Amazon Seller Fee Increase Will Put 80% Of Media Sellers Out Of Business By June

Hi gang,

So we need to have a talk about Amazon.

Look – as a buyer of items online, Amazon is unbelievable.  Basically, they have the widest selection for the lowest price at the fastest delivery speed. It will not be long before most of the country can receive their purchases within a few hours wherever they are standing at that time via an Uber/Lyft driver or a drone or by simply beaming the product over with Amazon Teleport.

Amazon has already won the e-commerce battle. I mean, it’s over. While everybody else was busy “testing the waters” and “finding their online identity” and “pivoting” and “re-purposing their brand”  Amazon was relentlessly building out a national shipping network and rolling out software that rivals the largest software companies. I can’t think of a scenario in the next several years where Amazon is not taking market share from other e-commerce companies and brick and mortar retailers. The pie is very, VERY large, but Amazon seems to have an overwhelming appetite for market share and disruption of industries.

So again, as a buyer of items online, this is all great news. The stuff that we buy will keep getting cheaper and delivered faster.

However, it may be hard to buy anything after you’ve been downsized because you are or work for an e-commerce book, DVD, or CD seller, because Amazon is about to do their best to put media sellers out of business and may be showing signs of dealing a death blow to printed media completely.

As you already know, Amazon sells millions and millions of movies, music, and books annually. They are, by far, the largest media seller in the United States.  For books in particular, Amazon accounts for almost 80% of all book sales.

In 2000, Amazon also opened up their Marketplace, which allows 3rd party sellers to sell their items on Amazon as well.  The Marketplace has become a substantial profit center for Amazon – they collect a royalty on every item an independent business sells on the Amazon Marketplace platform. There are tens of thousands of small and large businesses that sell their wares on the Marketplace. For many of these companies, Amazon can easily be 75% or more of their sales volume.

For a bookseller, Amazon is an easy choice.  Since Amazon already sells 80% of all books, it’s a simple decision to hitch your wagon to the Amazon juggernaut and sell books on their Marketplace.  Amazon is a sku-based website, so all a seller needs to list a book is the books’ ISBN number, the quantity, and their price. With good software, a seller can literally (and I have) list over a million books for sale.

The media category was the first Marketplace category Amazon opened up, and of course that makes sense. Amazon started as a bookseller, then a book, DVD, and CD seller. What that also means is that there are thousands of Marketplace sellers in those categories that derive 70% or more of their sales and revenue from Amazon with established businesses that can be 15 years along at this point.

So in March, I believe that Amazon fully intends to swat most of these sellers down.  Let’s talk about what they are going to do and then speculate as to why they are doing it.

Late last year, Amazon announced that they are again raising seller fees. This time, however, the fees are aimed ONLY at book, CD, DVD, and Video Game sellers. What looks on the surface as a single fee increase is actually two fee increases.

How bad is it? Let’s do math.

As it stands right now,  Amazon takes 15% of the sale price as a commission and also charges a flat fee of $1.35 per sale.  (As a side note, that $1.35 fee used to be $.90 and started at $0.00).  They then credit back $3.99 to the seller for shipping reimbursement.

So let’s say you purchased a book from a book liquidator for $3.00 and then sold it for $5.00 on Amazon.  Here’s what the fees look like:

Book sale price:  $5.00

Amazon shipping reimbursement:  $3.99

So the Amazon customer pays $8.99 in total.

Amazon takes 15% of the sale price:  $.75

Amazon charges $1.35 flat fee: $1.35

Then you ship the book to your customer. 1 pound USPS media mail rate is $2.63

Remember, the book cost $3.00 to purchase. Let’s also assume that your labor per item and shipping materials = $.40

So what the net profit looks like is this:

$5.00 + $3.99 – $.75 – $1.35 – $2.63 – $3.00 – $.40 = $.86

So your $3.00 book made you $.86, or 29% profit.

For a bookseller, the key is volume – medium/large sellers can sell hundreds or thousands of books a day on Amazon and so that $.86 has to add up to be worth it.

Ok, so let’s talk about the Christmas present all media sellers received from Amazon last year:

Changes to Selling on Amazon fees.

We will be making two changes to how Selling on Amazon fees are charged for Media products (including Books, Music, Video, DVD, Software, and Video Games). These fee changes will not take effect until March 1, 2017, to give you time to plan accordingly.

  1. Variable Closing Fees (VCF): The VCF charge in Media product categories (Books, Music, Video, DVD, Software, and Video Games) will increase to $1.80 from $1.35 per item. This charge will appear as a Closing Fee (CF) instead of as a VCF to avoid confusion, as it will be a fixed fee rate and not variable”

Well, isn’t that wonderful.  Amazon just jacked up fees by $.45 PER SALE.

