Marketplace Briefing: Amazon won’t hike fees in 2025, but some sellers say it’s ‘too little too late’
This is the latest installment of the Marketplace Briefing, a weekly Modern Retail+ column about the ever-changing e-commerce marketplace landscape. More from the series →
Christmas came early this year for Amazon’s 2 million independent sellers.
On Tuesday, Amazon said it won’t raise Fulfillment by Amazon fees for its third-party sellers in 2025. The announcement comes a year after Amazon levied new seller fees related to inbound shipping and low inventory levels this year, sparking widespread seller outrage and even an FTC probe, per Fortune. Many sellers had to adjust their businesses to absorb the costs associated with the fees, from raising prices on goods to trimming their product catalogs, Modern Retail previously reported.
For Amazon sellers, who make up 60% of the sales on the online marketplace, the announcement was a welcome relief as rising platform fees have increasingly squeezed their margins. And yet, sellers that spoke to Modern Retail for this said they’re still focused on diversifying beyond Amazon to other marketplaces, where the growth is bigger and the seller fees aren’t as steep.
In a blog post announcing the news, Amazon said those fees have helped the company get products faster and closer to customers. But Amazon also said that the slew of fee changes in 2024 introduced complexity, forcing many sellers to make changes to their businesses. As a result, the company said it wants “to focus on simplicity and stability, minimizing [sellers’] operational burden and costs” in 2025.
Amazon also said it would lower inbound placement service fees for large and bulky items by an average of $0.58 per unit, effective Jan. 15.
“This is a huge breath of fresh air,” said Craig Leslie, founder of The Bean Coffee Company, an Amazon seller. “Sellers have gotten into the mindset that Amazon is just going to continue to raise, raise, raise. But this was a showing of good faith.”
Leslie isn’t alone.
“It’s almost like a Pavlovian stress reaction this time of year because, for so many years now, there have been new fees added,” said Lesley Hensell, co-founder of Riverbend Consulting. “Sellers have so much pressure on them to keep prices low in an inflationary environment that any additional costs from Amazon’s side would have just been too much for them to bear.”
‘Too little too late’
To Judah Bergman, the CEO of Jool Baby, which sells baby products on Amazon, the announcement is bittersweet. When Amazon’s new fee structure went into effect earlier this year, Bergman raised prices 15% to 20% across his product catalog to absorb the costs. Despite that, he said his company’s margins have gotten worse because of expenses and inefficiencies tied to Amazon’s new fees. He cited one new fee as an example, which charges sellers if they don’t split up their inventory to be shipped around the country, a service previously done by Amazon for free. The exact impact is difficult to measure because the revised structure is so complicated to navigate, he said.
“For Amazon to take that shipment and divvy it up and spread it across the country is a lot more efficient and cost-effective than for someone like me to send a pallet to California, a pallet to Texas, a pallet to North Carolina, and a palate to New Jersey,” Bergman said.
While he said he likely won’t need to raise prices again, at least for the next year, thanks to the announcement, Bergman said the increased complexity and high costs associated with selling on Amazon aren’t going away. He pointed out Amazon’s inventory fee, which charges sellers when their inventory runs too low. Amazon also charges storage fees that increase if inventory lingers too long in Amazon warehouses.
“If I had to summarize, I’d say it’s too little too late,” Bergman said. From his perspective, “it’s almost impossible to make money on Amazon anymore.”
Amazon has been ratcheting up seller fees for years, according to data from market research firm SmartScout, which analyzed Amazon’s FBA fee changes since the program was launched in 2006. For example, the FBA fees for standard-sized products have jumped 96% over the past 10 years, outpacing inflation.
Such fee hikes have been big business for Amazon. The e-commerce giant earned $140 billion in revenue last year from the fees it charges sellers. Those fees can eat up about half of the cost per sale, hurting merchant profits, according to Marketplace Pulse.
Like many sellers, Bergman has been expanding to other e-commerce platforms, namely TikTok Shop, where he said his brand’s sales have grown 50% every month since Jool Baby began using the platform in earnest over the summer.
Eva Hart, who sells coffee on Amazon through her brand Couples Coffee, is also expanding to other platforms like Shopify, where the margins are better compared to Amazon, she previously told Modern Retail. And Leslie joined Temu in September as a way to reach new customers.
As part of the new announcement, Amazon said sellers are paying an average of $0.05 less per unit than they were a year ago. Amazon also said more sellers are seeing year-over-year growth as a result of the new services and fees.
More competition
Amazon’s announcement signals that the company is concerned about losing merchants as a result of the barrage of fees it has imposed over the years, Bergman said.
Indeed, even though Amazon dominates U.S. e-commerce, capturing 40% of online spending, the company faces more competition than ever before thanks to China-linked companies like TikTok Shop, Shein and Temu that can afford to beat Amazon on price. Temu, in particular, has hustled to win over more sellers to its platform, including those that sell on Amazon.
Temu recently made it easier for American merchants to join its marketplace by widely opening up its application process to any brand, which had previously been on an invite-only basis, Modern Retail has reported. Temu emphasized its affordable fee structure in a pitch deck to prospective merchants, Modern Retail also reported.
Amazon also faces competition in its own backyard.
On Tuesday, John Rainey, Walmart’s chief financial officer, told analysts on the company’s earnings call that e-commerce sales made up 18% of overall sales during the third quarter, up from 15% compared to the year-ago period. Given that Walmart raked in $169.6 billion in revenue overall, the retailer earned $30.5 billion from online sales.
That might seem minor compared to the $61 billion Amazon earned in e-commerce sales during the third quarter. But Walmart’s online sales are growing at a faster clip. While Walmart’s e-commerce business grew 27% in the third quarter, Amazon’s only grew 7%.
Walmart also said the number of sellers on the platform is growing by the double digits, and its marketplace now has 700 million unique product listings.
“While everyone is thanking TikTok Shop and Temu for the announcement that Amazon will not be raising fees in 2025, they should actually be thanking Walmart,” Jon Elder, CEO and founder at Black Label Advisor, which manages hundreds of brands, wrote on LinkedIn. “They continue to chip away at their market share and Amazon has noticed.”
Marketplace news to know
- Amazon rolled out an upgrade of its smart wall display, Echo Show, just in time for Black Friday.
- Temu has hit roadblocks in Southeast Asia, as government officials in countries like Indonesia and Vietnam have threatened to ban the app or done so outright.
- Target warned that it expects its fourth-quarter sales to be flat, as it is projecting weak holiday demand.