Amazon Charges Sellers Fees That Are High Enough To Offset Losses from Prime, a New Report Says (theverge.com) 64
The massive reach of Amazon's e-commerce platform is appealing for any small business that wants to sell its products online. But a new report suggests that the cost of doing business can become a Faustian bargain for a third-party seller, as the fees that Amazon charges them can quickly eat into profits. From a report: Amazon Toll Road, a report from the nonprofit Institute for Local Self-Reliance (ILSR), found that Amazon charged third-party sellers a total of $121 billion in fees this year alone. According to the report, written by ILSR co-director Stacy Mitchell, those fees -- for things like advertising, referrals, and shipping -- usually mean that small businesses lose money to Amazon; Mitchell said that in 2014, sellers paid Amazon $19 of every $100 in sales, and today, it's more like $34 per $100 in sales.
And, Amazon obscures the profit it makes from these small businesses in its financial reports, lumping it in with other less lucrative divisions "because showing that they generate these profits from small businesses is not a good look," Mitchell said in an interview with The Verge. But its Amazon Prime subscription service -- believed to be a money loser for the e-commerce giant -- provides Amazon a loyal base of shoppers who want to get their money's worth of free shipping. The profits Amazon makes from seller fees subsidize the losses from its Prime division, according to the report.
And, Amazon obscures the profit it makes from these small businesses in its financial reports, lumping it in with other less lucrative divisions "because showing that they generate these profits from small businesses is not a good look," Mitchell said in an interview with The Verge. But its Amazon Prime subscription service -- believed to be a money loser for the e-commerce giant -- provides Amazon a loyal base of shoppers who want to get their money's worth of free shipping. The profits Amazon makes from seller fees subsidize the losses from its Prime division, according to the report.
Re: (Score:2)
Being used like this by Amazon's competitors for free offends me.
that's not how this works: slashdot lives off traffic, so any crap that generates traffic is a net gain for slashdot. and who brings it or what sort of bullshit it is just as irrelevant as is being offended by anything found in the mountain of crap.
but ofc by all means offend the crap out of yourself if that's your thing! :D
Re: Another hit-piece on Amazon (Score:2)
Deal with the devil. (Score:2)
The massive reach of Amazon's e-commerce platform is appealing for any small business that wants to sell its products online. But a new report suggests that the cost of doing business can become a Faustian bargain for a third-party seller, as the fees that Amazon charges them can quickly eat into profits.
Soak the poor. Sounds like someone has been taking tips from Walmart and CC companies like Visa and Mastercard.
Re: (Score:2)
Soak the poor.
Small business owners are not "the poor".
They are the demographic most likely to be in the top 1%.
Re: Deal with the devil. (Score:2)
Re: (Score:2)
72% of people in the top 1% operate their own business.
Top 1% own businesses [smallbiztrends.com].
Re: Deal with the devil. (Score:2)
Re: (Score:2)
You obviously didn't read the link. The 72% are people who filed either S-Corp or partnership tax returns.
If you include small business owners filing with a Schedule-C, the number would be even higher.
Running your own business is, by far, the most common way to get rich in America.
Re: Deal with the devil. (Score:2)
Re: (Score:2)
If they are barely scrapping by, maybe they should, oh IDK, go get a real job then. Even working retail, I do much better then "scraping" by.
Re: (Score:2)
Re: (Score:1)
the poor
they don't look like the poor to me: https://ilsr.org/about-the-ins... [ilsr.org]
on a more serious note, no matter how much we despise amazon, the value it adds to the supply chain is tremendous to the point of totally ruling the whole system. these "poor" are actually making more money than ever thanks to amazon, they're just pissed because they have to pay fees and are not in control anymore.
btw, whenever i read "3rd party" i cant help but picturing a functional business unit that is racing its merry way to obsolesc
Re:Deal with the devil. (Score:5, Insightful)
Re: (Score:2)
What was anyone expecting? Amazon is a business not a charity. If the sellers would expect Amazon to operate at no profit or a loss why aren't they willing to do the same in turn? One greedy party is whining about the greed of another greedy part. Oh the humanity!
