Report Says Amazon Collects Over 50% Commission From Merchants

Amazon is charging retailers more than 50% commission on every transaction, according to several reports.

Based on TechSpot, this is the first time that the e-commerce company has taken a cut of each transaction, which is more than half the whole amount.

Commission Rate, Other Charges

Marketplace Pulse found that the standard referral fee paid by a seller to the e-commerce firm ranged from 8% to 15%. On top of that, they have to pay anything from 20% to 35% in Fulfillment by Amazon fees, which cover things like warehousing and other expenses. An additional 15% in advertising and marketing costs are charged to them, as well.

Per Bloomberg's case scenario, a merchant selling a $200 fire pit would only get $112 from Amazon.

By comparison, Amazon took in just 35.2% in merchant fees in 2016. Thus their 51.8% last year is a significant gain.

In an article published by Marketplace Pulse, despite the fact that Amazon's 8-15% transaction cost has been stable for over a decade, the company has increased Fulfillment by Amazon fees annually and instituted new storage price structures.

Seller Assistance

While it is true that merchants are not obligated to use Amazon's shipping and advertising services, the vast majority see them, particularly advertising, as essential to their success. Surprisingly, Amazon would disagree with that.

A representative told Gizmodo that many of their selling partners have created and operated their companies without advertising. Apparently, there is a plethora of options for them to pick from if they decide to market their goods. Vendors are under no obligation to use Amazon's logistical or marketing services unless these would increase their profits.

The spokesperson also noted that delivery costs are reduced by 30% on average when using Amazon's fulfillment facility and by 70% when compared to alternative two-day shipping choices.

Economic Uncertainties

The boost in internet shopping, notably during the Covid-19 outbreak, has helped businesses survive Amazon's pricing rises over the previous three years. As the lockdowns ended, individuals spent their money elsewhere.

In light of the present global economic uncertainties, they are putting less of their spare money toward frivolous purchases and more toward necessities, making it impossible for enterprises to raise prices.

Amazon is one of several internet firms laying off workers, which reached a number of 18,000 individuals, owing to overhiring during the pandemic. Therefore, it is not a surprise that last year saw the company's weakest sales increase in its history.

Melissa Burdick, president of Pacvue and a former Amazon executive, told Bloomberg that Amazon is growing its advertising space. "A lot of sellers are choosing to offer discounts rather than advertise because shoppers are responding more to discounts," added Burdick.

Amazon's advertising income grew 18.9% last year, down from 32.2% the year before.