Amazon, Flipkart raise seller fees and penalties ahead of India festive season

Amazon and Flipkart have revised fees and penalties for sellers on their platforms ahead of India’s festive shopping season, prompting concerns among small businesses over rising costs and the impact on already thin margins.

Amazon India, in a notice to sellers, said it had from August 17 changed the way it calculates order cancellation fees for sellers using its Easy Ship and Self Ship services.

The fee is now calculated as a percentage of the order value, rather than being linked to category-specific referral charges.

Sellers are charged 10% for orders below ₹10,000, 8% for orders between ₹10,001 and ₹50,000, 5% for orders between 50,001 and ₹100,000 and 2% for orders above ₹100,000, according to the notice. Goods and services tax is charged additionally.

The fee applies when a seller cancels an order for reasons other than a buyer request, as well as when an order is automatically cancelled because the seller fails to ship and confirm it within 24 hours of the estimated shipping date.

Amazon will also raise closing fees from September 7 for sellers using its Fulfilment Center, Easy Ship and Seller Flex channels.

The fee will increase by ₹1 for products priced up to ₹500 and by ₹3 for products priced above ₹500, the company said, citing higher fuel and logistics costs.

"We expect orders placed by customers to be fulfilled reliably by sellers on our marketplace. To encourage timely and dependable fulfilment, we have revised cancellation fees for Easy Ship and Self-Ship seller," an Amazon spokesperson said.

“This fee is conditional and only applies in the rare event of a seller-initiated cancellation, which accounts for less than 1 per cent of orders on Amazon.in,” the spokesperson added.

The company said it had measures to protect sellers when cancellations resulted from circumstances beyond their control.

Some sellers responding to Amazon's notices said cancellations could be caused by factors outside their control, including failed pickups by delivery personnel.

Flipkart, India's other major e-commerce marketplace, has introduced a three-tier penalty structure for fulfilment lapses effective August 23, according to information shared with sellers.

A shipment not made ready for pickup by the committed dispatch date attracts a penalty of ₹30 per shipment.

A seller cancellation, or an automatic cancellation after three missed dispatch deadlines, carries a ₹60 penalty. If a shipment is delayed and subsequently cancelled, the penalty rises to ₹90.

The earlier system could result in a seller's account being locked following a dispatch deadline breach, a measure that sellers said could have a greater impact on their businesses.

New Flipkart sellers, for their first three months on the platform, are exempt from the new penalty policy, according to the information.

The revised system was intended to encourage better fulfilment practices and improve customer experience, reported PTI, citing people familiar with the development.

Sellers maintaining good compliance could also receive benefits such as faster payment settlements and advertising credits, they said.

Vinod Kumar, a trustee of the Forum for Internet Resellers, Sellers and Traders (FIRST INDIA), said higher cancellation and dispatch penalties were a concern for small and medium-sized businesses ahead of the festive season.

"Not every cancellation or delay is caused by the seller," Kumar said, pointing to logistics failures, platform issues, demand spikes and customer-related factors.

"Sellers should not become the default financial shock absorbers of the e-commerce ecosystem," he said, calling for transparent attribution of responsibility and proportionate penalties.