Amazon’s sellers unhappy about fee hikes, eye rivals

by Alistair Barr, Reuters.com  |  published on March 19, 2013

A worker packs boxes at Amazon's logistics centre in Graben near Augsburg

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.

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