Amazon decides to allow sellers to advertise first and pay advertising fees later

India: Amazon, an E-commerce giant, has decided to launch a new system in India which will allow sellers to advertise on Amazon’s portal without paying advance fee. However, the advertising fees will be deduced from the sales proceeds. Prior to the launch of new system in India, the company has already launched and tested the system in U.S., U.K., Germany & Japan. This decision is taken by the company after the encounter of enormous instances wherein the sellers were not able to advertise due to shortage of funds in their account, payment failures, updating of advertising balance which takes around two-three working days and stopped campaigns due to ads running out of balance, which in turn is effecting the customers and the company.

Amazon is organizing various events across the country to promote sellers to target the upcoming festive season for increasing sales and to invite top performing sellers to get connected with them and avail the opportunities coming this festive season so that they are well prepared to grab it.

According to TechSci Research, Amazon’s decision is seen as a part of its sales & promotional strategy, however it seems favorable for Indian sellers as they will be able to focus on their core operations, ignoring the advertising challenges. As per Amazon’s current system of payment for advertising, sellers were required to recharge their accounts before availing the services, which might affect the cash flows in various cases. With increasing competition in the e-commerce industry, players are implementing innovative ways to increase sales on their platform as the upcoming festive season has always shown a hike in consumer spending. E-commerce companies are also offering high margins to its sellers as an incentive with an intention that it will be passed on to the customers. Even the companies are also working on synchronizing their back-end and logistics service providers to perform faster deliveries to their customers.

According to a recently published report by TechSci Research, “India E-commerce Market Forecast & Opportunities, 2020”, the country’s e-commerce market is projected to grow at a CAGR of more than 36% during 2015-2020. E-services segment, which comprises online travel, online payments, online classifieds, etc., is expected to continue its domination through 2020. However, the e-tail segment that includes electronics, apparels & accessories, health and personal care, etc., is expected to witness significantly higher market growth compared to e-services segment over the next five years. During 2015-20, the western region is expected to remain the largest e-commerce market in the country. Major players operating in India’s e-tail market include Flipkart, Snapdeal and Amazon.