E-Commerce Fee Hikes Squeeze Vietnamese Sellers: A Warning Sign for U.S. Businesses?

Vietnam’s Ministry of Industry and Trade is stepping in as online sellers voice concerns over rising fees on major e-commerce platforms.

April 1, 2024

E-commerce platforms in vietnam, like Shopee and TikTok Shop, are facing a wave of discontent from sellers grappling wiht increased platform fees. This situation, while unfolding in Southeast Asia, carries meaningful implications for U.S. e-commerce businesses, highlighting the delicate balance between platform profitability and seller sustainability.

Rising Fees Trigger seller Discontent in Vietnam

The Ministry of Industry and Trade’s Department of E-commerce and Digital Economy in Vietnam has pledged to investigate the impact of these fee adjustments, aiming to ensure fair practices. This intervention comes as small-scale and individual buisness owners, heavily reliant on these platforms to reach their customer base, express growing concerns. The core issue revolves around the potential for these increased costs to be passed on to consumers, possibly impacting affordability and overall market competitiveness.

Hoang Ninh, a representative from the Department of E-commerce and Digital Economy, emphasized the need for transparency and equitable request of fees, stating, “Fee increases must be based on data transparency, and fees must be applied consistently to sellers. For example, fees must be applied together to domestic and foreign sellers and must be publicly disclosed in advance in accordance with regulations.”

Fee Hikes Ignite Debate, Triggering Government Intervention

The Vietnamese government is taking a firm stance on the issue. According to Decree 98, e-commerce platforms are obligated to publicly disclose their policies, including transaction fees, to protect the rights of both sellers and consumers. failure to provide clear notifications or altering policies without prior notice could result in administrative violations, with fines ranging from 20 million to 40 million VND.

This regulatory scrutiny mirrors the increasing attention online marketplaces are receiving in the United States. The Federal Trade Commission (FTC) in the U.S. has been increasingly focused on ensuring fair competition and consumer protection in the digital marketplace, setting a precedent for global regulatory trends. For example, the FTC has been actively investigating Amazon’s business practices, scrutinizing its treatment of third-party sellers and its potential anti-competitive behavior.

Ninh affirmed, “The Department will coordinate with relevant agencies such as the National Competition Committee to assess the impact of fee adjustments and request exchanges to report on fee collection mechanisms to ensure that market dominance is not abused.”

He further added, “In cases where these platforms conduct activities such as providing e-commerce services without having a registration certificate or in accordance with the contents of the registration certificate or confirmed notification from a competent state management agency, the Department will explain and request platform owners to implement administrative measures in accordance with regulations.”

Platform responses and Fee Adjustments: A Detailed Breakdown

Shopee announced that starting April 1st, fixed fee rates for certain product categories would be adjusted, with increases reaching up to 10%. Electronics accessories,watches,and bags would see seller fees increase to 9%,tripling the previous rate. Categories such as products for mothers and babies have also seen adjustments from 4% to 9.5%, while othre items increased from 4% to 10%. however, Shopee has maintained fixed fee rates (1.5-7%) for electronics, computers, and mobile phone groups, mitigating the impact on these sectors.

TikTok Shop also implemented fee increases, raising platform fees for all product categories from 0.2% to 1.5%,effective April 1st.

these fee adjustments echo similar debates in the U.S., where platforms like Amazon have faced scrutiny over seller fees and their impact on small businesses. The U.S. marketplace operates with a complex fee structure, including referral fees, fulfillment fees, and other charges, which can substantially affect a seller’s profitability. As a notable example,Amazon’s referral fees can range from 8% to 15% depending on the product category,and fulfillment fees can vary based on size,weight,and storage duration.

Seller Reactions and Market Implications

Faced with these fee increases, online sellers have expressed frustration, with some lamenting that their earnings are being “swallowed” by these platforms.The concern is that if these policies persist, the Vietnamese e-commerce market could witness a mass exodus of online sellers seeking alternative platforms with more favorable terms.