If there are viable alternatives, then there is no problem, as the invisible hand of the market would prevent Amazon from unilaterally dictating trade terms. If there is no viable alternative, then Amazon would wield monopoly power to the detriment of competition. And that would potentially be illegal.
Re: (Score:2)
You can sell on Walmart.com, Amazon, Etsy, Ebay, Macari. I'm sure there are many more as well.
I don't have a problem with this (Score:3)
"because showing that they generate these profits from small businesses is not a good look," Mitchell said in an interview
I don't see why. They can get revenue from buyers, sellers, and advertisers. Advertising's always evil, so I don't want them doing that.
I'm a buyer, so I don't want to pay more. If a seller decides that paying the fees is worth it, then everyone is benefitting.
I for one approve.
Re: I don't have a problem with this (Score:3)
But they ARE using advertising. How do you think they decide what products to float to the top?
new twist: (Score:1)
It's not that hard (Score:4, Insightful)
Re:It's not that hard (Score:5, Insightful)
When an industry is in lock step being cunts, effectively being a cartel, you have no options.
What you're saying is "oh the price of gas is too high at that station I'll just go to another one" except, they all change their prices together.
TFA does not come as a surprise at all, did anyone really think Amazon was actually paying for any of the evil shit they do? No, we are, either directly with higher prices, or indirectly with privacy rape and ads.
Re: (Score:3)
"oh the price of gas is too high at that station I'll just go to another one" except, they all change their prices together.
But the price they charge does differ from station to station. I easily see 50 cent per gallon differences from station to station in my city. You CAN shop around for the best price.
Re: (Score:2)
stories about a gigantic almost monopoly behaving monopolistically are common.
Not really monopolistically... Just a large company behaving like a large company.
There are competitors...
Ebay charges sellers as well. The cost is $0.30 plus 15% final value for for many kinds of sales PLUS listing fees of approximately ~$1 insertion/listing fees for a simple 3day auction on most kinds of items (Although much higher fees for categories such as Real-Estate), and there are extra fees for "Features" on a listin
Amazon charges me more than eBay (Score:3)
Re: (Score:2)
Sports teams always lose money except when one includes all revenue and costs and tax breaks they donâ(TM)t.
In retail and wholesale margins are thin. Customer a
Re: (Score:2)
if you dislike their behavior, don't buy from them.
You cannot. One of the rules for selling on Amazon is that you cannot charge less for your products on other stores, and they keep bots checking other stores all the time. If they find you selling your goods there for less than you sell them on Amazon, they demote or outright remove your listing on Amazon. Hence, as long as everyone else mostly buys on Amazon, you're going to pay Amazon's price for the goods you want, with part of that money going to pay Amazon's sellers fees anyway.
That's the classic monop
Re: (Score:2)
Agreed. Walmart has a similar thing too but they are too stupid (like most of their platform) to enforce this even close to correctly. What winds up happening is some not-actually-serious seller joins our Amazon listing at a price they couldn't compete at, and then Walmart sees "oh you are selling it at a loss on Amazon?, guess we will suspend your Walmart offer for breaking policy"
tl;dr
You can hide a Walmart competitor simply by making a nonsense price appear on a di
You can't really vote with your dollars (Score:3)
Re: (Score:2)
What are you trying to buy that doesn't have a boutique option? Seriously. I'm truly interested in these items only Amazon, Target and Walmart are allowed to sell.
Clothing? Nah, tons of competition. Tools? Plenty of other options. Video games? Nope, plenty of options. Food, no way. Car parts, not a chance. Even random shitty Chinese items can be bought at different sites.
Sure, those 3 big stores offer convenience but they aren't even the best price points half the time.
You may of had a better argument befor
Prime doesn't make me beholden to Amazon (Score:2)
I have Prime. But I almost always try to buy direct from the manufacturer unless it's commodities like batteries or toothpaste, which I rarely order online. Amazon is a cess pool for shopping.
