Some sellers say that in its obsession with pleasing customers, Amazon India is squeezing sellers hard
Bengaluru/New Delhi:Amazon.com Inc. is famed for its customer obsession: driving prices lower, offering the widest range of products and delivering them faster to its customers. Since launching in India in June 2013, Amazon has applied the same strategy in the country, adding millions of customers and quickly becoming the biggest threat to local rivals Flipkart and Snapdeal.
In the process, the world’s largest online retailer has antagonized at least some third-party sellers or independent merchants that hawk their products through the Amazon.in website. Some of them say that in its obsession with pleasing customers, the company is squeezing sellers hard by putting in place stringent policies on product returns, closing down seller accounts and withholding payments for weeks.
According to six sellers, these issues are causing conflict with Amazon and they’re all considering leaving the platform. The sellers declined to be named.
“The problem is that Amazon controls everything: how much product you have to commit, when do you have to send it to them, when do you get paid and how much cash of yours will they reserve. On several occasions, even though a product isn’t faulty, they will deduct money from the sellers’ account without taking the permission of the sellers," one of the sellers cited above said.
The issues faced by these sellers highlight a crucial problem for Amazon: delivering the superior customer service it is known for without alienating sellers. This challenge is particularly tough to tackle in India since Amazon is supposed to operate as a marketplace rather than an online retailer as in the US, where roughly 60% of its business come from selling its own products.
“It’s not surprising that Amazon is facing such issues with sellers; they’ve been scaling up so fast that they would have to fire-fight most of the times, especially given their customer focus," said Harminder Sahni, managing director at consultancy Wazir Advisors. “But, over time, they will have to strike a balance because the only way a marketplace can function well is if both sellers and buyers are happy. Amazon has the funds and the proven ability to do this over time."
Amazon India delivers about 90% of the products sold on its site through its logistics services, Fulfilment by Amazon (FBA) and Amazon Easy Ship. The rest are delivered by external logistics providers.
Under the FBA service, Amazon requires sellers to park their products at the company’s warehouses before any order is placed. Then, as and when the products are sold, Amazon holds back a part of their sales for at least one week as protection against possible product returns. If there are product returns, Amazon decides what to do with the products without consulting sellers, the six sellers cited above said.
“When there’s a dispute between the customers and sellers, invariably, Amazon is biased towards the customer. In some cases, they will deduct 50% of the money when there’s a product return and sometimes the entire amount. In these cases, it can take more than a month to recover your money even though there was no fault of the seller. All this blocks the cash flow and makes it very challenging to do business with Amazon," one of the sellers cited above said.
For sellers that use external logistics services, Amazon imposes a fine and deducts the value of the order when there’s a dispute between the customer and the seller, two sellers said. This amount is deducted without taking the permission of the sellers, who then have to “open a claim" on Amazon’s seller software to try and get these funds back, the two said.
“They sometimes block our accounts as precaution. It takes weeks to get them to re-open it. Till then, your funds are with them,“ one of the two sellers cited above said.
Amazon is not new to dealing with sellers’ allegations of high-handedness.
In the US, several online sellers filed a class action lawsuit against Amazon in 2013, alleging the company was holding part of the sellers’ money for more than three months and suspending seller accounts for weeks in succession.
It is unclear if the claims made by the six sellers referred to above are also backed by other Amazon sellers.
Amazon India disagrees with the allegations.
“We have clear and transparent policies for sellers," said Amit Deshpande, head of seller services at Amazon India. “In case of FBA, there are four categories of returns: wrong product; if the product didn’t match the site description; change of mind by the customer; if Amazon damaged the product. If Amazon has damaged the product, we pay a fair market price to the seller and also return the product. We also always give sellers a chance to fix their problems. But when (underperformance) happens on a regular basis, it becomes an issue of protecting the customer experience and we have to suspend their accounts."
In cases when sellers use external logistics providers, Amazon gives the seller seven days to respond to customer complaints. The company only charges the seller for product returns after receiving permission from the sellers, Deshpande said.
“We’re operating in a market where selling online is new. We have to recognize that and help sellers. More than 80% of our sellers who sign up with FBA see an increase in their monthly sales. Eighty per cent of our sellers get at least one order in every month. (But) some sellers do find it challenging, not only to sell on Amazon, but also other sites. There’s a level of rigour required on fulfilment," Deshpande said.
To be sure, defection of a few sellers won’t directly hurt Amazon India, which has more than 25,000 sellers on its platform. Amazon has also set up a seller, Cloudtail India Pvt. Ltd, on its site in a joint venture with N.R. Narayana Murthy’s Catamaran Ventures. Cloudtail is fast scaling up and has added thousands of products across categories such as electronics and apparel.
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