Using the same math as above:

$5.00 + $3.99 – $.75 – $1.80 – $2.63 – $3.00 – $.40 = $.41

So the profit margin just got cut in half, and because it’s a fixed fee, that means that the lower the price you sell an item for, the worse the fee is for you.  I’m looking at you, used book sellers.

But wait – Amazon announced TWO changes:

Referral fees: Currently, the referral fee for Media products is an applicable percentage of an item’s sales price (excluding any shipping or gift wrap charges). Effective March 1, 2017, the referral fee will instead be calculated on the total sales price 

That is a massive fee increase also.  Remember Amazon currently collects 15% on the sale price, so:

$5.00 sales price = $.75 fee.

Now, Amazon will collect 15% on the TOTAL sale, so:

$5.00 + $3.99 shipping = $8.99 the customer pays = $1.35 fee

To remind you, here’s what the current formula looks like:

$5.00 + $3.99 – $.75 – $1.35 – $2.63 – $3.00 – $.40 = $.86

And here is the new formula with both fees built in beginning March 1:

$5.00 + $3.99 – $1.35 – $1.80 – $2.63 – $3.00 – $.40 = $-.19  

And that’s all she wrote, folks.  All the profit is gone and now you will lose money selling on Amazon.

Simply put, this fee increase is devastating and designed to kill off the very media sellers that enabled Amazon Marketplace to grow and thrive to begin with.

Who Does This Impact The Most?

If you are a third party media seller on Amazon and you sell new or used items for under $9.00 total, you’re dogmeat.  Simple as that.

Unfortunately, this includes most media sellers. Think about it – no one is selling physical CD’s for over $9.00. DVD is even worse – Amazon must pre-approve you to sell certain publishers or over a certain price, and that knocks out 80% of sellers, so DVD sales are well under $9.00.  And then there’s books. Used books are absolutely under $9.00 and the vast majority of $16.00 retail trade paper books sell for under $9.00.

If you want to deep dive Amazon book pricing, there’s a dynamite analysis over at

The major exception I can think of is Textbooks – congratulations! You’ll be paying millions more in fees to Amazon, but you’ll survive this.

So How Do Sellers Survive This?

Here’s what sellers can do:

Action: Sell books, DVD’s, and CD’s elsewhere. There are plenty of other places to sell.

Analysis: Most sellers are already selling everywhere else also. As I’ve stated, Amazon makes up 70% or more of the average media seller sales. So there’s really no place to go

Action: Raise prices.

Analysis:  Well yeah, duh. There’s no way to remain on Amazon without raising your price by at least $1.25 on the low end. There are several challenges with that.

a) Customers probably won’t pay more for printed books. We’ll talk more about this in the Why? section, but raising prices move printed books up into the pricing for….e-books. (raises eyebrows suspiciously)

b) At first many sellers will, for whatever reason, NOT raise their pricing at all or just a little. While you are losing tons and tons of sales, these sellers will be busy going out of business. Can you survive 3 months with a 90% drop in sales while you wait for these dummies to flame out?

Action: Get out of the business.

Analysis: Face reality, sellers. It’s probably time to move on. This is a killer blow and there may be no way out of it.

Action: Hey dummy, I’m not a media seller!

Analysis: Well, good for you. Question: If Amazon can take out an entire category worth of sellers, do you believe that your category is bulletproof?


Why Is Amazon Doing This?

I have a complete and thorough analysis of the Why? question coming out soon – for now let’s just say it isn’t good news for anybody except Amazon.


My condolences,

Kevin Harmon

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Son Of A Titanic Is eBay’s Defect Rate Rating Going To Be A Disaster

Is there anyone on planet Earth who can’t see that this policy is going to significantly help sellers of New product and completely crush sellers of Used or Refurbished product?

Hi gang,

Well, it’s almost here.  August marks the line in the sand where eBay begins judging sellers on a brand new, er, brand new to eBay metric.  It’s called the Order Defect Rate, or ODR, and man-oh-day do I think it’s going to be a disaster for a lot of sellers.

Let’s start out with a battle-tested philosophy of mine concerning eBay.  This is coming from a dude who has sold over $15 million on Amazon and eBay over the years.

Number 1 –  The level of seller disruption increases exponentially based on eBay’s competency level.

