Why E-commerce portals like Amazon and Flipkart are not profitable for most sellers in India?

E-commerce giants like Amazon and Flipkart have transformed the retail landscape in India, providing unparalleled reach to sellers. However, many sellers find these platforms challenging and unprofitable due to several factors.

Fake Orders and COD Rejections ??

One significant issue is the prevalence of fake orders and cash on delivery (COD) rejections. Sellers often face the burden of shipping products only to have them returned unpaid, leading to wasted resources and increased costs. For instance, COD orders are frequently rejected upon delivery, creating a financial strain on sellers who must cover shipping both ways without compensation (India Today).

Customer Favoritism and Unjustified Returns ?

Customer-centric policies on these platforms can be a double-edged sword. While they enhance customer satisfaction, they often place sellers at a disadvantage. Unjustified returns are a common problem, where customers misuse return policies, leading to significant losses for sellers. These returns are sometimes encouraged by the platforms' lenient policies, which can be abused (Nimbuspost) (India Today).

High Commission Rates ??

The high commission rates charged by Amazon and Flipkart eat into the profit margins of sellers. Depending on the product category, these rates can be exorbitant, making it difficult for small and medium-sized enterprises (SMEs) to sustain profitability. Sellers are often left with thin margins after accounting for these commissions (Forbes India) (Ecommerce Guru)

Higher Shipping Costs and Return Pickup Charges ??

Shipping costs, including return pickups, add another layer of financial burden. The cost of shipping products, especially to remote areas, can be high. Additionally, the platforms charge sellers for return pickups, further squeezing their profit margins. This can be particularly harsh for low-value items, where shipping costs can exceed the product's value (Nimbuspost) (YourStory).

Rejection of SAFE-T Claims ??

Amazon's SAFE-T claims, designed to protect sellers from unfair return claims, often get rejected, leaving sellers to bear the brunt of fraudulent claims. This lack of adequate seller protection discourages many from fully engaging with the platform, knowing that they might not get reimbursed for legitimate disputes (Ecommerce Guru) (India Today).

Competition and Price Wars ??

The intense competition on these platforms forces sellers to participate in frequent discount wars, further eroding their margins. Larger players with deeper pockets can afford to slash prices and offer heavy discounts during festive seasons and flagship sales, making it hard for smaller sellers to compete without incurring losses (YourStory).

?? While platforms like Amazon and Flipkart offer immense reach and potential sales, the challenges faced by sellers—from fake orders and high commissions to customer favoritism and competitive pressures—often make it a tough and unprofitable endeavor. Sellers must navigate these complexities carefully, balancing the benefits of exposure with the financial risks involved.

By addressing these issues through better seller protection policies, fairer commission structures, and stricter return guidelines, these platforms could create a more equitable environment that benefits both sellers and buyers.

By understanding these challenges and working to mitigate them, sellers can better navigate the e-commerce landscape, while platforms can improve their ecosystems for all stakeholders involved.