic businesses.

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