Amazon-Fee-Increases

Amazon Fee Increases What Can Merchants Do?

As I am sure most reading this blog are aware that on the 4th April Amazon are increasing some of their fee categories.  It was announced first on the e-commerce news site Tamebay.  You can see the original post here:  http://tamebay.com/2013/02/amazon-fee-increases-for-electronics-accessories.html.

This announcement has led to much uproar on forums around the web from angry third-party sellers that will be affected.  The general fear from third-party sellers is that this will be the first of many fee increases to come and that Amazon are going to start squeezing out third-party sales.  If this is the case, then it will leave a lot of smaller businesses wondering what to do.  Many already struggle to compete with Amazon as it is and by being priced out of the marketplace it could really affect their turnover.

What are the effects?

Amazon fee increases

As anyone who sells on Marketplaces will tell you, fee’s only ever tend to go up with the very odd exception, and prices only ever tend to come down.  This can be a sort of double whammy for third-party merchants.  They end up selling their products for less and the marketplaces want to take a bigger cut of their sale price.

As for the cause of Amazon doing this, some people online is guessing, it is because Amazon envisage having to pay more tax.  To be fair though for a company who made a loss of $274 million alone in just Q3 of 2012.  You can’t blame the company for looking at ways to increase profitability.

What Can You Do?

As you would expect this hits most sellers with a bit of a problem.  Amazon is just too big to ignore.  They are Amazon and they can do what they want in effect.  The obvious one is that if you don’t already then strongly consider opening an eBay account and building your brand on this channel.  eBay got a similar number of unique visitors a month and they will never compete with you as a retailer.  Chances are however that you already sell on multiple channels in which case you need to work on steering your dependency away from Amazon (If you need any help or advice in how to build up an eBay or website presence then please get in touch with me here.)flubit Logo

The next obvious choice is to look at potential new streams of revenue.  If you have Amazon and eBay ticking over nicely and a website which is bringing in good sales, then looking at new channels to drive sales to your business.  One of the newest and most exciting channels is Flubit.  They offer a totally unique buying journey to their customers and best of all they do not charge any fixed channel fees.  To find out more about Flubit check out the website here, you can also get in touch with them using the instructions on the page.  In case you have missed it you can also see the Flubit buying journey from a blog I wrote back in September

 

I would love to hear your thoughts on this, are you being affected by Marketplace fee increases?  Or do you run a business and are noticing that you are working harder to make the same amount of profit?  Please let me know in the comments below, it would be great to hear from you.

2 replies
  1. John Davies
    John Davies says:

    Hi Dave,

    This is a really good article and it clearly demonstrates that relying on a third party for all your sales can be dangerous – you can’t control or predict what they are going to do. Not only that, their focus is on building their business, not necessarily yours! This is absolutely the case with Amazon – you’re not working towards a shared goal – Amazon are allowing you to contribute to their goals and their achievements (in my opinion).

    For example, there are many horror stories online that show Amazon have used the Seller Central platform as product sourcing initiative (with scary results for the small business that relied on Amazon for their market and revenue).

    It’s very similar to the Paypal argument – before I left my previous company we experienced a sales spike of 1000% coming into Christmas due to a new product category we entered… Paypal limited our account for three weeks while they investigated us for money laundering (due to the huge and almost instant revenue increase) – meaning all we could do was accept payments (we couldn’t withdraw any money!) – it completely strangled our eBay cash flow and was incredibly hard to take – particularly as the documented duration of the ‘limitation’ was 48 hours!

    Anyway, back to the point… (soapbox back under the bed!)… for the marketplace seller, adding new channels is definitely the way to go but the problem I’ve found is that NONE of the marketplace inventory management systems (eSellerPro etc) add channels to their portfolio fast enough – I think this will be the hurdle that marketplace sellers and new channels like Flubit need to overcome to come together to access each others customers.

    It will be interesting to see, when Tesco open up their marketplace to mainstream sellers, how long it takes for eSellerPro, ChannelAdvisor etc to integrate it for their users.

    Marketplace selling and building a business on 3rd Party Marketplaces certainly isn’t easy but then neither is building sales on and investing huge amounts of money in a standalone website – for many small businesses marketplace selling is a necessary evil and I’ve always wondered whether the business model of a marketplace competing with their sellers (and vice versa) is just a ticking time bomb?

    Only time will tell.

    All the best,
    John

    Reply
    • DaveF
      DaveF says:

      Hi John

      Sorry for the late reply, I must have missed your comment come through on the blog. Thanks for the reply as well, your right it certainly is going to be an interesting one to see how it develops as time goes on.

      Funnily enough I was talking to some guys from both eSellerPro and Channel Advisor over the course of the past few weeks. The guys at Channel Advisor confirmed that they get hundreds of marketplace partnership requests every year and it is not top of their priority lists to work these integrations through. What a lot of the new inventory management guys are doing is working on setting up a really deep and broad API set up which will allow new marketplaces to integrate into. I was talking to James Scott at Brightpearl at IRX this year and he confirmed that this was the goal of Brightpearl.

      I got lucky with my work with Flubit and managed to get eSellerPro to integrate with Flubit as a Marketplace partner.

      In terms of Tesco I know that both Channel Advisor and eSellerPro have been testing accounts that have been invited on to the Tesco Marketplace and hopefully by the time they open up Tesco Marketplace to everyone instead of being invitation only then both of these guys will have working integrations.

      Like you say only time will tell but fingers crossed more marketplaces will be a good thing.

      Best Wishes

      Dave

      Reply

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