May 17, 2024
US
This “time” refers to the new set of fees imposed by Amazon. Over 60% of the products sold on the platform come from small and medium-sized businesses, and Amazon already takes around 50% of each sale when it manages storage and shipping.
Now, the costs for these traders are likely to increase even further due to new fees that quickly became controversial to the point of attracting the attention of the Federal Trade Commission, as Fortune exclusively reported last week. Long-time sellers agree that selling on Amazon could soon become unsustainable.
As a result, many of them anticipate an “extinction event” for Amazon sellers. While some will adapt, many others may disappear, no longer able to survive in the current “climate” of the platform.
Is it the uninformed seller who will not be able to predict the impact of the new fees and risk seeing their margins erode without realizing it in time?
Or the sophisticated seller, who, aware of the changes, finds himself trapped, unable to pass on the extra costs to their prices due to fierce competition from less experienced or China-based sellers, using cross-border supply chains to bypass fees?
“People are going to tend to undervalue and erode everyone's margins,” says Bernie Thompson, an Amazon seller since 2009 and founder of the USB electronics brand Plugable. “There's going to be a lot of bankruptcies.”
Amazon counters that its new fees are lower than other major fulfillment services, saying that many sellers will see a decrease in the average fees paid per unit sold.
“These changes allow sellers to choose where they want Amazon to take care of different aspects of fulfillment,” spokesperson Mira Dix told Fortune.
Previously, sellers could ship their products to a single Amazon center, which then handled dispatch. Now, Amazon wants sellers to pay to send their inventory to multiple facilities, charging a fee per item if it's not done so.
Unit fees vary depending on the number of distribution centers used and their location. It is only at the time of shipment that the seller discovers the exact costs, further complicating the process.
One salesperson summed up the frustration on a forum: “Arghh, I think you need a doctorate to calculate fees.”
Other fees, such as those for “low inventory”, make the situation worse, imposing penalties for insufficient inventory, but also for excessive inventory, creating particular confusion for sellers of perishable or seasonal products.
Some sellers find the AWD option acceptable, but others, especially those with oversized or expiration date products, cannot use it. Also, those who already own warehouses or have commitments with third parties cannot easily switch to AWD.
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