Amazon.com, Inc. (NASDAQ:AMZN) can’t seem to catch a break these days. Just a week after book authors accused the company of “anticompetitive” behavior, it had to deal with gripes from an even more powerful customer group: sellers.
Some third-party vendors complained to Reuters that the e-tailing giant has gone too far with the fees it charges for access to its selling platform. Sellers are apparently mad, and they’re not going to take it anymore. Is this the opening that rival marketplaces like eBay, Inc. (NASDAQ:EBAY) have been waiting for?
Going, going, gone
There’s no doubt that sellers are critical to Amazon’s business. The 2-million-strong army of vendors accounted for 39% of the company’s product sales last quarter. And those third-party sales are also big profit drivers. Since Amazon takes care of logistics like shipping, warehousing, and customer service, it collects higher margins on those sales than it does for its own products.
Those sellers might have some good reasons to gripe. First, unlike with eBay or the new shopping service that Google Inc. (NASDAQ:GOOG) is testing, Amazon directly competes against many of its sellers by hawking its own wares. That’s always been an uncomfortable position, but it’s been made even more so as Amazon hikes its fees, whether for legitimate reasons or not.
And on top of that, the company might be squeezing sellers to pad its own margins. Shipping costs fell fast last quarter, which was a big reason that Amazon’s gross margins surprised to the upside. The company pointed to more efficient delivery as the reason. But as sellers are being asked to kick in more for shipping and logistics, many of them suspect that those fatter profits are coming at their expense.
But it’s working
Still, Amazon.com, Inc. (NASDAQ:AMZN) is clearly helping its sellers hawk more stuff. Third-party sales were up by 3 full percentage points last quarter. While Amazon’s total sales growth was a strong 32% over the holiday quarter, third-party sales grew even faster, by 40%.
That spike in sales was goosed by the massive investments Amazon has been making in its shipping network. The company opened up 20 new warehouses last year, bringing fulfillment centers ever closer to end customers. And all those new locations made for faster and cheaper shipping, so that shoppers saw lower prices and near-instant gratification on many orders.