A new study shows Amazon has consistently raised transaction fees since 2016.
Key Details
- Facing pressure in an economy of tech layoffs and tightening currency, Amazon has resorted to progressively increasing transaction fees for sellers who use the platform.
- A study from Marketplace Pulse, released on Monday, shows Amazon takes nearly 55% of the profit from third-party sellers on the platform—up 40% over the past five years.
- This fee includes a 15% transaction/referral fee, a 20% to 35% fulfillment fee, and a 15% promotional fee.
Why It’s Important
Fees such as these are commonplace for other retailers such as Walmart and Shopify and are difficult to compare fairly. Amazon’s prices have rapidly increased though, as the company feels the pinch of poorer sales and increasing costs.
“Every year, Amazon sellers pay more fees as a percentage of their sales. The increase is not a result of sellers using more services. The same services have gotten more expensive (FBA) or unavoidable (advertising),” says the study.
Amazon only feels additional pressure now as the high profits and sales it received during 2020 and 2021, during the pandemic, have lifted and left the company with shallower pockets. As Bloomberg notes, Amazon generated some of the lowest sales growth in company history last year.
For now, the high transaction fees are worth it for some sellers, including companies like Chicago-based Desert Cactus—who told Bloomberg that Amazon is still one of the cheapest shipping services available. “It’s hard to replace Amazon because the value is still there. They deliver all of these customers and the shipping fees are less than if we did it ourselves. It’s the place to be, and it’s going to be for some time,” says founder Joe Stefani.
Notable Quote
“For these small businesses, it’s getting harder and harder to be profitable because they are spending more and more money on Amazon fees. Amazon might be tempted to keep increasing fees because it’s in a tough spot, but you have to reach some kind of equilibrium,” Marketplace Pulse CEO Juozas Kaziukena tells Bloomberg.