New Amazon Fee Could Sting Third-Party Sellers
Amazon’s focus on cutting costs appears to extend to third-party sellers.
In October, the e-commerce giant will reportedly impose a new 2 percent fee on sellers who opt out of using Amazon’s logistics and fulfillment services, according to Bloomberg. That would add to the approximate 15 percent commission that merchants already pay Amazon to sell products on the Everything Store.
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The development comes as the Federal Trade Commission (FTC) is said to be preparing to file an antitrust case targeting Amazon’s perceived pricing power and policies that force merchants to use services such as Fulfillment by Amazon (FBA).
“Creating a separate fee rather than just increasing commissions is a bit unusual and regardless of whether it is intentional or not, it suggests Amazon is trying to nudge more sellers into using its own services,” said Neil Saunders, managing director at GlobalData Retail, a London consultancy. “This isn’t necessarily just about trying to make more money; it’s also about increasing the volumes going through the Amazon network to make it more efficient.”
The fee targets merchants who use the recently relaunched Seller Fulfilled Prime (SFP) delivery program, which Amazon reintroduced after four years on hiatus, enabling third-party sellers to ship Prime-eligible products out of their own warehouses. These merchants often sell bulkier items like furniture that are harder for Amazon’s warehouses to handle.
“Seller Fulfilled Prime is a voluntary, optional program that enables sellers who independently handle the fulfillment of their products to have their offers receive the Prime badge,” an Amazon spokesperson told Sourcing Journal. Without confirming the reported 2 percent figure, the spokesperson said there is “a small fee associated with units sold through this program.”
One furniture merchant told Bloomberg the fee would cost them an extra $1 million per year, and force the seller to raise prices.
“The new fees will certainly eat into seller margins,” Saunders told Sourcing Journal. “However, Amazon’s own costs have risen over recent years, so it is probably passing some of these over to sellers. Amazon still delivers a lot of benefits to sellers including exposure to a massive audience, so it likely feels that even with the increase, it is still offering very good value.”
The potential new fee comes as Amazon reportedly wants to extend its ground delivery capabilities to include non-Amazon products.
The tech titan has re-launched a non-urgent ground delivery service called Amazon Shipping that is designed for shippers that aren’t selling products on Amazon, according to a report from FreightWaves. It appears to be a reboot of a pilot service it had discontinued at the start of the Covid-19 pandemic, when the company delivered non-Amazon packages via its own logistics service. Amazon has not confirmed the launch.
The service is accessible to shippers who place orders through Amazon’s marketplace, but they can also integrate the option into their own website and other selling channels, according to the report. Ground deliveries will be made in five days or less, with 24/7 customer support available.
Rather than delivering packages from Amazon warehouses, the original program allowed businesses to ship their goods using Amazon’s delivery fleet. The online giant wanted to entice those shippers with promises to eliminate the fees and surcharges leveraged by other providers. The pilot program launched in 2018 in cities including New York, Chicago and Los Angeles.
Although Amazon has captured 23 percent of total parcel volume delivered in the U.S., according to Pitney Bowes, it hasn’t established a standalone shipping business that directly competes with UPS and FedEx.
In the time since it discontinued the service, Amazon doubled the size of its fulfillment network, regionalized it into eight interconnected hubs and now offers same-day delivery in more than 90 U.S. metro areas. Amazon said it now touches delivered packages 20 percent less, and travels 19 percent fewer miles to make a delivery. It now fulfills 76 percent of orders from the region around the customer.
The new ground option isn’t the only change coming to the company delivery operations. Amazon is also teaming up with local small businesses as part of its Hub Delivery program. Third-party businesses in the program commit to delivering packages with their own staff, vehicles and devices. By the end of the year, Amazon aims to partner with 2,500 small business drivers.