What do I mean?  Well, let’s take Feedback for example.  For those of you who don’t know, eBay doesn’t buy or sell anything – eBay exists to facilitate transactions between individual buyers and sellers on their platform. Also, somehow, eBay considers the transactions themselves to be eBay property, which means the person who bought from you is eBay’s customer, not yours.  You can’t brand yourself in any meaningful way and you aren’t allowed to communicate with buyers off of the eBay platform.  Anywhoo, that’s another discussion.

eBay should be, and pretty much is, competent at designing Feedback policy, and so for their original Feedback system, there was minimal seller disruption. UNTIL they rolled out the new 5 star rating systems.  Why? Please see above – eBay does not buy or sell anything.  So when eBay decided to judge sellers based on things like Shipping Time and Shipping and Handling Charges – things which eBay knows nothing about – we had a giant train wreck in the seller community for a long time.  Sellers were PUNISHED, and big time, for not being able to live up to eBay’s crazy, uninformed standards.

But let’s be fair here – over time, the Rating System got a little better, then a little better again, and for a decent amount of time, eBay seemed to understand and reconfigure the metrics to mimic the real world of sellers.  In fact, sellers became so good at living up to eBay’s expectations that eBay’s Top Rated Seller status became pretty worthless.

Well, hold on to your butts sellers – it’s about to get Alice in Wonderland down the rabbit hole bad for a while again.

So here comes the ODR, which stands for Order Defect Rate but really means Oh Dammit, Run!

Why should sellers be freaking out about it?  Let me count the ways:

1. 2. 3. and 4.  EBAY DOES NOT SELL ANYTHING OR BUY ANYTHING, but they are about to judge the hell out of you for doing so.  Amazon also has an ODR and has for a while, but the difference is that Amazon has sold product since Day 1 and they completely understand the system and so their ODR makes pretty good sense.

5. Sellers are going to be pounded for receiving 1,2 or 3 ratings in their DSR’s.  I’ve never liked this even for the current system.  Here’s what a buyer who is unhappy does:  leaves a negative, leaves 1’s across the board for the DSR’s.  Do sellers sometimes deserve that?  Um, NO.  A bad transaction that was the seller’s fault was probably in 1 area – not all of them.  Unfortunately, eBay has done a very poor job of educating buyers that anything less than a 5/5 rating will mean serious trouble for the seller.

6.  This one scares me the most:  Return initiated for a reason that indicates the item was not as described.  Let me address one particular group of sellers with this one.  Are you listening? I’m going to scream anyway:


Is there anyone on planet Earth who can’t see that this policy is going to significantly help sellers of New product and completely crush sellers of Used or Refurbished product?

eBay’s new benchmark for Top Rated Seller status is going to be < 2% Defect Rate.  This is a very simple conclusion for me – Used/Refurb sellers are going to be kicked out of the Top Rated Seller program by the Titanicload.  They will lose 20% discount, visibility, and ranking.


If you were to research large e-commerce company performance even the ones that only sell new product will not be > 98% perfect.  Used item sellers have no chance here at all.

It’s always interesting when eBay makes moves like this because if you read between the lines you can identify where eBay is trying to ‘push’ the marketplace.  This move sure seems to be a clear statement that eBay wants Used product on the site way less than New, which continues their trend of implementing policy that leads to New goods – policies like actively recruiting brands to the site and crushing the Auction format in favor of the ‘standard’ e-commerce Buy It Now model.

I spoke with a seller the other day who has a 99.9% feedback, 4.9 5.0 5.0 5.0 DSR’s, and is Top Rated – who is losing TRS when the ODR rolls out.  I suspect that, across the board, many more sellers are being dropped in rating than are holding or being promoted because of ODR.

I am looking forward to seeing the data on this after we get a Quarter in the new DR era – I love eBay sellers and I hope I’m wrong.


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Let’s Face It – Sometimes Running A Business Is Just Like This

In the event you are NOT and entrepreneur, and want to know how a bad day feels to a business owner who has his entire being engaged in building something great and yet trips up now and then, I happily present THIS:

Hi gang,



Admit it – running a business isn’t always easy.

In fact, there are days, sometimes weeks, where you just feel like you’re getting nut-punched over and over again.  You’re an entrepreneur, so you can always see the forest for the groin, but that just doesn’t stop the pain sometimes.

In the event you are NOT and entrepreneur, and want to know how a bad day feels to a business owner who has his entire being engaged in building something great and yet trips up now and then,  I happily present THIS:

Have a great day!



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Hey Media – Stop Rewarding Mediocrity With Startups

The sad part is that true innovation is happening every day across thousands of companies worldwide. Unfortunately, since they don’t make it easier to share a photo or rent movies, you just don’t hear about them very often.

