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

by Will Blears

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

by Will Blears

by Will Blears
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!

Entrepreneur and Online Advertising Expert. I have 11 years experience in Online Advertising and currently I am the founder of a boutique Paid advertising agency and Affiliate Marketeer.

8 Comments

  1. For those already locked in at 4% and potentially dropping to 3% that a 25% reduction in earnings. I really hope this is not the case. Looks like alot of people will now be targeting high percentage Amazon Fees. Crazy that one seller could be getting 3% and another getting 10% without any regard to how many products they sell.

  2. It’s March 1 for everyone. It’ll be widely announced, along with the new rates, before then.

    It’s not just about their margins, although that’s clearly part of it. It’s also about pushing in categories where they haven’t yet established the kind of market dominance they’ve established in some other categories. From Amazon’s perspective, the affiliate program falls under their marketing budget. Large as it is, they have a finite marketing budget and need to prioritize it to serve the company’s broader efforts.

  3. Do you think that the commission rates will be same as in the UK?

    If so, it won’t be too bad for me as my main niche is at the 7% level but just as I’m working hard to raise conversions (to hit a higher commission level) they do this. Bad timing!

    Well, time will tell but it might be time to start looking at other alternatives.

  4. I’m a bit torn between believing this will roll out to all affiliates from best-performing on down slowly and it rolling out to all at one time. While both ways make sense to me, I also think they (Amazon) are reaching out to their best-performing affiliates before the change to give those affiliates a ‘heads up’ in attempts to not lose them.

    If I were the Wirecutter or The Sweet Home I’d be a little bent to wake up one day and see it’s all changed, wouldn’t you? If the change is inevitable, the respect of advanced warning and information would go a long way to keeping me with their program.

    BUT – I am not a WireCutter or Sweet Home level of Amazon affiliate so I imagine I’ll wake up one day and things will have changed (as it goes with virtually everything in this business).

    As I talked about in my blog post, based on rumored new commission rates, some things for me would take a loss – others just might do better.

    However, these changes probably will encourage me to actively promote things in categories that are not my norm.

    All that said, I think for many affiliates it may not make THAT much of a difference. We can actively refer to specific products, but the beauty of Amazon’s affiliate program is that there’s NO TELLING what someone will buy and we get a piece of all of it.

    Personally, I’m not going anywhere. Like you there might be some specific products and/or brands that I might take some time to reach out directly to the company if it makes sense, but otherwise, it will be business as usual.

    Thanks for the post – AND for your information on the Authority Hacker podcast =)

    Jennifer
    ~PotPieGirl

  5. I wrote about “Amazoncalypsa” few weeks ago. In my view nothing good will happen in the future and this is just first of many negative changes.

    There is no way back for Amazon since they started posting profits they must now show huge profit growth every quarter. Their Price to Earnings is 175

    Their international ecommerce business is still in loss. Their US ecommerce business generated only 25% of the profits.

    The management will soon start to talk why they should pay commision on already acquired customer. I wouldn’t see impossible that the commision on already acquired customer will drop to the floor and only newly acquired customers will bring real cash.

  6. Amazon Commission is changed and it is good for some people and not good for some.

    My Revenue is almost similar like before, not a big difference, neither positive nor negative.

    My site is all about Bedding Sets and it comes in 8%, which is okay for me.

    Thanks.

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