Amazon.com Inc. is imposing a new fee on merchants who don’t use the company’s logistics services, a change many of these sellers consider coercive and surprising because the U.S. government is poised to file an antitrust lawsuit against the ecommerce giant.
Thousands of third-party merchants who ship products via Amazon’s Seller Fulfilled Prime program will start paying a 2% fee on each sale in October, according to documents reviewed by Bloomberg. That’s on top of the commission — usually 15% — that merchants already pay Amazon to sell products on the popular web store.
Several merchants interviewed by Bloomberg interpreted the new fee as an attempt to pressure them into using Amazon’s logistics services rather than fulfilling orders themselves. The company didn’t explain to sellers why the levy was required, but told Bloomberg it will help cover the costs of running a separate infrastructure and measuring its effectiveness.
Amazon is No. 1 in the Top 1000, Digital Commerce 360’s ranking of the largest North American online retailers. Amazon is also No. 3 in Digital Commerce 360’s Global Online Marketplaces Database, which ranks the 100 largest such marketplaces by 2023 third-party GMV. The latest analysis of the industry as a whole is published within the 2023 Global Online Marketplaces Report.
The largest, even among ecommerce giants
Amazon has been accused of having too much power over the some 2 million merchants who use its platform. It captures about 37.6% of all online spending in the U.S., according to Insider Intelligence, or about six times more than its closest online competitor Walmart Inc. The Federal Trade Commission is in the final stages of preparing an antitrust case against Amazon. And the timing of the new fee took some merchants and consultants by surprise.
“We’re sitting here waiting for the FTC to take action against Amazon for antitrust issues, and this fee shows Amazon is not scared at all,” said Jason Boyce, whose Avenue7Media helps about 100 businesses sell products online.
In recent years, Amazon has been ratcheting up fees on merchants, who typically pay for advertising and logistics to help maximize their sales. The business has become increasingly important to the company as sales growth in the core online operation slows. Seller services generated $32.3 billion in the second quarter, up 18% from the same period a year earlier and more than the profitable cloud services business. Last year, for the first time, seller fees began gobbling up about half the cost of each sale, making it harder for merchants to make a profit.
Who does the new Amazon fee affect?
The new fee targets merchants who use Seller Fulfilled Prime, a service that lets them handle logistics themselves and still get an Amazon Prime badge. The Prime badge lets customers know they can expect quick delivery. These merchants often sell bulkier items such as furniture that don’t mesh well with Amazon’s highly automated warehouses. Those Amazon warehouses, by design, mostly handle smaller products.
Amazon launched Seller Fulfilled Prime in 2015 as a way to expand inventory without overloading its fulfillment centers. It closed enrollment in the program a few years later, saying merchants had difficulty meeting Amazon’s delivery standards. Amazon in June announced it would again open enrollment for Seller Fulfilled Prime. That was a move the company saw as a way to appease regulators investigating it for antitrust issues, according to people familiar with the matter.
Amazon informed merchants about the new fee last week.
How will the new Amazon fee affect merchants?
One office furniture merchant enrolled in Seller Fulfilled Prime said the fee will cost his company approximately $1 million a year. That forces it to raise prices. He said he will probably continue to use the service because Amazon has so many customers. But he notes that he’s not getting anything extra in return for paying the fee.
Another merchant also expected to raise prices to cover the new fee and said that, for many merchants using the service, the 2% levy will wipe out as much as one-third of already meager profit margins. He also said Amazon only gave sellers a few weeks notice. That makes it difficult for sellers to adjust because they had already ordered inventory for the busy holiday shopping season.
Both sellers requested anonymity for fear of retaliation from Amazon.
“We are excited to offer Seller Fulfilled Prime to sellers as a way to independently handle fulfillment of their products while also making those products available to Prime customers with fast, free delivery, great customer service and free returns,” Amazon spokesperson Jonathon Hillson said.
Amazon’s seller fees have been a focus of regulators and lawmakers since at least 2019, when a merchant accused Amazon of using its dominance in ecommerce to force sellers to use its logistics services. Multiple sellers have since echoed the allegation. And the allegation has emerged as a focus of the FTC’s antitrust case against Amazon, according to people familiar with the situation.
Juozas Kaziukenas, founder and chief executive officer of Marketplace Pulse, which monitors online sales, says Amazon has been making it harder and harder in recent years for merchants to qualify for Seller Fulfilled Prime. The upshot: “Most sellers use Fulfillment By Amazon instead.”
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