Hi gang,

Does anyone remember what true innovation is?

Innovation is dreaming up and implementing something which will literally help the entire human race. The development of language was innovation.  Mass crop production was innovation. The microchip was innovation.  The internet was innovation.

You know what’s not innovation?  Almost every new startup coming out of Silicon Valley that is heavily covered by the media.

They’re easy to spot. Ready?

1. The company or product has a single, cute name

2. 90% chance that the company has found some new way to aggregate and display existing data.

3. The founders are all very young and start every sentence with “So,”

4. 90% chance that the company is not disrupting anything. They’re simply making some stupid aspect of our privileged lives a little bit easier.

5. The media covers the CRAP out of the company, as if they have cured cancer or something.

The sad part is that true innovation is happening every day across thousands of companies worldwide. Unfortunately, since they don’t make it easier to share a photo or rent movies, you just don’t hear about them very often.

The companies changing the world are hidden away in research parks. They’re making nanorobots to fight cancer.  They’re analyzing stem cells to heal the human body. They’re mapping the human genome and brain. They’re discovering new types of renewable energy. They’re designing new spacecraft. They’re working on tractor beams and ion cannons and teleportation and faster than light travel. In other words, they are trying to advance human civilization.

This prediction for Humanity’s next 40,000 years is worth fighting for

C’mon, media companies – spend some time on covering the future of the human race. It’s really great that I can listen to music on my phone, but for my money I’d take an Elon Musk over a Steve Jobs any day.


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It’s Not About Falling Down – It’s About Getting Back Up

ALL entrepreneurs fall down. Some, like me, have fallen down a LOT lol. There’s an easy choice to make: do you stay down or do you get back up?

Hi gang,

So, you fell down.  Your deal didn’t go through. Your business collapsed.  Your financing wilted. Your business partner just left.

Boo hoo. The sad truth is that nobody cares.

ALL entrepreneurs fall down.  Some, like me, have fallen down a LOT lol. There’s an easy choice to make: do you stay down or do you get back up?


Go get ’em!







Monday Morning e-Coffee : Hey Baby!

An Entrepreneur won’t understand this pic at all for 2 reasons

Hi gang,

Take a look at this picture:



If you are a “normal” 9 to 5’er, this picture will crack you up! Sooooo true!

An Entrepreneur won’t understand this pic at all for 2 reasons:

1.  We are not necessarily sure at any given moment what day it is

2.  To us, EVERY day’s picture would be a 1/3 mix of Saturday, Sunday, and Sunday night.

Go get ’em!


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Motivation Sunday: The Perfect Moment

Perfect moments are a choice. You choose to remember a moment as perfect, just as you can choose to make this moment perfect

Hi gang,

The perfect moment doesn’t exist.

At least, not the one you’re waiting for.

I’ll bet you can think back to perfect moments in your life.  They are different for everybody, but we all have them.  A wedding. The moment you fell in love.  The way the wind felt in your hair and the way the warmth of the sun caressed your face on that boat last summer.

Perfect moments are a choice.  You choose to remember a moment as perfect, just as you can choose to make this moment perfect.

And don’t we all need more perfect moments? It’s up to you. Stay focused. Stay present. Notice your surroundings.

There’s a perfect moment right there in front of you.


Happy Sunday,


Come play with me at



Amazon Prime Membership Raised To $99 – Still The Best Deal Going

I am pretty certain that this price increase angers – nobody

Hi gang,

what if

Amazon Prime members today were e-mailed and told that the price of their Amazon Prime membership will increase from $79 to $99 a year.

I am pretty certain that this price increase angers – nobody.

Let’s face it – Amazon Prime is an amazing deal. Not only can you receive just about everything in 2 days for free, but you also get an amazing 40,000 video streaming service which is growing quickly and adding original content (ala Netflix’s House of Cards).

If I would venture a guess, I’d say that Amazon will lose less than 1% of memberships because of the price increase. Amazon needs the money – unlike most companies that offer loss leader products to attract buyers, Amazon uses the entire shipping process as its’ loss leader. It’s a move that is turning out to be brilliant.


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eBay Spring Seller Release 2014: Detailed Seller Ratings Are Out – Defect Rate Is In

Today, eBay released the Spring 2014 Update. Let’s talk about them.


Hi gang,

Many moons ago, when eBay wanted to implement a change in policy or code they would just roll it out whenever they felt like it.  I remember one change in particular that eBay decided to roll out in mid-November – right before the busiest time of the year. The change had bugs in it and sellers were deeply impacted by it. A few years ago, eBay very smartly began to roll out changes in planned sequences which they called Seller Updates.  Today, eBay released the Spring 2014 Update. Let’s talk about them.

