According to Capterra research, nearly half (48%) of third-party Amazon sellers say new holiday fulfillment fees will impact profitability—and they’re overwhelmingly looking to competitors for lower costs
Amazon’s continued fee hikes are alienating sellers and opening the door for competition from other eCommerce platforms. In Capterra’s Amazon Seller Survey, half of small businesses (50%) that use Fulfillment by Amazon (FBA) say their fees are unfair and nearly all (99%) intend to sell on other marketplaces in 2023, including Google Shopping, Facebook Marketplace, and Walmart Marketplace.
This is significant because only 31% of current FBA users list products on other eCommerce platforms. Amazon will soon face retribution in the form of elevated competition from other established eCommerce platforms, fledgling startups, and direct-to-consumer options. It shouldn’t come as a surprise that the consistent fee hikes have driven small businesses to explore other options.
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“By making it more expensive for sellers and consumers to participate in its marketplace, Amazon is opening the door to rivals like Walmart, which offers similarly convenient shopping and selling experiences at a lower cost.”
Half of the 99% of respondents who plan to operate in marketplaces beyond Amazon in 2023 will start selling on Google Shopping, eBay, and/or Facebook Marketplace. 53% will sell on Walmart Marketplace, which offers unique member perks such as fuel discounts and convenient in-store pickup and return. Other eCommerce platforms include Etsy (38%), Overstock.com (22%), and Newegg (17%).
Rising supply-chain costs and increasing holiday demand have resulted in unprecedented fee hikes. This is the first time Amazon is charging more for FBA during the holiday season, and it’s a hefty 30% increase from 2020. In response, small businesses have had no choice but to raise product prices (54%), use the Fulfilled by Merchant option (FBM) (52%), absorb the cost (50%), and reduce marketing spend (44%).
“Raising Amazon seller fees is risky, given customer expectations for low prices and fast shipping,” says Molly Burke, senior retail analyst at Capterra. “By making it more expensive for sellers and consumers to participate in its marketplace, Amazon is opening the door to rivals like Walmart, which offers similarly convenient shopping and selling experiences at a lower cost.”.
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Fee hikes disproportionately affect smaller businesses, as well. In fact, FBA users that earn $25,000 in average monthly revenue from Amazon were significantly more likely to say their profitability will be impacted, compared to higher earners. Higher-earning FBA users are more likely to sell products across additional channels, including brick-and-mortar and directly on their own website. Despite fee hikes, businesses will continue to sell through FBA (two-thirds of respondents rank their business as successful on Amazon).
Looking forward to 2023, retailers say they’ll diversify their eCommerce business to reach new customers and reduce costs. While Amazon’s third-party marketplace isn’t going away anytime soon, retailers can balance the effects of FBA fee hikes by expanding their revenue streams on other eCommerce marketplaces and social media platforms.