Amazon charges 16 types of fees, sellers: layers of fraud

Amazon's return processing fee policy officially took effect on June 1, 2024, and sellers will have to pay additional costs.

Rising costs are a common problem faced by every Amazon seller in recent years. One seller said that for a product that costs more than a dozen dollars, he only makes 2 to 3 dollars, excluding advertising fees, which is not profitable at all. Another seller also said that his current net profit is not even 10%.

Under such a high-pressure environment, some sellers choose to sell their stores and leave, including some old sellers who have been in the industry for many years. However, some sellers choose to continue to stick to it and transform towards refinement and branding in order to seek higher premiums.

There are as many as 16 charges , and the seller laments that he has been ripped off at every level.

As of now, Amazon has three new fees in 2024. In addition to the return processing fee mentioned at the beginning of the article, which has just officially come into effect, there are also low inventory fees and warehouse configuration fees. There is a warehouse configuration fee in March, a low inventory level fee in April, and a return processing fee in June.

According to statistics from Amazon sellers, they have to face 16 charges from the moment of shipment, including warehouse configuration fee, warehouse defect fee, low inventory fee, FBA processing fee, return processing fee, removal and abandonment fee, monthly storage fee, peak season storage fee, storage utilization surcharge, overage inventory surcharge, multi-channel delivery fee, bulk clearance fee, hazardous goods delivery fee, advertising fee, account subscription fee, and excess storage fee.

Sellers complained: "If sales are good, they will charge low inventory fees, but if sales are poor, they will charge storage fees. It's really a rip-off, Amazon eats it all up."

While new charges are constantly being added, existing charges are also rising year by year. For example, in terms of advertising fees, according to Marketplace Pulse data, in June 2021, the average CPC for Amazon US ads was $1.16, an increase of more than 50% year-on-year. In September 2023, the CPC for Amazon ads increased by 30% from the beginning of the year, and increased by more than 50% year-on-year.

The increased costs of sellers are converted into revenue for Amazon. The financial report shows that Amazon's advertising revenue in 2023 will be US$46.91 billion, an increase of 24% from US$37.74 billion in 2022.

Earlier data from Marketplace Pulse showed that Amazon pocketed more than 50% of sellers’ revenue, an increase of more than 10% in five years.

Among them, fulfillment fees and advertising fees are the biggest expenses. According to a sample profit and loss statement of an Amazon seller, he has to pay a 15% commission (Amazon calls it a referral fee), 20%-35% Amazon fulfillment fees (including storage fees and other fees), and up to 15% Amazon advertising and promotion fees.

Amazon increases fulfillment fees every year, but because it is tied to sales on Amazon, sellers cannot give it up. In terms of advertising, although Amazon does not set prices, as competition intensifies, advertising fees are becoming more and more expensive. Moreover, most of the positions with high conversion rates are allocated to advertising. If sellers want their products to be more easily discovered, they can only advertise.

So although FBA and advertising are two optional services on the surface, sellers must choose these two services if they want to remain competitive and successful.

Although the commission has not changed much over the years, it is not cheap compared to other platforms. Huabao New Energy, a major energy storage company, responded to the Shenzhen Stock Exchange's 2023 annual report inquiry letter, showing that in 2023, it paid 129 million yuan in Amazon platform fees, including commissions, refund service fees, gift packaging fees, etc., accounting for 14.45% of the platform's sales, the highest proportion among all online platforms it operates. This is almost the same as the salary of its sales staff (350 people, 121 million yuan).

Leave or hold on, some go left and some go right

As costs soar, competition is also intensifying. One seller lamented the serious involution in the current market environment, saying: "In a niche category, his two competitors are selling at a discount. Before, they had to sell for more than 20 dollars to cover the cost, but now they sell for less than 10 dollars, and the delivery fee plus commission is almost that price!"

As one senior seller said: “To do business on Amazon now, you cannot do it without a strong heart.” So some people who can’t bear the pressure choose to sell their stores and leave.

Last June, a Shenzhen seller who had been selling on Amazon for seven years said he was going to quit. After years of working in the cross-border e-commerce industry, he had experienced both highs and lows. His order volume once went from 10 orders a week to 5,000 orders. However, it has become increasingly difficult to sell on Amazon in recent years. By 2023, his monthly order volume was less than 100 orders, and he was still losing money.

So when the situation still did not improve in June, he decisively decided to sell the store and leave. "I don't want to roll anymore. I want to enjoy life while I have money left. It's also a way to make an account of the past few years."

There are many Amazon sellers who got out as soon as possible like him. As we all know, there is a very popular model in the cross-border circle, namely Amazon aggregator. A large amount of capital was invested heavily to acquire Amazon stores. At that time, many sellers took the opportunity to get out and used the money from selling their stores to buy cars and houses, travel and enjoy life.

Israeli seller Y is one of them. During the epidemic, he sold his furniture store/brand to Thrasio, the leading giant of Amazon aggregator, for a high price of US$20 million. At the time of the sale, his store had sold 20 products, with profits of millions of dollars and employed 3 employees.

Y opened his shop when he was 21 years old, and his business tripled between 2017 and 2020. Due to too many uncertainties during the epidemic, in order to ensure his own financial security, he decided to sell the shop and buy a house.

An industry insider shared his experience of attending some events and said: "In the past two years, more and more sellers have left. In one meeting with 55 people, only four sellers were still doing business on Amazon. Everyone generally believes that cross-border e-commerce is no longer so easy to make money."

Of course, more people choose to continue to persevere, but they are also trying to transform towards refinement and branding in order to seek higher premiums.

Relevant data shows that in the past three years, the growth rate of Chinese brand sellers on Amazon has been more than 6 times that of non-brand sellers. In addition, sellers who pay attention will find such a phenomenon that now Amazon's various categories are increasingly moving towards the top, and high-quality products will receive more traffic.

In this context, many sellers have decided to move towards branding, and even Youkeshu, which is deeply stuck in the quagmire, is firmly implementing this. In its 2023 annual report , Youkeshu stated that in terms of branding transformation, Youkeshu plans to continue to focus on specific categories in 2024, strictly control the number of SKUs, and develop high-quality private brands to promote branding strategic transformation.

Not long ago, Huakai Yibai acquired Tongtuo Technology. Many people believe that by acquiring Tongtuo Technology, Huakai Yibai will further accelerate the branding process and tap into new growth points.

Return processing fee

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