Amazon Screws Sellers Again. Everything's About To Get More Expensive

Name: Amazon Screws Sellers Again. Everything's About To Get More Expensive
Uploaded: 2025-11-18T14:30:40.000Z
Duration: 26 min 13 s

Amazon's Fee Increases: What You Need to Know

Introduction to Amazon's Fee Changes

Amazon claims fee increases will only be 8 cents, but some sellers may face over 150% hikes.

The announcement was obscured in corporate jargon, misleading the public about the true impact on sellers.

The Impact of Fee Structure

Amazon has implemented a tiered fee system that penalizes successful sellers; higher margins lead to larger fees.

Despite record profits and a booming stock price, Amazon is increasing fees for sellers rather than focusing on retail growth.

Financial Performance Insights

Online retail sales grew by 8%, down from 10% last year, indicating a slowdown in retail growth.

Advertising revenue surged by 22%, significantly outpacing retail growth and increasing costs for sellers.

Seller Challenges and Cost Absorption

Sellers are facing multiple cost increases: advertising (22%), FBA fees (8-15%), and other seller services (11%).

These rising costs force sellers to increase prices, ultimately impacting consumers directly.

Misleading Communication About Fees

Amazon's claim of an 8-cent increase per unit is deceptive; actual increases vary significantly based on product pricing tiers.

Tiered fee structure:

Products under $10: fee increase of 3-4%.

Products between $10-$50: fee increase of 6-9%.

Products over $50: fee increase of 14-16%.

Consequences for Premium Products

Higher quality products face steeper fees, effectively taxing success and quality in the marketplace.

Real-world Examples of Profit Losses

Example: A premium skin cream priced at $60 faces a significant fee hike leading to reduced profit margins.

Overall Market Implications

Sellers' profit margins are shrinking due to cumulative cost increases; many may struggle to remain profitable.

Amazon's Fee Structure and Its Impact on Sellers

Strategic Fee Adjustments

Amazon is strategically lowering fees for inexpensive products (under $10) to compete with budget brands like Teimu and Shien, while increasing fees for premium products where sellers have higher margins.

A significant fee increase has occurred in placement fees, which doubled without much public awareness, impacting sellers' costs dramatically.

Changes in Placement Fees

Previously, sellers could ship inventory to one warehouse for free distribution; now they face high costs either by shipping to multiple warehouses or paying Amazon directly.

For products under 5 lbs, placement fees increased by about 20%, while heavier items saw increases of 100% to 179%, drastically raising shipping costs.

Financial Burden on Sellers

An example illustrates that shipping 1,000 units of a 10 lb product can raise placement fees from $440 to $1,500 per shipment—an annual increase of over $12,720 before any sales occur.

The cumulative effect of FBA fees, placement fees, and advertising can lead to an additional cost of $18,000 annually for typical sellers selling a $30 product.

Price Increases Passed to Consumers

As sellers cannot absorb these rising costs indefinitely, prices for consumers are expected to rise significantly—for instance, a supplement may go from $30 to $35 due solely to increased operational expenses.

Amazon's Revenue Strategy

Despite retail sales growth slowing at only 8%, Amazon's revenue from seller services and advertising is increasing faster than its retail business growth. This indicates a shift towards monetizing seller relationships rather than focusing on customer sales.

The Future Landscape of E-commerce

Seller Summit Announcement

The speaker promotes the Seller Summit as an opportunity for e-commerce sellers to learn practical strategies from successful peers in the industry.

Implications of Rising Costs

Amazon aims to maintain low consumer prices by forcing sellers not to raise their prices despite increased operational costs. However, this strategy is unsustainable as many small brands will struggle or cease operations due to financial pressures.

Expected Market Changes

With upcoming fee changes set for January 2026 and rising tariffs and advertising costs contributing further pressure on margins, price increases across various categories are anticipated.

Competition Dynamics

Many small brands may exit the market due to inability to cope with new fee structures leading potentially less competition but higher prices among remaining players.

Shifting Away from Amazon

Building Independent Brands

Sellers are encouraged to create their own websites and brands as a way out of dependence on Amazon’s fluctuating rules and fees.

AI Shopping Revolution

The introduction of AI shopping technology could disrupt traditional online shopping methods by allowing customers direct access through AI recommendations rather than relying solely on platforms like Amazon.

This structured overview captures key insights regarding the evolving dynamics between Amazon's fee structure and its impact on both sellers and consumers within the e-commerce landscape.

The Future of E-commerce: Building Direct Customer Relationships

The Shift Towards AI and Direct Sales

AI prioritizes quality and relevance over ad spending, indicating a significant shift in e-commerce dynamics. Brands must adapt before AI shopping becomes mainstream.

Sellers are encouraged to stop relying on Amazon for sales power and start developing their own platforms to foster direct customer relationships.

Purchasing directly from brand websites benefits customers by eliminating Amazon's fees, leading to better prices, products, and customer service.

Preparing for the Future

The anticipated increase in fees starting January 2026 is prompting proactive sellers to create exit plans now rather than waiting for adverse effects.

The future landscape of e-commerce will favor brands that establish direct connections with consumers instead of depending on third-party platforms like Amazon.