Amazon reduced the transaction fee to 5% from the typical 15% for sales originating from brands bringing the shopper to Amazon. Amazon is trying to incentivize brands to invest in marketing on platforms like Facebook and Google but link to Amazon instead of their e-commerce website.
The Brand Referral Bonus program, launched last week, “credits brands an average of 10% of sales from traffic you have driven to Amazon.” The bonus rate varies by category and is not paid out to brands directly but instead gets used to deduct future transaction fees (Amazon calls them referral fees). Amazon Attribution, the analytics solution that powers the program by allowing Amazon to attribute sales to off-Amazon clicks, has been around since August 2018.
Effectively, if a shopper goes to Amazon and finds the product, the brand will pay a 15% fee. But if the brand sends the shopper to Amazon via their newsletter or an ad on their Instagram account, the brand will only pay a 5% fee.
The program has a singular purpose: stopping brands from investing in direct-to-consumer websites and directing those shoppers to Amazon instead. The transaction fee Amazon charges is significantly more than, for example, Shopify’s 2.9% + 30¢ USD credit card processing fee. The new program reduces Amazon’s fee to be closer to Shopify’s.
The catch, of course, is that fee structures are irrelevant to brands driving shoppers to their websites. The brand moat, long-term value (LTV), data capture, and other aspects are more important than fees. Brands are only renting shoppers from Amazon, after all. That’s why the Brand Referral Bonus program is mostly going to benefit Amazon. If not for the simple reason that the second time the shopper orders the brand’s product on Amazon, the brand will be back to paying the full 15% fee.
Brands do drive traffic to Amazon already, however. They get around some of Amazon’s limitations by often driving traffic to a landing page rather than directly to an Amazon listing too. The new program will only make those brands drive more traffic as it reduces the net cost of off-Amazon marketing. The consideration of short-term versus long-term ROI when weighing Amazon against direct channels is complex.