Good reason for local affiliates to capitalize on ad reduction on Amazon and swing to local-direct. Philip Jay LeNoble, PhD 

COMMENTARY

Brands Selling on Amazon May Reduce Ad Spend Based on Added Fees

• by Laurie Sullivan , Staff Writer @lauriesullivan, Yesterday

Brands and companies selling goods on Amazon this holiday season may need to cut back on advertising buys to cover other costs the marketplace is passing on during the holiday season.

Ama­zon told third-party sell­ers us­ing its ship­ping ser­vices it would in­tro­duce a “hol­i­day peak ful­fill­ment fee” from October 15 to January 14.

The fee is ex­pected to in­crease costs for sell­ers in the U.S. and Canada by an av­er­age of 35 cents per item sold, ac­cord­ing to several media outlets.

The fees are in response to rising op­er­at­ing costs dur­ing the hol­i­day season. Reports suggest Amazon had pre­vi­ously ab­sorbed the costs, but sea­sonal ex­penses are reach­ing new heights.

The fee increase is the second this year. The company added a “fuel and inflation surcharge” to seller fees in April that averaged 5% of fulfillment costs at the time.

Ecommerce in the United States grew 7.3% in Q2 and 9%, according to Baird Equity Research, citing data from the Department of Commerce. This compares to Baird's Q2 ecommerce forecast of more than 6% year over year and more than 7.6% quarter-over-quarter.

Local ad spend on Amazon remains small, compared with Google and Facebook. Last week, Borrell Associates released data showing the percentage of local businesses that buy ads on Amazon is a mere 3%, compared with Google at 36%, and Facebook at 58%.

The average annual ad spend on Amazon is $9.6 billion, compared with Facebook at $13.3 billion and Google at $38.7 billion, according to Borrell.

Higher costs are likely the reason Amazon continues to add fees and diversify revenue streams.

On Sunday, reports surfaced that Amazon is among the bidders for the healthcare company Signify Health, a home-health-services provider.