Amazon to impose fee on sellers that ship products themselves

SEATTLE – Amazon.com is imposing a new fee on merchants that do not use the company’s logistics services, a change that many of these sellers consider coercive and surprising since the US government is poised to file an antitrust lawsuit against the e-commerce giant.

Thousands of third-party sellers that ship products themselves will start paying a 2 per cent fee on each sale in October, according to documents reviewed by Bloomberg. This is on top of the commission – usually 15 per cent – 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 did not 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 has been accused of having too much power over the some two million merchants that use its platform, which captures about 37.6 per cent of all online spending in the United States, according to Insider Intelligence, or about six times more than closest online competitor Walmart. The Federal Trade Commission (FTC) 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 Mr Jason Boyce, whose Avenue7Media helps about 100 businesses sell products online.

In recent years, Amazon has been ratcheting up fees on merchants, which typically pay for advertising and logistics to help maximise their sales. The business has become increasingly important to the company as sales growth in the core online operation slows. Seller services generated US$32.3 billion (S$44 billion) in the second quarter, up 18 per cent from the same period a year earlier and more than the profitable cloud services business. In 2022, 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.

The new fee targets merchants that use Seller Fulfilled Prime, a service that lets them handle logistics themselves and still get an Amazon Prime badge, which lets customers know they can expect quick delivery. These merchants often sell bulkier items such as furniture that do not mesh well with Amazon’s highly automated warehouses, which are designed to mostly handle smaller products.

Amazon launched Seller Fulfilled Prime in 2015 as a way to expand inventory without overloading its fulfilment centres. It closed enrolment in the programme a few years later, saying merchants were having difficulty meeting Amazon’s delivery standards. Amazon in June announced it will again open enrolment for Seller Fulfilled Prime, 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.

One office furniture merchant enrolled in Seller Fulfilled Prime said the fee will cost his company approximately US$1 million a year, forcing it to raise prices. He will probably continue to use the service because Amazon has so many customers but noted that he is not getting anything extra in return for paying the fee.

Another merchant also expects to raise prices to cover the new fee and said that, for many merchants using the service, the 2 per cent levy will wipe out as much as one-third of already meagre profit margins. He also said Amazon gave sellers only a few weeks’ notice, making it difficult to adjust because inventory has already been ordered for the busy holiday shopping season.

Both sellers requested anonymity for fear of retaliation from Amazon.

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 e-commerce to force sellers to use its logistics services. The allegation, since echoed by multiple sellers, has emerged as a focus of the FTC’s antitrust case against Amazon, according to people familiar with the situation.

Mr Juozas Kaziukenas, founder and chief executive of Marketplace Pulse, which monitors online sales, said Amazon has been making it harder and harder in recent years for merchants to qualify for Seller Fulfilled Prime. The upshot is that “most sellers use Fulfilment By Amazon instead”, he added. BLOOMBERG