The two e-commerce giants Amazon and Flipkart, are battling at a breakneck pace when it comes to offering take rates.
According to an analysis done by Jefferies, an American brokerage firm, for low-value items (which cost less than Rs 2,000), the difference in effective take rates amid both the e-commerce behemoths is less than Rs 50. And, when it comes to high-value items (which cost over Rs 10,000), it is less than 1% of the order value.
‘Take rate’ refers to the fees and commissions that the e-commerce marketplaces such as Amazon and the Walmart-owned Flipkart collect from online retailers for helping them generate sales.
Jefferies’s research report highlights that they have found Flipkart’s take rate to be lower in some major categories compared to that of the US-based Amazon in India. However, that being said, the homegrown e-commerce giant does have a relatively ‘complex’ commission structure wherein most of their categories have different take rates based on pricing tabs.
On the other hand, despite having a higher take rate than Flipkart, Amazon takes a more uniform approach to their commission structure for most of their categories, which is way simpler to understand.
The report further added that even though Flipkart does charge lower commission rates, the 2% collection fee on the order value makes up for it. For Amazon, if an online retailer wants his goods to be delivered via FBA services (Fulfilment by Amazon) and has to stock the products for a longer-than-anticipated period, the storage chargers can severely impact their profitability.
Both Amazon and Flipkart have their own pricing structure split broadly into commission, shipping, service/collection, and other fixed charges involved.
Here, a commission rate or referral fee is charged to the online seller for letting them use the marketplace. And, the fees involved in this domain varies depending upon product categories and their pricing.
For instance, electronics generally have a low take rate of 3-5%, whereas eyewear has at least 10-16% commission fees attached to it.
As for fulfilment, as the name suggests, it is storing, packaging, and delivering the goods to the consumers’ doorsteps. Flipkart requires its retailers to mandatorily provide goods through their own logistics partner know as eKart, which it acquired back in 2015.
Amazon provides its sellers with three options for delivery. They are Self-Ship (sellers are responsible for the successful delivery of the goods ordered), Easy Ship (Amazon’s own logistics partner), and FBA, wherein Amazon offers end-to-end inventory and shipping management.
Lastly, the report highlighted that among all major categories, consumer electronics is the most important from a gross merchandise value aka GMV perspective, as it contributed a whopping 40% to the entire e-commerce industry in the FY20.
Thus, smartphone devices attract only 7% take rates which is one of the lowest among all other product categories however, the unit value of the mobile phones is very much crucial to the platforms. Against this, FMCG or basic staples’ or low-value categories attract a 15-30% take rate as the costs involved in storing them and shipping them are higher as well.
All in all, it is well understood that Amazon and Flipkart both are vying for a bigger piece of the Indian online retail pie and thus offering near similar take rates.
Prior to this report’s surfacing, quite recently, it was found out that Amazon was employing backhanded strategies to favour specific sellers in which they had an indirect stake. And taking a cue from their mistake, soon after, Flipkart went on to onboard more sellers on their platform to reduce monopoly and even the playing field for their marketplace. It now remains to be seen what the future holds for both the giants in India’s e-commerce space. We will keep you updated on all future developments. Until then, stay tuned.