Amazon's Sellers Unhappy about Fee Hikes

[Hum]

A brewing conflict between Amazon.com Inc and its merchants over fee hikes could benefit rival eBay Inc, and provide an opening for Wal-Mart Stores Inc and Google Inc, which are just getting into the space.

Amazon's online bazaar generates margins many times higher than traditional retail as the company takes a cut of every sale on its site made by a merchant, known as a third-party seller, and charges extra fees for handling logistics.

The growth of this business, which now accounts for almost 40 percent of unit sales, has helped push Amazon shares to record highs.

But a series of fee hikes over the past year and a half have alienated many merchants, and some are threatening to defect.

"If they increase fees too much, some sellers will decide to not sell there anymore," said Niraj Shah, chief executive of furniture retailer Wayfair, which uses Amazon, eBay and Wal-Mart's online marketplaces, as well as its own websites.

"That's against Amazon's plan, which is to get as much selection as possible on their site," Shah added. "The vast majority of Amazon sellers are perfectly happy to go to any marketplace offering meaningful volume."

Amazon said many of the fee increases have been driven by rising costs, such as higher gas prices and hence transport expenses. It said it has also invested in changes to get products to customers quicker - a push that third-party sellers will benefit from because faster shipping should increase sales.

Google may be the bigger threat. It already owns most of the necessary pieces, such as product search, listings and a payment service -- it just hasn't combined them yet.

It began testing a same-day delivery service with retailers in recent weeks, sparking speculation it's building a marketplace. A spokeswoman said Google is always working to improve the user experience, including shopping.

"If somebody comes in, a Google for instance, and says you can list with us and we will give you wide exposure at much lower cost, that would be a problem for Amazon," said Scott Tilghman, an analyst at B. Riley Caris.

Consumers want selection, bargains and fast shipping, which all cost money. Getting sellers to cover those expenses could drive them elsewhere. Yet if marketplace operators cover such costs, their profits suffer and shareholders grumble.

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[+LogicalApex MVC]

Sounds good, but just like how WalMart can beat the manufacturer over the head to lower their prices so WalMart can have the lowest prices Amazon can beat them up too. The traffic is at Amazon so if you jump over to eBay or something else you'll lose business. Just like how you'll lose business leaving WalMart.

[Growled Member]

Competition is always a good thing.

[Hum]

I reckon somebody has to pay for the extra shipping costs, somewhere along the line.