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| Amazon uses sellers to make up for losses on Prime |
The sheer impact of Amazon's e-commerce platform appeals to any small business looking to sell their products online. However, a new report notes that the cost of starting a business can become difficult for outside sellers because company fees can hurt profits.
A report by the nonprofit ILSR's Local Self Employment Research Institute found that Amazon raised a total of $121 billion from third-party sellers this year alone.
According to the report, such costs as advertising, referrals, and shipping costs usually mean that small businesses lose money to Amazon.
In 2014, sellers paid the company $19 for every $100 sold. Today, for every $100 sale, the price is $34.
According to the report, Amazon hides the profits of these small businesses in its financial reports and merges them with other low-profit industries, as it shows that it is not in its interest to obtain those profits from small businesses.
But subscription service Prime, a shortfall for the e-commerce giant, offers the company a handful of buyers who want free shipping. According to the report, gains from Amazon's sales fee supported Prime's loss.
If you are a company that makes or sells consumer products, if you don't sell on Amazon, you are a loser, and if you do, you are a loser.
Small retailers may try to use their website to reach customers. But that's usually tricky, since Amazon's role as head means it's often the first and only place customers can shop online.
“Prime subscribers have grown to 200 million,” former Amazon chief Jeff Bezos said in his latest annual letter to investors in April.
Amazon earned $121 billion in sales fees
There are other e-commerce platforms that small businesses can use to sell their products online. But if sellers want to keep selling on Amazon, they have to keep the price the same across the board.
According to Amazon's Fair Pricing Policy. When companies find that they charge different product prices to their customers on other e-commerce platforms, sellers can be penalized.
Penalties can range from removal of the seller's product from the purchase field shown on the product list page to termination by the sales authority.
The company said that the goal of its fair pricing policy is to pursue pricing behavior that undermines customer confidence. However, the report concluded that this generally means that customers generally pay higher fees. This is because third party sellers need to increase the prices they charge their customers so that they can pay Amazon fees and make a profit.
A company spokesperson said in a statement that the ILSR report was intentionally misleading. It also confuses Amazon's sales fee with the cost of optional services purchased from some sellers, such as logistics and advertising.
He added that these fees constituted between 8 and 17% of the selling price. Compared to options to sell across other marketplaces such as Wal-Mart, this is a competitive price. Or sell directly to consumers through companies like Shopify.