Reduced commission rates on select product categories go into effect today for the Amazon Affiliate Marketing Program. Those who respond to the program to monetize their websites are not surprised; However, many saw the cuts coming and had one word for those who were surprised: diversify.
Amazon’s affiliate program, called Amazon Associates, pays referral fees to bloggers, website owners, and digital publishers when links from online content drive purchases from Amazon. While the income generated can be a side hustle to younger players who indulge in the program, the revenue loss will be greater for online publishers such as CNET, Consumer Reports, BuzzFeed, and the New York Times.
For some product categories, such as Luxury Beauty, the commission Amazon pays is as high as 10%. Luxury Beauty’s affiliate rate of return remains unchanged while fees paid on Amazon sales in the furniture, home, home improvement, and lawn and garden categories are now more than halved – from 8% to 3% as of today. Grocery commission fees have been significantly reduced, from 5% to 1%, effective today.
says Kelly Video, founder of Digital Shelf Strategy, an Amazon consulting firm.
“For these small businesses, unfortunately, it is very likely that their livelihoods will be wiped out.”
The new commission structure includes deep discounts in product categories that are in high demand due to the coronavirus outbreak, such as health and personal care items whose payout rate is down to 1% today, down from 4.5%. For this reason, some are speculating that the global health crisis is what prompted the changes although an Amazon spokesperson told CNBC last week that the fees had been updated as a result of periodic assessment practices.
“I don’t think it’s just due to COVID. I think Amazon routinely reviews its software and profitability, adjusting as necessary,” says Fahim Naim, founder and CEO of eShopportunity, the Amazon consultancy he founded after working as a category manager at Amazon.
Just a few years ago, in 2017, a similar commission fee restructuring caused an uproar from Amazon affiliates.
Naim said the changes that Amazon has put into effect today are likely part of a long-term game, although the timing could be better. “Even if it was the right business decision, they are not doing themselves a favor by declaring this during the COVID chaos,” he says. “I’m a little surprised they didn’t wait another month or two before announcing this.”
Amazon’s stock hit an all-time high, rising to $2,283 a share on April 14, the same day the commission rate cuts came to light.
Reddit posters recorded their displeasure with the fee cuts: “What a tough time to do this, but it’s, like I said, the path of capitalism,” okletsdothisthang wrote last week after announcing the changes. “Many sites are about to put it up for sale as well. I know we say these things every time this happens, but for one last cliché: diversify and diversify.”
Fedio, who founded and created her own outdoor lifestyle brand One Savvy Girl on Amazon before launching her consulting company, agrees that those who rely on commissions from Amazon anticipate change and strategize for the long term.
“If you want to survive for the long haul, you need to adapt to changes. This should be a stark reminder of the need to diversify, as there are huge risks to a single monetization method around a platform that you have no control over.”
While some companies will be hurt by the changes and others may move away from Amazon entirely, Fedio says there are other opportunities and affiliate networks to consider. “Amazon is by far not the only game in town,” she says. “Look for diversification opportunities through traffic and revenue streams.”
The Amazon Associates Marketing Program and other programs may see more changes in the future because subsequent revisions and adjustments are inevitable.
“I expect Amazon will start pushing its spin-off programs more and more difficult in the future, so I think they still understand the importance of external traffic,” Naim adds. “Maybe they are just trying to correct the situation as it relates to the profitability of the program.”
Jeff Bezos, Amazon CEO, provides more indications of what lies ahead in his annual letter to shareholders issued last week.