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Amazon Sellers to Take Advantage of New Referral Fees

April 9, 2019

Following a successful trial in American markets this February, Amazon is reducing referral fees for multiple product categories in the UK and the EU.

Amazon’s share of retail is huge – over £4 in every £100 spent in the UK is spent on Amazon. Only four companies beat that; Sainsbury’s, Tesco’s, Asda and Morrisons. Outside the groceries sector, Amazon stands unchallenged.

(This may be why Grocery is one of the categories seeing a bigger reduction, from 15% to 8% on items costing £10/€10 or less.)

Many of these packages may cost Amazon Sellers less to sell under new reduced referral fees.

By reducing referral fee percentages, Amazon will make its platform even more appealing to potential Sellers. With a little over half of all sales on Amazon being made by third party sellers, attracting more Sellers in – and encouraging Sellers to increase the amount of business they do on Amazon – is key to increasing their market share even further.

The referral fee reductions take place on June 5th.

Breaking Down Amazon Referral Reductions

From 15% to 8%

  • Beauty
  • Health & Personal Care
  • Baby
  • Grocery (Beer, Wine & Spirits excluded)

This reduction only applies to items with a total sales price of £10/€10 or less.

From 15% to 10%

Furniture, excluding mattresses, with a total sales price greater than £175/€200, will reduce referral percentages from 15% to 10% on the portion of the price above that value.

From 25% to 5%

UK referrals on Jewellery items have been at 25%, but any portion of total sales price greater than £225/€250 will instead be charged at 5%. (EU referrals drop from 20% to 5% for the same values.)

From 15% to 5%

Watches referral fees will be reduced on the portion of their sales price above £225/€250. The drop will be from 15% to 5%.

Per-Item Minimum Referral

All categories other than Grocery and Media (including Books, Music, Video, Video Games, DVD and Software) will now have a minimum per-item referral fee of £0.25/€0.30.

Referral Increase in France

TVs, Laptops, and Computers sold in France will see their referral fee adjusted from 5% to 7%.

Example High-Value Referral

Imagine a hypothetical UK customer ordering a ladies’ watch with a value of £300 and a matching necklace with a value of £400 from the same Amazon Seller. For that £700 order, the Seller would have paid £45 (15% of £300) for the watch and £100 (25% of £400) on the necklace. The total payment is £145.

Under the new system, they would pay £40 (15% of £250 and 5% of the remaining £50) for the watch. They also pay £70 for the necklace (25% of £250 and 5% of the remaining £150). The total payment under the new system is £110 – increasing profit by £35.

Example Low-Value Referral

Another customer is stocking up on over-the-counter medications, cold remedies, vitamins and other low-cost Health & Beauty essentials.

Their spend comes to £40 over 20 items, none of which have a total cost of over £10. 7 of those items have a low enough price that they instead charge the minimum per-item fee of £0.25 per item. These items account for £6.65 of the total spend.

Under the old rule, the total referral fee would have been £6 (15% of £40).

With the new system, the referral comes to £4.42 (5% of £33.35, plus 7 £0.25 minimum fees). This is a saving of £1.58.

(An order with the same spending breakdown in Groceries would not face the minimum per-item fee. So that order would have a total referral cost of £2, down from £6.)

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