Reading Into Amazon Seller Fee Changes

As often pointed out, greater than 50% of the product sold on Amazon is sold by small and medium size businesses around the world. In fact, it is estimated that more than 2 million sellers on the US marketplace are selling more than >$1 million in retail sales annually. These sellers use Amazon’s customers/traffic, logistics network and marketing capabilities to sell their product on Amazon each and every day. This type of business is incredibly lucrative for Amazon as they never take ownership of inventory.

Just yesterday Amazon made some changes to those fees charged to sellers that typically provide a viewpoint on the type of product Amazon is looking to attract or how their current businesses are performing. Here are my thoughts:

  1. Storage Fees - Amazon surprised most sellers by eliminating the 6-12 month long term storage charges. This goes against their recent increase and monthly long term storage charge that began to charge monthly in Summer 2018. This leads me to believe that Amazon saw significant drops in inventory held by sellers that led to higher out of stocks and missed sales.

  2. Referral Fees - Three years ago Amazon led everyone to believe they cared most about Apparel. In reality that was a massive head fake as Amazon eventually realized that everyone’s wallet is spent on grocery, health and beauty. You can see that is evident in Amazon dropping the referral fees in both categories. Additionally, they are dropping the referral fees in Jewelry for items over $250. This tells me they are trying to recruit less trinkets and trash and more high end jewelry.

  3. Fulfillment Fees - Generally there were very little changes. Amazon did however simplify the Subscribe & Save fee structure showing their desire to build this business further.

Bottom line: All the above changes highlight Amazon doubling down on key categories like Grocery and Health along with an understanding that Sellers drive the overall marketplace with their consigned inventory.