Location location location (Score:1)
Shocking (Score:2)
That's not everything. (Score:5, Insightful)
- Be completely in control of your claim/refund process, whether the customer is right or not, because they want to protect their own brand at your cost.
- They will bully you into agreeing to ridiculous discounts and even to giving up control over the amount of discount to Amazon.
- You won't truly know the meaning of "being screwed over" until you start using their fulfillment centres.
- If they're not happy with your performance or if you don't agree to participate in any events/discounts, they will lower your rating as a seller and even delist you from the platform if your rating drops too low.
Amazon is unusable (Score:1, Insightful)
I went from avoiding Amazon due to general dislike and annoying gimmicks like withholding sales of certain items readily available elsewhere designed to get people to capitulate to prime.... all the way to avoiding it out of necessity because it is now impossible to use. Searching for anything wastes too much time between searches routinely inundating you with irrelevant and sponsored crap to the fact everything they sell now is a randomly derived fly by night non-name brand of impossible to discern qualit
Re: (Score:2)
Re: (Score:3)
Probably 1/3 of my search results from Amazon are mildly related to what I'm actually looking for.
Re: (Score:2)
Bragging about how bad you are at searching will get you nowhere.
Re: (Score:3)
No, seriously. Amazon search is getting worse.
Re: (Score:2)
I agree. Try searching for a specific video card, you're likely to get everything BUT that one. You can't filter by seller, or remove scalpers. Your left sifting through page after page of bad search results.
Searching for anything else that aren't hot ticket items is marginally better. The first 10 results may be sponsored, and the next 10 a mixture of the actual product, their competitor, and third party sellers using a different item id.
Amazon sells tat (Score:1)
at inflated prices. What more do you expect?
Bezos didn't get so filthy rich being an honest trader now did he?
Just give the tat bazaar the finger.
Amazon does most of the work and prices it as such (Score:5, Insightful)
I don't want to defend Amazon, but Amazon performs all of the warehouse management, transaction processing, delivery (both ground and air), deals with customer service, returns, etc. Those costs obviously get passed onto the sellers in terms of fees.
If the sellers' margins aren't high enough to deal with those costs, how is that the fault of Amazon? Increase your margins in order to offset these costs. Especially if you are paying big money for advertising, which is entirely optional.
There is no constitutional right to be a seller on Amazon, dictate a price and have that magically be profitable. Some items just might not be profitable because of the weight, size, spoilage, competition, etc.
If you can't do math, don't sell online (Score:3)
Amazon is pretty transparent with its fees. For those fees you get access to a large, motivated customer base.
If you're losing money selling on amazon you're doing it wrong.
And FBA does seem expensive, until you research how much fulfillment services actually cost. It's not a bargain, but it's not exorbitant either.
Re: (Score:3)
I don't want to defend Amazon, but Amazon performs all of the warehouse management, transaction processing, delivery (both ground and air), deals with customer service, returns, etc.
In addition, it provides a single point for buying, a single company with my CC and other personal information. I wouldn't mind buying directly from the online merchants -- and sometimes do for some things -- but am not thrilled about having my CC and other info spread around. Like it or not, Amazon (and Prime) perform a service. Services are usually paid for by someone.
Re: (Score:3)
No kidding. Those are completely standard markup rates for retail. This amounts to "Amazon marks up third party products enough to make a profit", which is a complete non-story. Amazon may well have exploitative business practices with its third party sellers, but you wouldn't learn it from this article.
The only legitimate complaint I saw was over the MFN clause of the Fair Pricing Policy which I agree is an antitrust concern in many if not most cases.
Amazon & Whole Foods Pays for My Prime Members (Score:1)
I like Amazon, but.... (Score:2)
I really enjoy the Amazon services. There is no doubt in my mind that they save me time and are super convenient.