First off, if you want to read everything in full, you can go to eBay’s Seller Information Center here . They also have a video up which discusses the changes here

What I want to say is that in general, eBay casts very broad, very wide nets with the changes they make. Depending on how much you sell and what you sell, these changes could impact you negatively or positively.  I’m just going to hit some of the highlights. Here we go:

From eBay’s website:

“Starting with the August 20 monthly seller evaluation, a new measure, the transaction defect rate (“defect rate”), will replace the current four individual detailed seller rating requirements in evaluating seller performance. This new rating may impact your status”

This is going to be the most contentious of the changes and I am going to predict that sellers are going to be the most vocal about this one. Couple of things here:

1. So, Amazon has had this measurement for a while now. They call it the ODR, or Order Defect Rate. If you sell on Amazon at all, you’ll recognize this new rating immediately. It’s very interesting that eBay is, once again, moving towards Amazon with policy

2. They are REPLACING the current DSR system.

“Starting with the August 20 evaluation, to meet eBay’s minimum standard, sellers can have up to a maximum 5% of transactions with one or more transaction defects over the most recent evaluation period. A maximum 2% will allow a seller to qualify as an eBay Top Rated Seller. Only transactions with US buyers count.”

1. I don’t think they stated the penalty, but you can have a max of 5% “defective” transactions. How this will work out is anyone’s guess. For various reasons, I don’t think you could ever do an apples to apples comparison of Amazon ODR and eBay DR – the platforms are just too different.

2. So now, instead of a feedback goal, you’ve got a Defect Rate goal of 98% perfect to become a Top Rated Seller and be boosted in search results.

“The defect rate won’t affect your status until you have transactions with defects with at least 8 different buyers (at least 5 different buyers to impact Top Rated status) within your evaluation period”

1.This is the “casting a wide net” that I was talking about. So, a small seller might take months to have 5 different buyers that affect their Defect Rate.  A large seller will be affected in a single day.

2. Also, this will really affect sellers of used/refurb items over sellers of new goods.

To summarize these particular changes:  eBay is doing away with their Detailed Seller Rating System in favor of a new Defect Rate metric. The DR looks to be one of the only determining factors now in Top Rated Seller status and search results, even above overall Feedback %.

At first glance, this seems to be a pretty dramatic change in policy. Unfortunately, it’s also going to be very tough to determine if the change is a good one or a bad one for sellers. eBay spent a ton of time and energy developing the DSR system. Yes, it was a really flawed system, but I’m not sure that the new DR system is going to improve on it or just confuse the heck out of both buyers and sellers for a while. In reading through the changes, eBay doesn’t appear to be adding any additional rewards for meeting the new qualifications.

” To qualify for the Top Rated Plus seal and 20% final value fee discount between November 1 and December 31, your listings must include the new extended holiday return option, with returns accepted through January 31. Bullion, Gift Cards, Tickets, and all Business & Industrial categories are exempted from this requirement”

I don’t know how I could be reading this wrong, but is this saying that sellers must have up to a 60 day return policy at Christmas? Wowza, that’s a long time. Again, though, I don’t know what this new policy is fixing – most sellers offer a very generous return policy and guarantee anyway. Personally, I think that eBay is the only marketplace where sellers have to state their own return policies – wouldn’t it just be better to standardize them?

eBay then moves on to the returns process. Of course, every seller deals with returns. Recently, eBay launched a returns portal for sellers and continue to integrate the eBay returns process into the platform:

“Buyers using hassle-free returns are happier. The process is streamlined for you. And now, with the latest enhancements, managing returns is easier than ever”

“Confidence-boosting message to buyers on your item page: Buyers appreciate knowing that they can initiate a return and print the shipping label—and if necessary pay for shipping—right from My eBay. Now, to encourage the purchase, eBay lets buyers know right on your item page that you offer that service and they can buy with confidence”

Returns is another “your mileage may vary” system.  I would imagine that small sellers like the returns process built in. Large sellers, however, are using completely different systems to handle returns, and I think the last thing they would want is to have their returns processes dictated by eBay and be forced to generate shipping labels and pay eBay postage rates.  By the way, I think that is exactly the plan – eBay will require all sellers to use eBay returns at some point.

The rest of the update concerns Best Practices for sellers to prepare for the updates, category changes, etc – the usual.

What do you think, sellers? Are the changes going to help or hurt you?


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