Amazon India
Employees of Amazon India are seen behind a glass bearing the company's logo inside its office in Bengaluru in this August 2015 file photo. REUTERS/Abhishek N. Chinnappa

Online marketplace Amazon India has suspended its exclusive, invite-only Platinum Seller Program (PSP) temporarily, according to a report in financial daily Economic Times. The portal has not renewed the contracts of the top sellers until there is further clarity on Goods and Service Tax (GST) regulations for sellers across categories, four sources briefed on the matter, told ET.

The ET report noted that as Amazon India is not renewing the one-year contracts immediately, Cloudtail India, a top seller on the portal, which is a joint venture between Amazon.com and Infosys co-founder Narayana Murthy's Catamaran Ventures, has emerged as the sole Platinum seller.

A platinum seller told ET that Amazon had conveyed to them that any contract renewals are on hold due to lack of clarity on GST, which is due to come into effect on July 1 this year. "There will be a single tax under GST, the benefits of which will be passed on to the merchant and to the buyer in terms of pricing. Hence, Amazon is trying to understand whether there is a need for differential standards. Even the sellers are confused and do not know what margins to quote as the impact of GST is still not clear," the platinum seller was reported as saying.

Amazon has over 2 lakh sellers on its online marketplace.

Volume decline likely

The report noted that the impact of the contracts not being renewed could be as much as 25-30 percent fall in volume terms in a month for the seller. PSP is a growth-oriented programme, where sellers are asked to meet certain metrics and sales targets. Amazon India picks sellers to become a part of PSP in strategic categories like smartphones, fashion and large electronics.

This programme gained importance last year after the Department of Industrial Policy and Promotion (DIPP) said sales by a single seller on e-commerce marketplaces will be capped at 25 percent of the overall sales by the marketplace, the report added. Till then, Cloudtail accounted for a large majority of Amazon India's sales. But over the next few months, new sellers emerged in high gross sales categories like smartphones, helping Amazon India bring down the share of Cloudtail on the platform.

The ET report stated that the delay in renewal of PSP has impacted the business of these sellers as they are exempted from logistics costs and required to pay considerably lower fixed fee to the marketplace per sale, specific to the category they operate in.

High overheads

"For a seller in the television and appliance category for example, the overhead on logistics and service tax comes up to Rs 3,000 for a TV set priced at Rs 25,000. The benefit of being a PSP member is that the marketplace absorbs the overhead to provide prices competitive to offline stores. By bringing down the margins, the benefits are passed on to the customer," a seller told ET on condition of anonymity.

He added that the criteria for being a part of PSP is based on the inventory in topselling categories, history of selling, customer experience and volume, apart from the condition that the seller will never run out of inventory at a given point of time. Conversations on seller discussion platforms reviewed by ET indicated that the 'by-invite' PSP involves a contract signed by the seller to comply with the conditions set down by marketplace.

"The details of our engagement with our sellers are business confidential and we do not discuss them externally," said an Amazon India spokesperson in response to queries sent by the newspaper.

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