The wide reach of Amazon’s e-commerce platform is appealing to any small business that wants to sell its products online. But a new report suggests that the cost of doing business could be a bargain for a third-party seller, as the fees Amazon charges them could quickly turn into profits.
Amazon Toll Road, A report by the non-profit Institute for Local Self-Reliance (ILSR) found that Amazon collected 12 121 billion in fees from third-party sellers this year alone. According to the report, written by Stacey Mitchell, co-director of ILSR, these fees – for things like advertising, referrals, and shipping – generally mean that small businesses lose money to Amazon. ۔ Mitchell said that in 2014, sellers paid Amazon $ 19 out of every $ 100 in sales, and today, that’s about $ 34 per $ 100 in sales.
And, Amazon hides the profits from these small businesses in its financial reports, adding them to other low-profit distributions “because it doesn’t look good to show that they make these profits from small businesses.” Mitchell said in an interview. the edge
But its Amazon Prime subscription service – which is thought to be a money-maker for the e-commerce company – provides Amazon with a loyal base of buyers who want to get their money for free shipping. According to the report, Amazon, which makes profits from sellers’ fees, subsidizes the losses of its prime division.
Mitchell said, “If you are a company that makes or retails consumer products, you will be cursed if you do not sell on Amazon and you will be cursed if you do. . ” A small retailer may try to use its website to reach consumers, but Mitchell says it is often “basically tantamount to hanging your shingles on a dirt road because Amazon is often the first consumer And because of Prime’s role in creating a unique place. Shopping on the Internet. ” Former Amazon CEO Jeff Bezos said in his last annual letter to investors in April that the number of Amazon Prime subscribers had reached 200 million by that time.
There are other e-commerce platforms where a small business can sell its products online, theoretically charging users on these sites different prices from its Amazon customers. But if the seller wants to continue selling on Amazon, he will have to keep the same prices across the board. Under Amazon’s fair pricing policy, if Amazon finds that sellers are charging consumers different prices for their products on other e-commerce platforms. Penalties can range from removing a seller’s product from a prominent “buy box” on a product listing page to ending a sales concession.
Amazon says the fair pricing policy is aimed at pricing practices that “harm customer confidence”, but the ILSR report concludes that this generally means that consumers Overall they can pay more because third party sellers have to increase the prices they charge customers. To pay Amazon’s fees and make a profit, Mitchell explained.
Amazon spokesman Brooke Oberwitter said in an emailed statement the edge That the ILSR report was “deliberately misleading” and that it combined Amazon’s selling fee with the price of “optional services” that some sellers buy, such as logistics and advertising. Ober Waiter said the fees range from 8 to 17 percent of the sale price. “These selling fees are very competitive when it comes to other sales options such as Walmart, Target, eBay, ATC, and others, or directly from the consumer through companies like Shopify and BigCommerce.”
In addition, Ober Waiter said, some Amazon third-party sellers buy complements through the Amazon logistics service, which they say complements services are 30% cheaper and faster than other logistics providers. Shipping.
“Some sellers also choose to buy ads from Amazon or use other ad providers such as Google, Facebook and Twitter.” And use them only if they add value to your business. ”
Bezos testified before Congress last year that the seller’s fee was not mandatory. When asked by correspondent Mary Gay Scanlon (D-PA) about the rapid increase in sellers’ fees to Amazon, Bezos said, “When you see these fees rising, So what’s really happening is that sellers are choosing to use more of our services that we make available.
However, the ILSR report states that if sellers want their products to appear on search results pages in places like Amazon’s “Customers who also saw this item” then fees are all necessary. And unlike other forms of advertising, where a business advertises, reaches out to consumers, then sells directly to those consumers, Amazon’s policies prevent most sellers from building this type of direct customer relationship. But, Amazon tested a feature earlier this year that would allow sellers to interact directly with consumers.
Mitchell wrote in the report that an effective policy solution would separate Amazon’s distribution – marketplace, retail, AWS, and logistics – into separate companies. “Amazon seems more likely to break up than in recent years,” he said. Lena Khan, the new chair of the Federal Trade Commission, “sees the dangers of big technology.” Earlier this year, Amazon actually requested that Khan refrain from engaging in dealings with the company. And while there has been an overall increase in no-confidence scrutiny by President Biden’s administration and Congress, Mitchell noted that it remains to be seen whether there is enough momentum behind the new focus on no-confidence issues. Is.
“A year ago, if you asked me if we would have a bill of bilateral no-confidence in Congress the kind of co-sponsorship we see, I would be amazed at how much progress has been made,” he said. “We’ve gone much faster than expected.”