Amazon Charges Sellers Fees That Are High Enough To Offset Losses from Prime, a New Report Says

The massive reach of Amazon's e-commerce platform is appealing for any small business that wants to sell its products online. But a new report suggests that the cost of doing business can become a Faustian bargain for a third-party seller, as the fees that Amazon charges them can quickly eat into profits. From a report: Amazon Toll Road, a report from the nonprofit Institute for Local Self-Reliance (ILSR), found that Amazon charged third-party sellers a total of $121 billion in fees this year alone. According to the report, written by ILSR co-director Stacy Mitchell, those fees -- for things like advertising, referrals, and shipping -- usually mean that small businesses lose money to Amazon; Mitchell said that in 2014, sellers paid Amazon $19 of every $100 in sales, and today, it's more like $34 per $100 in sales.

And, Amazon obscures the profit it makes from these small businesses in its financial reports, lumping it in with other less lucrative divisions 'because showing that they generate these profits from small businesses is not a good look,' Mitchell said in an interview with The Verge. But its Amazon Prime subscription service -- believed to be a money loser for the e-commerce giant -- provides Amazon a loyal base of shoppers who want to get their money's worth of free shipping. The profits Amazon makes from seller fees subsidize the losses from its Prime division, according to the report.

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