Amazon under scrutiny for increasing advertising rates

Amazon is facing criticism for allegedly increasing fees and advertising costs for sellers on its platform. 

A report by SOMO has revealed that between 2017 and 2022, Amazon tripled its earnings from fees charged to independent sellers in Europe. Delivery and storage costs for sellers in the UK, France, Germany, Spain, and Italy more than doubled in some categories between 2017 and 2023. 

Critics argue that Amazon has exploited its dominant position, creating a “captive clientele” of independent retailers who have no choice but to use the platform.

The analysis showed that Amazon’s income from seller fees rose 6% to €23.5 billion in 2022, even as retail sales fell 1%. Additionally, Amazon’s advertising revenue soared from €0.3 billion in 2017 to €5.4 billion in 2021, with an estimated 51% of that revenue coming from independent sellers. Sellers on Amazon UK reported fees, including advertising, accounting for nearly 40% of the pre-VAT price of their products. Some sellers felt compelled to continue spending on advertising services to maintain visibility and stay ahead of competitors.

The report suggests that Amazon’s squeezing of sellers is a crucial aspect of its European business, as revenue from independent sellers’ fees is growing faster than its core retail arm. Amazon is currently under investigation by the UK’s competition watchdog for potentially giving unfair advantages to its own brands and logistics services over third-party rivals on its marketplace. The European Commission conducted a similar investigation last year, leading to commitments from Amazon to address concerns.

Amazon defended itself, stating that its revenue growth was due to European sellers expanding their businesses through the platform. The company emphasised that optional logistics and advertising services were available, and sellers chose to use them because they saw value in doing so. Amazon also disputed claims of market monopolisation, pointing out the competitiveness of the retail industry and the various options available to sellers.

Why does this matter?

Critics argue that sellers, driven by Amazon’s high market share (reportedly up to 70% in Germany, France, and Spain), feel compelled to bear rising costs. Amazon has not disclosed data on sellers’ sales values but mentioned that independent and third-party European sellers sold over 2.2 billion products worldwide in 2021.

The company claimed that revenue from sellers’ listings increased by 85% over a two-year period.

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