Amazon US rumoured to be changing to a category based commission structure

amazon and your doneWord on the street: Amazon may change to a fixed category commission, rather than their current volume-based commission tier (similar to the UK).
 
A few friends of mine have been contacted by Amazon reps informing them that their commission structure will be switched to a category based commission on the 1st March 2017.
 
Now it appears, a thread on WF (link) is also suggesting the same if this does happen it will have a greater impact on those like myself who already achieve the 8.5% commission tier each month. For example, if you predominately promote and sell products in the home category and are currently hitting 8.5%, if this changes to the same commission structure as the UK then this will be reduced to 5%. If that did happen you would go from $8,500 per $100,000 of revenue to $5,000, that’s a huge drop.
US Amazon commission structure (currently)
amazon associates us commission structure
UK Amazon commission structure
amazon uk commission structure

Personally, I am not 100% sure if this will happen on the 1st March 2017 for everyone, if Amazon reps are contacting certain people individually then it suggests to me that they maybe rolling it out to a smaller number of affiliates first to examine the impact. On the other hand, they could just be telling a few affiliates first and letting it spread via word of mouth, as it is doing right now.

I don’t think there telling just the biggest affiliates first as one of my friends is generally on a similar revenue as myself (except for Christmas), so if they were targeting certain tier affiliates then would have probably contacted me as well.

Does Amazon care about its affiliates anymore?

Yes, obviously they do – they’ve invested a significant amount of time and money into the Amazon Associates platform throughout 2016 and continue to do so in 2017 with the interface updates, shopping ads and their latest update the official WordPress plugin, and there is more to come.

This change, if it does happen is obviously just motivated by Amazon’s margins, but what annoys me is that they already charge sellers 6.5% as a referral fee when they sell on Amazon, so they’re covered up to 6.5% on every single sale from a third party vendor. If we just assumed 25% of sales were generated via affiliates then they’d be covered by the 6.5% they charge sellers.

Is changing to a category based model the best idea?

No, it’s not – if they want to increase their margins and have the least impact on their affiliates then perhaps change to a revenue-based model, rather than a volume based model – this way they can ensure their affiliates are motivated to seek out higher ticket items (those which make Amazon a higher percentage based on their own Amazon seller fees). Meanwhile, it ensures affiliates are not getting 8.5% commissions on small, low margin items.

If this happens, what’s my plan of action?

Whether this happens or not, next week I will be downloading all of my sales data and highlighting any singular brands where I sell a lot of products. I will then research if that company sells directly and also if they have an affiliate program, if so then I will make contact with each company and begin negotiating commissions if I were to sell directly. We may as well be prepared for the worst case scenario!

Note: I just threw this article together very quickly, I am entertaining guests tonight, so I am supposed to be cooking dinner right now. I will update this tomorrow with a larger, more in-depth reaction and look at this potential change. For now though, please share your thoughts in the comment section below!

7 Comments

  1. GoPro Gimbal February 11, 2017
  2. rathernotsay February 12, 2017
  3. Josphwork February 12, 2017
  4. Ken February 16, 2017
  5. Jennifer (PotPieGirl) February 21, 2017
  6. Armando Boni February 22, 2017
  7. Jakub February 23, 2017

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