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Amazon Raising Fees to Third-Party Businesses

2 Jan, 2014 By: Erik Gruenwedel

Amazon is slated Feb. 4 to raise fees charged to third-party businesses (“webstores”) selling products through its platform. The ecommerce giant is also hiking rates charged for fulfillment, monthly storage fees, inventory placement service, and apparel handling, according to Michael Pachter, analyst with Wedbush Securities in Los Angeles.

Third-party businesses have become key to Amazon’s growth, especially its ability to guarantee two-day shipping to Amazon Prime members. Amazon makes money by taking a percentage of third-party sales and, providing fulfillment, shipment and services

Reportedly, 2 million third-party businesses use Amazon to sell products through standalone websites, although Amazon does not disclose the actual number. Last Christmas, almost two in five items bought on the site were sold by third-party businesses, according to The Guardian.

Amazon currently charges a $39.99 monthly subscription fee to businesses and sellers it helps create proprietary branded websites that operate outside of Amazon. The monthly fee for third-party business websites posted is slated to increase to $79.

In addition to the subscription fee, the transaction fee for third-party websites that also sell on Amazon will increase to 2% of sales from 1%, with fees charged third-party sites that don't sell on Amazon remaining at 2%.

Amazon last year raised fees abroad to European businesses operating on its platform, including a 5% hike in France to businesses selling DVDs, music CDs and video games.

“We have long believed that Amazon will increasingly attempt to find ways to augment profitability in coming years as its influence on online and offline shopping grows,” Pachter wrote in a Jan. 2 note. “These fee increases are evidence of a greater focus on profitability.”

About the Author: Erik Gruenwedel

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