The Platinum Seller Program offered by Amazon India has been temporarily suspended. While it is known for its exclusivity and invite-only status, the contracts have not been renewed on account of the lack of clarity on the new Goods and Service Tax (GST) regulations.
According to a platinum seller who spoke to ET,
The company has conveyed to us that the renewals are on hold due to clarity on GST. 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.
Because Amazon India is not renewing its one-year contracts with platinum sellers, Cloudtail India has become the only Platinum seller for now. Cloudtail is a joint venture between Amazon.com and Catamaran Ventures, which is owned by Narayana Murthy.
PSP is a program that was started to increase overall growth. Essentially, Amazon India picks specific sellers to join the program in particular categories like smartphones, fashion, large electronic, and consumables. These sellers are then required to meet certail metrics and sales targets.
The primary criteria that must be fulfilled in order to be a part of PSP is decided according to the inventory in top-selling categories, history of selling, customer experience and volume, as well as the requirement that the seller will never run out of inventory at a given point of time.
This program became significant last year because the Department of Industrial Policy and Promotion (DIPP) announced that no single seller could have more that 25% of the total sales on an e-commerce marketplace. Until this announcement, Cloudtail had a primary part of the sales happening on the platform. Following this however, newer sellers emerged in high grossing sales categories and reduced the share of Cloudtail on the platform.
The suspension of this program which has benefits like low marketplace fees and lower logistics costs will lead to consequences such as a fall in the volume of business for these sellers. This impact could be as high as 25-30% in a month and is already being felt.
According to a seller who spoke on condition of anonymity,
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
While Amazon India has not revealed any details on account of business confidentiality, the by-invite PSP contract requires sellers to agree to terms set by the marketplace.
There are over two lakh sellers on the Amazon India marketplace of which there are only a handful of platinum sellers for each category. Because of the advantages that sellers get from signing such a contract, there are several brands that have started selling directly to PSPs like Cloudtail through trade channels instead of remaining a direct seller on the platform.
