Amazon, the most publicly respected corporation in the U.S., is generating some hate mail.
The e-commerce giant has been hiking fees for its third-party sellers over the past year-and-a-half, according to a Reuters report. Amazon takes a cut of every sale made on its site; these fees are used to cover "handling logistics."
Now, with third-party sales comprising almost 40 percent of total Amazon unit sales (and nine to 12 percent of the company's annual revenue), Amazon is pushing for greater cuts to merchant profits, a practice that could drive away many small sellers using the platform.
"If they increase fees too much, some sellers will decide to not sell there anymore," said Niraj Shah, CEO of Wayfair, a furniture retailer that sells through Amazon. “The vast majority of Amazon sellers are perfectly happy to go to any marketplace offering meaningful volume.”
Ebay and Google have both offered to reduce costs and transparency for third-party sellers. Brian Hsu, eBay's senior director of pricing, believes that making seller fees less complicated will draw users from Amazon. "We want sellers to feel comfortable bringing all their inventory to eBay,” Hsu told Bloomberg today. The launch of Google's same-day delivering service seeks to challenge Amazon further.
The companies are naturally hoping to trigger a merchant exodus from Amazon.
Here's what people are saying:
Chris Morley, Managing Director of e-commerce consulting firm Online Market Experts, believes that Amazon is "already walking a fine line" and that the new fees "...may be a step too far."
Kat Simpson, a seller and e-commerce educator, added that while she would have recommended Amazon's seller services last year, "Now I would say no."
"Holy crap!" wrote one seller on an Amazon forum regarding the hikes. "Amazon just pulled a fast one," wrote another.
Users are frustrated — 10 years ago, it was cheaper to sell goods on Amazon than on any other e-commerce platform. Now, the hikes are shrinking smaller sellers' margins to increasingly uncomfortable and untenable points. The fact that Amazon is a direct competitor to those merchants stings even more.
"Conspiracy confirmed," commented a six-year seller of electronics. "Now that Amazon has all the power they're imposing increased fee hikes to all those cozy sellers who have supported Amazon since Day 1."
Many of the new fees are due to increased warehouse storage costs. These come alongside "other costly...changes, such as the advent of the add-on program and split shipments," complained a user yesterday.
The hiked fees are most likely an effort by Amazon to maintain high quality and standards in a world of higher transportation costs and increased customer expectations. That being said, Amazon cannot let its sellers' expectations fall by the wayside; 40 percent is too large a share of sales to ignore.
Amazon is also being sued by several third-party sellers in Washington State. The sellers claim the company is holding their money hostage, breaking the 90-day limit defined by seller contracts. Amazon has not commented on the lawsuit.
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