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Amazon’s online bazaar generates lucrative sales
March 20, 2013
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SAN FRANCISCO: 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 per cent 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.

But sellers see it differently, complaining on online seller forums that Amazon’s fatter returns came partly from putting a heavier burden on their shoulders. “Shipping & fees are killing my margins,” wrote one seller last month. 

Another, in August, complained about higher fees for selling electronic accessories that were due to kick in early this year: “Holy crap! 8 per cent to 15 per cent! Goodbye good deals from 3rd party sellers on Amazon in the electronics section.” 

A third ranted in August about higher costs for shipping products to multiple Amazon warehouses. “Amazon just pulled a fast one,” the seller wrote. “Now that Amazon has all the power, they’re imposing increased fee hikes to all those cozy sellers who have supported Amazon since Day 1.”

The complaints became so raucous last year that the company took the forums down and re-launched them. The new forums let sellers give each other ratings for their posts — a move that some sellers viewed as a way to reduce extreme complaints. 

“The updated forums were created to be more responsive to the needs of the seller community and give them information they need to help build their businesses,” Amazon spokesman Erik Fairleigh said.

Reuters

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