Retailers Pay A Large Amount Of Commission To Amazon

Dareen Cone
Dareen Cone Business
4 Min Read

Market Pulse’s recent report has unveiled that Amazon increased the commission fees paid by sellers to store goods in their warehouses, packaging, and shipping orders, as well as pay for advertising on the platform. Beyond this, vendors who rely on Amazon Marketplace must reimburse a commission fee of over 50% of every sale they make.

Amazon Commission Fees Increased Gradually Over Time

According to the report, the commission fee has steadily increased since 2016; however, sellers were hardly affected due to a surge of customers and exponential sales growth during the pandemic. Though unfortunately, when restrictions were relaxed, buyers shifted their attention away from online shopping towards activities such as travel and dining out – resulting in a sharp decline in sales for marketplace businesses.

Marketplace Pulse disclosed that Amazon charges a 15% transaction fee from sellers, an additional 25-35% fulfillment fee, and another 15% for advertising/promotion on its platform.

Last year, the average commission fee Amazon collected jumped to a staggering 51.8%, much more than its usual 35.2%. According to an emailed statement sent by a company spokesperson to Gizmodo, fees that sellers are charged depending on the cost and investment put forth by Amazon first and foremost. The email further stated: “Many selling partners have been able to effectively grow their businesses without any advertising; however, if they deem it advantageous for them, then there are many service providers available for them to make use of.” Sellers can choose whether or not they would like to utilize these services – no pressure!

retailers pay a large amount of commission to amazon

Although sellers can decide if they want to include packing, shipping, and promoting services with their products, Amazon still maintains control over the commission fees it charges. As reported by Marketplace Pulse in Q4 of last year, advertising revenues grew significantly at 18.9%. However, that was a small comparative increase from 32.2% growth just one year earlier.

Merchants Are Hesitant To Raise The Prices Of Their Products

Even though they struggle financially, merchants remain hesitant to raise their prices. This is according to a report stating that small business owners have taken up shipping their own packages instead of using Amazon’s warehouse service and spending less on on-site advertising.

Juozas Kaziukenas, Founder and CEO of Marketplace Pulse, mentioned to Bloomberg that small businesses are struggling increasingly with the rising Amazon’s commission fees. Sadly, it seems as though Amazon may be tempted to continue raising them despite this difficult economic situation – yet a balance must be established for all parties involved to remain successful. Contrarily, an Amazon spokesperson told Gizmodo that their fulfillment center is typically 30% less expensive than third-party delivery services and 70% cheaper compared to two-day shipping options available out there.

“Our partners have had the privilege of constructing and running their businesses with no advertising, but if they decide to promote their products, a wide array of service providers are available for them to pick from,” declared the spokesperson.

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Experienced Journalist with a demonstrated history of working in the financial services industry. Skilled in Management, Banking, Strategic Planning, Business Development, and Teamwork. Strong community and social services professional with a Bachelor's Degree focused in Economics.
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