Those selling on Amazon will see increases in the fees they pay the online retail giant. These so-called third-party merchants market their products on Amazon’s platform in exchange for a cut of their sales and some additional fees for Amazon’s logistics services.
The sellers include small businesses that benefit from Amazon’s online technology as a supplement or in place of their own online presences.
Selling on Amazon: You Will Pay More
Recent increases started last month with the announcement that those selling on Amazon who use Amazon’s merchandise management services will pay more for the privilege.
On Feb. 18, 2013, a new set of fees for Fulfillment by Amazon services went into effect. By using the services, small businesses selling on Amazon can have Amazon store, ship and handle customer service for online inventory.
In an official company statement introducing the increases, Amazon insisted that the fee for a one pound standardized package, which Amazon says makes up a “significant portion” of the packages in the fulfillment program, would increase by only $0.09.
Other increases might be a bit steeper. For example, Amazon announced recently it will increase variable closing fees, the share that Amazon takes from each sale on its platform, from $0.80 to $1.35 for music, video and DVD products, a 55 cent increase or 69 percent. The increase brings the share taken out of each sale by Amazon up to the level currently collected for sales of books, software and video games.
The increase will take effect April 24, 2013 for sellers fulfilling their own Amazon orders, and April 24, 2014 for merchants using the Fulfillment by Amazon program. But that’s not all.
Amazon also announced it would be boosting its standard and expedited shipping rates, the share Amazon credits its sellers to cover shipping costs, in the same product categories. Domestic standard rates would rise from $2.98 to $3.99, an increase of $1.01 or 34%, while domestic expedited rates would rise from $5.19 to $6.19, a difference on one dollar per package or 19 percent.
The increase could change what those selling on Amazon in these categories charge for their products or even what they decide to offer. Small business owner John Baker, who operates on Amazon under the handle bestbookshelf, told eCommerce Bytes in an interview:
I use a scanner when buying (NeatOScan) and I set the scanner to reject any item whose FBA selling price is below my calculated minimum (thus leaving pricing room for a small profit for me). The recent increases to postal fees and to Amazon FBA fees combined to raise that threshold for a used, single-disc music CD in a jewel case by 13.1%. And now this latest increase will raise it an additional 12.9% from the December, 2012, figure.
The increase is affecting other merchants too. In an email interview, Louisa Eyler, President of Positive Distribution LLC, a company handling the marketing of Lock Laces, a brand of shoelace that has sold products on Amazon and other eCommerce sites, explains:
Prior to the spike in Amazon fees, the base fee for selling a pair of Lock Laces was $2.37. Today, the base fee is $3.62 -meaning for an item that is $7.99 – you (the seller) are only getting $4.37 of that sale.
Those selling on Amazon are concerned over the new Amazon increases and have discussed viable alternatives including selling through Amazon’s rivals, like eBay. However, small businesses that continue to sell online may also need to consider the benefits of using Amazon, even with increased costs, before making other arrangements.
The site continues to offer a well-known brand, high online visibility, features like Amazon’s customer fulfillment program and prompt and easy payment of merchants.
Merchants have also complained about eBay’s rate increases in the past, and certainly Amazon is not the only eCommerce site to increase rates for members recently, due, at least in part, to increased costs.
Small eCommerce businesses would also need to weigh the expense, time and expertise needed to establish their own eCommerce sites as well as the cost of providing customer fulfillment.
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Wow, lots of changes going on with Amazon. Wonder what else is to come.
I am not surprised to hear about Amazon. Ebay is no better either. The larger these conglomerates get the more powerful they get and the greedier they get. They become so large and powerful that they are a law unto themselves. I had an ebay business which I closed in 2010 after 5 years of trading. Starting from next to nothing, selling just a few second hand items, the business expanded continuously at a rapid rate and in the end with all the ebay fee hikes and changes of rules which cost us more and more we were forced to close. I worked full time, my wife part time, nobody else employed. We turned over £150,000 in our best year, before the recession hit, and ended up paying ebay £22,000 in fees.
The governments of the world do not seem to be able to control this blatant abuse of companies who destroy the chances of many budding businesses. We were lucky because we were able to establish from scratch what has now become a successful business costing only a fraction of the massive amount of fees paid to ebay over the years.
These companies do not care if you leave them because they know that you will be replaced by the droves of new businesses joining up. This is because they make it so easy to start a business with them. At no initial cost you can be trading within an hour of inception.
Amazon is raising the annual fee for small presses to sell books in the Advantage program from 29.99 to 99.99. They already take 55% of the cover price, and we have to pay the shipping to get the books to them. There was barely any profit to begin with (for us, not them) and this extra $70.00 means we’ll have to sell about 70 more books each year before we start making any profit.