In a recent notification to its sellers, Amazon announced a revision in its fee structure that will take effect from May 31, 2023. This change is expected to result in price increases for certain items sold on the platform.
Currently, for every item purchased from a seller on Amazon, the seller pays fees to Amazon, including charges for inventory storage, shipping, returns, and a seller fee.
One seller interviewed by Moneycontrol expressed concerns that the increased seller fee would likely lead to lower sales and reduced earnings from the platform.
Amazon's notification stated that the revised fee structure encompasses changes in each category of items, long-term storage fees, and refund fees. It's important to note that these fee increases do not include the 18 percent Goods and Services Tax (GST) that will be levied on the seller fee.
The steepest increase in seller fee was observed in the over-the-counter (OTC) medicine category. Previously set at 5 percent, the fee has now been raised to 12 percent for items below Rs 500 and 15 percent for items priced above Rs 500.
Beauty products, including haircare, bath and shower products, and makeup, also experienced significant increases in seller fees, as did apparel.
While certain categories saw fee increases, Amazon also reduced fees for specific products such as solar panels, gym equipment, automotive parts like floor mats, and more. These fee reductions are expected to be implemented by the end of May.
Although most of the price increases will likely be passed on to customers, sellers are concerned about potential repercussions on their ranking within the platform's search results.
They fear that the higher prices resulting from the fee revisions could negatively impact their position in the "similar" tab, primarily due to Amazon's algorithmic ranking system. Additionally, there is a risk that the same product may be available at a lower price either from other sellers on Amazon or on alternative platforms, leading to a decline in sales.
The decision to revise the seller fee follows Amazon's move in September of the previous year to reduce the fee by half for new sellers joining the platform, aiming to encourage them to sell on multiple e-commerce marketplaces.
In addition to changes in seller fees, Amazon has also made adjustments to inventory holding fees, shipping charges, and other related aspects. More details can be found in the provided link.
Explaining the rationale, an Amazon India spokesperson told Moneycontrol that, "seller fee revision are based on various factors including change in market dynamics and various macro-economic factors. As a part of our recent fee revision, we have made certain changes to our fee rate card including introduction of new fee categories and also reduction of fees in certain categories."
"Our endeavor is to ensure that fees on Amazon continue to remain competitive for sellers so that the sellers find value for doing business on Amazon,” the spokesperson added.
The revision in seller fee comes at a time when the e-commerce giant has been pushing for profitability in India, a key market for Amazon, after investing over $6.5 billion in the past decade or so.
The Seattle-based company has shut down unprofitable units like Amazon Food and said that Amazon Academy would also be closed down as well in a phased manner starting August 2023. It is also axing jobs across divisions like Amazon Web Services (AWS) and others, which are affecting employees, across the world, including India.
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