Amazon Affiliate Marketing Fees

The Prime Effect: How The Amazon Marketplace Shapes How We Shop

(AP Photo/Wilfredo Lee, File)
Written by publishing team

Like everything with Amazon, its market is large. Small businesses like Steve Chou’s Bumblebee Linens can go up. But is the market also destroying the brick-and-mortar high street stores? In the third episode of the Amazon series, take a look at the peaks and pits of the Amazon retail market.

guests

James Thompson, chief strategist and partner at Buy Box Experts, an agency that works with Amazon brands and brand investors. Co-founder of Prosper Show, an educational conference for top Amazon sellers. Author of Controlling Your Brand in the Age of Amazon. (Tweet embed)

Stacy MitchellCo-Director of the Local Self-Reliance Institute, a research and advocacy organization focused on combating corporate control to build just societies. Author of numerous reports and articles on Amazon’s strength, including “Amazon’s Stranglehold” and “Antitrust and the Decline of Independent Business in America.” (Tweet embed)


Read the Local Self-Reliance Institute’s summary of the House report on Amazon and digital monopolies here.


also appeared

Sherry Euckle, CEO and founder of Big Dot of Happiness, a retailer of party supplies on Amazon.

Steve ChuBumblebee Linens owner. (Tweet embed)

Sebastian Remars, CEO and co-founder of Heyday, one of the largest investors in Amazon-focused brands.

Danny King, owner of the Raven Book Store. Author of How to Resist Amazon and Why. (Tweet embed)

Darmish Mehta, Vice President of Amazon’s Customer Trust and Partner Support (CTPS). (Tweet embed)

Interview highlights

On how to visualize how big Amazon really is

Stacy Mitchell: “It’s huge, I mean Amazon Marketplace, the fee Amazon charges to third-party sellers, last year was roughly $90 billion. That’s a quarter of the company’s revenue, and a multiple of the revenue it gets from AWS, Amazon Web Services, its massive cloud computing division.” So that’s huge. And the marketplace really shows what Amazon is all about. Amazon wants to be the infrastructure for the exchange of goods and services. They want to be the backbone of how commerce works, and the platform where transactions happen. So the marketplace is really an illustration of their core strength.”

You mentioned the $90 billion fee from third-party sellers selling their merchandise on Amazon. What are those fees? How does this work?

Stacy Mitchell: There are three main components to this fee. And just to give some perspective on how these fees may change over time, in 2014, Amazon was on average taking in about 19% of every dollar a seller earned. By last year, it was over 30%. This is average. Lots of sellers in the US give 40%, 50% of their revenue directly to Amazon.

This fee consists of three main components. One is the base commission, which is simply the percentage you have to give Amazon to list and sell a product. This is 15% for most products. That hasn’t changed the whole time Amazon has been up and running. One might expect it to decline as Amazon makes more transactions, because presumably everything became more efficient. But it hasn’t changed. So this remained very high. On top of that, Amazon has added fees for storage and product shipping as well as fees for advertising.

Increasingly, in order for your products to appear on the first page of search results, you have to buy their ads. So you have to pay extra for that. Shipping and warehousing are clearly a service. But the problem there is that Amazon is actually asking sellers to use its own shipping service instead of UPS or the Postal Service, for example. And so it effectively forces them to buy that if they want to succeed on the site. So those are the three main forms of fees. There are a number of other smaller fees, but these are the big fees.”

On How Amazon Radically Changed E-Commerce

James Thompson: “I work with a number of brands that, quite frankly, although they might have a chance to sell elsewhere in e-commerce, if they’re not on Amazon, and if they don’t have an Amazon channel strategy, they’d rather obviously be there. A bigger problem for them.Amazon is where customers shop. And so they have to be there. Even if they don’t want to be there, they have to be present, whether they’re selling themselves, whether they’re working with other sellers selling their products.Brands need to Amazon channel strategy.

