Amazon Imposes New Fee on Third-Party Merchants

In October, Amazon is set to impose a new fee of 2 percent on third-party merchants who use its Seller Fulfilled Prime (SFP) program, increasing costs for numerous businesses who rely on the e-commerce giant.

The announcement is the latest attempt by Amazon to extend its ground delivery capabilities and comes during a time of increased focus on antitrust measures from the Federal Trade Commission.

One furniture seller estimated that the new fee could cost their business an extra $1 million each year. “The new fees will certainly eat into seller margins,” said Neil Saunders, GlobalData Retail. “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.”

Using the SFP program, merchants can avoid Amazon’s Fulfillment By Amazon (FBA) payment and still get the Prime badge, giving their products increased visibility among shoppers. However, due to this, some merchants have questioned Amazon’s motives for the new fee. “We’re sitting here waiting for the FTC to take action against Amazon for antitrust issues, and this fee shows Amazon is not scared at all,” said Jason Boyce, of Avenue7Media.

Read more: Amazon Challenges EU’s ‘Large Online Platform’ Law

Though the fee applies to those using the SFP program, the majority of third-party sellers use FBA due to the increased convenience. “Most sellers use Fulfillment By Amazon instead,” said Juozas Kaziukenas of Marketplace Pulse.

For those that do use the SFP program, Dharmesh Mehta, Amazon’s vice president of worldwide selling partner services, has sought to reassure them: “These optional, paid services aren’t required for succeeding in the Amazon store — some independent sellers run thriving businesses without them — but many sellers choose to use them because they offer impactful opportunities to drive their business growth at lower cost.”

The new fee increase provides Amazon with another method of increasing its own revenues and improving its delivery capabilities, however it also affects the business of numerous third-party merchants. Graham Lewis, an executive at a furnishings company, expects the fee to cost their business an extra $1 million per year. Merchants on the SFP program and those considering enrolling should consider the new cost implications when deciding how best to proceed.

Source: CNBC