Amazon reduces fee rates for the members of its affiliate program. The company notified Amazon Associates members of the commission reduction starting April 21. Fees are reduced for a number of partner product categories. For example, fees in the niche of furniture and home goods fell from 8% to 3%, while the fee for groceries - from 5% to 1%.
Other niches will also suffer:
- headphones and beauty products (from 6% to 3%),
- sports and health products (from 4.5% to 3%),
- tools (from 5.5% to 3%), and much more.
Amazon doesn't give the reason for this decision but it would be logical to assume that the coronavirus outbreak is to blame. However, everything is not as simple as it seems at first glance. This is not the first time Amazon has lowered fees — this has been happening for the past 4 years.
Every spring, the company surprises its partners by cutting their income. So, last May, Amazon reduced fees in such categories as watches, shoes, and bags from 7% to 4%. And in 2013, fees in some categories reached up to 25%. What is the reason for Amazon behave like this — why does the company desert partners who have made a considerable contribution to the growth of the platform? To understand this, you need to go back to the history of Amazon over the past few years.
Back in 2016, Amazon's market share in American eCommerce was only 38%, and by 2018 it had grown up to 48%. In 2019, the platform has already occupied more than half of the online sales market. Together with the growth of market share, Amazon's dependence on partners, which previously provided the lion's share of traffic, fell. So, if in 2012-2013, traffic from affiliates accounted for 40% of the total volume, now it barely exceeds 6%.
Everad announced the acquisition of the RocketProfit partner network.
Of course, there are still a few categories that were not affected by fee reduction. These include toys, shoes, watches, bags, and accessories. But it is only a matter of time before fees fall in these niches as well. Bloggers and webmasters are expressing their disappointment about the reduction of the fees. One of Amazon's partners writes:
The decline is huge. Payouts for many categories now make just 1-3%. I think this will reduce the revenue of websites by 2-3 times. Everyone thought that now people stay at home and order goods and affiliates get their good commission for everything. "How well we survived the crisis", but no. You had an asset that generated $5000. Now it will generate $1700 and you still have to say thanks to the breadwinner Amazon.
Competition in other niches is now going to grow enormously. Links will definitely fall in price against this background. A huge portion of the pie that went to affiliates will now settle in the Amazon itself. That's how quickly the crisis hit the online business. You know what the reason is.
Conclusion
Low commissions of 1% to 3% in popular product categories will make it unprofitable for many webmasters to launch new sites, taking into account the cost of content and promotion. Many existing sites can be put up for sale — it's clear that the site sales market is expecting an influx of new lots.
However, few people will decide to buy such sites now, since their profitability will be calculated based on old data for previous months and, accordingly, the multiplier will not be 30, as before, but 50-80. In other words, such a website will become cost-effective just in 4-7 years, if Amazon, of course, doesn't further reduce the fees.
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