“One of the hardest parts of working with brands that have historically grown up without e-commerce is that for a lot of them, they look at the Amazon channel and say, ‘This is just another channel. We’re going to sell in this physical channel and that physical channel. And that’s where the Amazon e-commerce channel comes in.’ I think it’s We can sell in that channel. But the dynamics of what’s happening on Amazon has implications for all of their distribution efforts, both online and off. So for brands that don’t care what happens to their products on Amazon, they could wake up one day to discover that there are unknown sellers representing their products.

“There are people who create branded content for their brands and don’t necessarily think it has to go along with the messages they’re spreading across all other channels. Then there are all kinds of issues that can happen with price-following on Amazon because there’s a lot more competition on the channel than on any other channel. So when you look at all these different kinds of issues, when you talk about transforming e-commerce, I would argue that Amazon is actually shifting sales in every online and offline channel to consumers. Because what happens in Amazon affects what happens in every other channel. “.

About How Small Businesses Perform on Amazon

Stacy Mitchell: “We surveyed nearly a thousand independent companies across the US in 2019. Only 11% of those who sell on Amazon describe their experience as successful. I mean, most sellers don’t succeed. And what we see in the data is that sellers have a relatively short lifespan. To be on the site It’s kind of like going to a casino. You might win a hand. You might have a good streak. But at the end of the day, only the house wins. And that’s the basic setup here.

“And over time, those two million sellers, that’s a lot of diversity. It’s hard to describe them in a general way. But we do know that over time, the share of those sellers selling in the US market that are overseas, especially in China. I mean, the sellers in China account for Now about half of U.S. sales. So, as a measure of how well small businesses that are in the U.S. are doing, I think that’s an indication that … very few are succeeding.”

There was an internal Amazon memo that was revealed during a recent congressional hearing. What did he say about the strength of Amazon?

Stacy MitchellExternally, Amazon talks about external sellers as “partners,” but inside the company, as this note revealed, they refer to them as “internal competitors.” So Amazon considers sellers to be its competitors. It sees them as an opportunity to get a lot of revenue, because They have nowhere else to go. And as a business they can personalize their data and compete against them. And that’s really a core problem. I guess just going back to that kind of concept of like, well, doesn’t Amazon provide all these great tools and services?

“You know, again, the web is great for online shopping, and there are platforms and tools out there for independent businesses that they just can’t build on their own. That’s all for good. The problem is Amazon doesn’t have real competition. So, if you’re a seller and you don’t like the way Which Amazon treats you like, where else would you go? They have two-thirds of all eyeballs.

“Starting when people go shopping online, two-thirds of them start on Amazon. So you don’t have competition regulating Amazon behavior. You also don’t have any regulation. Without any of those things, what we have is a situation where Amazon itself is effectively regulating online commerce.” They decide. And it’s basically not democracy. It fundamentally goes against our values ​​of freedom and open markets.”

From the reading list

The Wall Street Journal: “Amazon collected data from its sellers to launch competing products” – “Amazon.com Inc. 0.91% AMZN employees used data about independent sellers on the company’s platform to develop competing products, a practice that is inconsistent with the company’s stated policies.”

local self-reliance institute: “Report: Amazon’s Monopoly Tollbooth” – “Amazon’s dominance of online retail means hundreds of thousands of small businesses must rely on their location to reach customers.”

the edge: “Jeff Bezos Can’t Promise Amazon Employees Not to Access Independent Seller Data” — “During Wednesday’s antitrust hearing, Amazon and CEO Jeff Bezos came under fire from lawmakers for the company’s alleged use of third-party seller data in developing its own products.”

USA TODAY: “Small businesses can become Amazon sellers to take advantage of online retail sales” – “While the pandemic has been bad for many businesses in many ways. There was a positive side if you happen to be a small business selling on Amazon, in this case, it is likely that 2020 will be a prosperous year for you.”

New Yorker: “Kansas Library’s Battle with Amazon Is More Than Just the Price of Books” – “If you know anything about the Raven Library in Lawrence, Kansas, you know they charge more for books than Amazon.”

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