Does Amazon Charge 50% as Commission? 

Did you know that Amazon is fleecing the sellers on its platform and possibly you as well? A new report by MarketPlace Pulse quoted by Bloomberg said for the first time ever Amazon’s average commission from each sale surpassed 50% in 2022. The research firm said it had done the sampling of seller transactions going back to 2016. 

According to the research agency, the total cost of sales on Amazon was calculated by tallying the commissions for each sale, fees for warehouse storage, packing and delivery. In addition, the money spent by the seller to advertise on the platform was also added and while payments for logistics and ads are optional, the survey said merchants consider these a necessity. 

The report, which was largely based around Amazon.com and its practices in the US, said the sellers were paying more per transaction for six years in a row, but could absorb these hikes as the platform continued to grow its customer base. The pandemic changed all of this and with people traveling and dining out, online shopping took a hit. Last year was Amazon’s slowest sales growth in the history of the company. 

Merchants feel squeezed from both side

With consumers actually going out seeking deals, merchants on Amazon have been reticent about raising prices, while the platform itself kept doing so steadily. Thus squeezed, the sellers have now resorted to shipping products themselves and considerably reducing their ad spends. 

Marketplace Pulse’s founder and CEO Juozas Kaziukenas feels that small businesses find it harder to be profitable as Amazon, which itself is in a tight spot, keeps increasing fees. A seller we spoke to in New Delhi told us that Amazon’s demand for ad spend made his products unprofitable and without the ads, it did not show up even in the tenth page of Amazon listings. 

However, Amazon thinks otherwise

The article carried an emailed rejoinder from Amazon spokesperson Mira Dix claiming that Amazon sellers chose its logistics because these were 30% cheaper than alternatives from other shipping companies and that merchants were free to buy ads anywhere. “The fees Amazon charges reflect the company’s own costs and investments,” the statement said. 

The article went on to quote specific sellers on Amazon as saying that turning a profit on the platform was getting harder. One seller’s product costs $200 for which Amazon charges $112 as commission, warehouse storage, delivery and advertising. This leaves just $88 to pay the manufacturer, ship the product in from China and cover overheads.

The seller, based in Wisconsin, claimed that his product was being delivered for $28 by other carriers, which was about half of what he was paying Amazon to deliver bulky items. Moreover, it takes longer than the two days that customers expect, which means paying the premium was no longer in the interest of the merchant. Amazon’s statement claimed that this was an exception and not true for other cases.  

The report said Amazon has been dedicating more and more space on its platform for ads, making for more space to sell but each spot less valuable. Conversion rates that measure the number of shoppers purchasing a product after clicking on an ad, have declined on a quarterly basis through 2022, says the report. Ad revenues in the US during the holiday quarter grew by 18.9%, which represented a decline over the 32.2% hike in the same period a year ago. 

However, sellers were also clear that Amazon still provides some value as they help acquire customers, help them select the products, make the payments and then deliver to customers.