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Not this time.
That was a common refrain in phone and text conversations with more than two dozen longtime U.S.-based Amazon sellers in recent weeks. luck I’ve heard it many times, but this time it’s different.
“This” refers to the latest fees that Amazon charges sellers. More than 60% of the products Amazon sells worldwide come from these small businesses, and Amazon already takes an average cut of at least 50% from each sale when storing and shipping sellers’ products. I am getting . Goods.
Now, the amount of money sellers are forking over to Amazon is likely to increase even more thanks to some additional fees that have quickly become so controversial that the Federal Trade Commission has begun investigating them. luck It was exclusively reported last week. What is the consistent message that dispassionate sellers have been sharing with each other over the years? Selling on Amazon may soon be impossible.
As a result, many of these same business owners predict some kind of extinction-like event for Amazon sellers. The general category of third-party sellers will never disappear, and some hardy types and emerging varieties will always adapt and survive, but for many existing sellers, the climate of the planet Amazon is no longer sustainable. My view is that it may not be possible. As they know. The only question is which types of sellers will be forced out of business (or at least off Amazon) first.
Will you be an unsophisticated seller who has a hard time predicting how new variable costs will impact your business? damage may go unnoticed.
Or consider the plight of a sophisticated seller who understands what is about to happen but finds himself in a tight spot. This seller may want to increase the price to account for Amazon’s additional fees. However, if the seller is A. too inexperienced to understand the impact of fees on revenue, or B. is based in China and therefore leverages Amazon’s cross-services, the seller may be able to lower the price. That may not be possible if you’re competing with competitors in a controlled manner. Border supply chain services that could help avoid new fees.
In either scenario, things can get worse.
“People will tend to underprice and eat into their profits,” said Bernie Thompson, founder of Pluggable, a USB electronics brand that has been selling on Amazon since 2009 and is a top seller on Amazon. talk. “There will be a lot of bankruptcies.”
Amazon said the fee changes are significantly smaller than those announced by other major fulfillment services, and many sellers will see a reduction in the average fee paid to Amazon per unit sold.
The price changes will “allow sellers to choose where they want Amazon to handle various aspects of fulfillment, and where they want to do the work themselves,” Amazon spokeswoman Mila Dix said. Told. luck last week.
Win-win for Amazon
Many of the sellers we spoke to luck While we understand the rationale for at least one fee known as the “inbound referral fee,” we do not agree with the introduction and variation of the fee. Previously, Amazon sellers could ship selected products from their own warehouses, or warehouses where they essentially rented space, to a single Amazon facility, and then Amazon would split up that inventory. We were able to obtain the product by shipping it to various facilities across the United States. Get closer to your Amazon customers. In these scenarios, Amazon would be responsible for paying to transport the items between its fulfillment centers.
Now, Amazon is pushing to store more products closer to customers in more parts of the U.S. while cutting its own costs, hoping sellers will start paying for it themselves. There is. Amazon will charge sellers a new “inbound placement fee” per item unless they pay to ship their inventory to at least four Amazon facilities. (If you’re a small seller who doesn’t have enough sales to split into four properties, that means you’ll likely pay some sort of listing fee no matter what.)
The more warehouses a seller ships to, the lower the fees. However, the price per unit depends on how many warehouses Amazon provides to sellers and where those warehouses are located. Then, only when the seller creates the shipment and Amazon displays the rates, the business owner can calculate the cost of shipping to various warehouse locations and choose the cheapest option.
One comment from a seller on Amazon’s seller forums captures some of the frustration with the new complexity.
“Oh, I think you need a Ph.D. to calculate the fees.”
Jens Büttner/Photo in association with Getty Images
Some sellers are similarly unhappy with new “out of stock” fees that Amazon charges sellers when Amazon warehouses don’t have enough inventory, especially those who store excess inventory in Amazon facilities. Amazon is also considering charging a fee for those cases. Great confusion remains for sellers who sell products that have an expiration date and shouldn’t be kept in stock for too long, and for sellers who sell seasonal items as well.
The pitfall of both new fees, of course, is that there is one easy way to avoid them. That means paying Amazon for a new warehousing service called Amazon Warehousing and Distribution (AWD) to store long-term inventory. Of course, when you sign up to use AWD, inbound placement fees and low inventory fees essentially disappear. One seller calls this a very clear “carrot and stick” approach, but if you’re feeling less diplomatic, it’s a crumbs and sledgehammer approach.
Some sellers told Fortune they felt AWD was a suitable alternative, but many types of sellers couldn’t switch to AWD even if they wanted to. Oversized items or items with expiration dates cannot be stored in AWD. Additionally, some sellers already own or lease their own warehouses for long-term storage or have long-term contracts with third-party logistics companies to manage their storage facilities. For them, switching to AWD right away is not a realistic option.
On the surface, the new fees certainly seem like a win-win for Amazon. The company could offset some of its costs through new fees and gain more control over its supply chain if sellers opt for AWD. Because of the increased burden on sellers, many may decide to stop selling. But with hundreds of thousands of sellers, it will take many failures for a seller to feel the pain of Amazon and its shopping experience.
As a reporter who has talked to Amazon sellers every week for the past decade, I have never encountered this level of anger and despair. Many of these small businesses – who have great small business success stories and are usually not afraid to praise themselves – are now furious and desperate. Will Amazon heed their plea?
Do you have thoughts on this topic or tips to share? Contact Jason Del Rey at jason.delrey@fortune.com, jasondelrey@protonmail.com or through the secure messaging app Signal at 917-655-4267 Please contact me. You can also message him on LinkedIn or @delrey onX.
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