For example, I ordered a couple of items last week. Both were hand delivered to me at my door within 4 hours. You really can't beat that. I wouldn't have been able to make it to the store in that time. Once you figured in the time it would have taken me to drive to a couple of stores (or make a few phone calls) to find my items, purchase them, and drive home, it was cheaper for Amazon to
Re: (Score:1)
Both were hand delivered to me at my door within 4 hours. You really can't beat that. I wouldn't have been able to make it to the store in that time.
I live in Europe. Local supermarket chains here deliver at my door in 2 hours, and these are large supermarkets that have basically everything.
Amazon delivery has problems (Score:4, Informative)
Why is this a concern? (Score:2)
I'm not defending Amazon in any way. I think they are an evil corp. just like all of the rest (but gorammit their convenient!). That having been said, I don't see where they are doing anything different than any other brick and mortar store does. Loss leaders are a thing. You lose money on one thing so you can make money on another while providing what appears to be an exceptional savings to your customers.
Nothing to see here....move along.
Damned if you do... (Score:2)
Amazon basically has no competition in this area. And if you are a seller, you want to reach the "Prime" users.
To be fair, there is eBay, Walmart, Sears, Best Buy, ..., with "marketplaces". But none of them has the same reach. So you need to be on prime.
(There are nuances, though. Some buyers never use amazon, and are exclusively on ebay, etc).
Amazon knows this, hence they charge high prices. Granted they give a good service, too (customer management, warehousing, delivery), but will screw sellers at every
What's 100% of zero? (Score:2)
I am shocked and outraged that a small business owner in Pocatello, Idaho, is only getting 60%-70% of revenue from sales to the 7 billion people on the planet who don't live in Pocatello, Idaho, and have never heard of Pocatello, Idaho!
Gosh darn you, "Late Stage Capitalism" -- will you never relent from your cruel tyranny of giving people access to goods and services they would never have even had access to 50 years ago, and thus allowing people to generate wealth from markets which didn't exist before? [s
Re: (Score:2)
You really think that a small business owner in Pacatello, Idaho is getting revenue from sales to 7 billion people? If they were getting that many sales I don't think you could call them a small business. 8^)
On a more serious note, if you are selling items on Amazon for a loss (after all fees are accounted for) why are you still selling items on Amazon? It isn't like you are going to be creating foot traffic into your brick and mortar store to make up for this loss.
Re: (Score:1)
You really think that a small business owner in Pacatello, Idaho is getting revenue from sales to 7 billion people? If they were getting that many sales I don't think you could call them a small business. 8^)
Through online megamalls like Amazon, the SBO is getting revenue from a global market which would be completely out of their reach otherwise. An SBO is not showing up on the first page of Google search results performed by customers who don't already live in their area.
The most beautiful and creative Macrame artisan in the entire western hemisphere could have a storefront in, say, Shiprock, New Mexico, but only a small percentage of the 50,000 people living within easy driving distance would even know it ex
It's news that Amazon makes money? (Score:1)
Seems odd. Reporters today have discovered that Amazon is a business and charges for use of its platform.
And? (Score:4, Interesting)
In today's news, the sky is blue!
Did people actually believe Amazon is going to just eat the cost of prime? My company dipped our toes into the water of selling some items about 10 years ago (time sure flies.) By the time we factored in all the hidden fees that Amazon tacks on, what we thought was a decent profit on the items ended up being a loss unless we bumped the price up to well above the MSRP. I've been wondering for years how anyone is able to actually make money selling through Amazon unless they're only dealing in high-margin products to begin with.
34% (Score:2)
34% sounds like a huge number. And I'm a great fan of hating big-tech and amazon generally.
But I'm also an entrepreneur (totally different space, programmer). A 34% commission that covers shipping, listing, customer service, customer processing, promotions, customer communications, and inventory sounds small to me.
Compared to any small retail business, amazon would take the place of their brick-and-mortar store. That means rent, signage, promotions, landscaping, cleaning, snow removal, et cetera.
For my b
34% is higher than Apple's cut (Score:2)
Amazon is not the only gouger... (Score:1)
Have you seen ebay's fees lately?
At 34%, those fees are better spent on brick-and-mortar; or on your own website and ads.