This situation mirrors the challenges faced by U.S. sellers, who often navigate a landscape of fluctuating fees and policies on major e-commerce sites. The ability of sellers to adapt and diversify their sales channels is crucial for survival in an increasingly competitive market. Many U.S. sellers are exploring options like Shopify, Etsy, and Walmart Marketplace to reduce their reliance on Amazon.

To navigate these challenges, sellers in both Vietnam and the U.S.are exploring strategies such as:

| Strategy | Description

E-Commerce Platforms Squeeze U.S.Sellers with Rising Fees: A Deep Dive

Online sellers in the United States are increasingly feeling the pinch as e-commerce platforms hike fees,sparking concerns about transparency,fairness,and the potential impact on consumers. This “squeeze,” as some describe it, is particularly acute for small businesses and independent entrepreneurs who rely on these platforms to reach a national audience.

Fee Hikes Spark Seller Outrage Across the U.S.

The core issue revolves around escalating transaction fees levied by major platforms like Shopify, Etsy, and Amazon. While these platforms offer essential services such as marketplace access, payment processing, and marketing tools, the rising costs are eroding sellers’ profit margins. For smaller businesses and individual sellers, these fees can be especially burdensome, potentially leading to higher prices for consumers or even forcing some sellers to abandon these platforms altogether.

Consider a hypothetical scenario: a small business in Iowa that sells handmade jewelry on Etsy. If Etsy increases its transaction fees, the business owner may have to raise the prices of her necklaces and earrings to maintain her profit margin. This could make her products less competitive compared to mass-produced alternatives, potentially hurting her sales. This ripple effect is being felt across various sectors of the U.S. economy.

Transparency and Fairness Under Scrutiny: A Call for Accountability

The debate centers on the transparency and fairness of these fee structures. Sellers argue that fee increases should be clearly communicated and justified, allowing them to adjust their business strategies accordingly. Concerns arise when platforms change their fee policies without adequate notice or explanation, leaving sellers feeling vulnerable and exploited.

This situation mirrors concerns raised in other markets, where regulatory bodies are stepping in to ensure fair practices. “Fee increases must be based on facts transparency, and fees must be applied uniformly to sellers. Such as, fees must be applied to domestic and foreign sellers at the same time and must be announced in advance according to regulations before being officially applied,” experts say.

The Impact on Consumers: higher Prices and Reduced Purchasing Power

Ultimately, rising e-commerce fees can impact consumers. Sellers may be forced to raise prices to offset these costs, potentially reducing consumer purchasing power. This is especially concerning in the current economic climate, where inflation and cost-of-living pressures are already affecting household budgets.

Imagine a consumer looking to purchase a handcrafted wooden toy on Etsy. If the seller has to increase the price due to higher platform fees, the consumer may opt for a cheaper, mass-produced alternative from a big-box retailer. This shift in consumer behavior can have a significant impact on small businesses and independent artisans.

Regulatory Scrutiny and Potential Action: The FTC Weighs In

The U.S. Federal trade Commission (FTC) has been increasingly focused on the practices of e-commerce platforms, particularly regarding competition and consumer protection. It is conceivable that the FTC could investigate potential anti-competitive behavior related to fee structures or require platforms to provide greater transparency to sellers.

Drawing parallels, experts state, “The department will coordinate with relevant agencies such as the National Competition Council to assess the impact of fee adjustments and request exchanges to report on fee collection mechanisms to ensure that market dominance abuse does not occur.” This collaborative approach highlights the importance of regulatory oversight in maintaining a level playing field.

Furthermore, “In cases where such platforms engage in activities such as providing e-commerce services under registration documents and regulations verified by competent state management agencies, the department will request such platform owners to explain and implement administrative remedies according to regulations.” This underscores the potential for regulatory intervention to address unfair practices.

Shopee’s Fee Hike Example: A Case Study in Rising costs

Shopee’s announcement of fixed fee increases on certain product categories, effective April 1st, serves as a concrete example of the concerns being raised. These increases, which can reach up to 10% for some categories, have sparked considerable debate among sellers.

As an example, transaction fees for electronics accessories, watches, and bags have reportedly increased to 9%, a threefold increase compared to previous rates. Similarly, fees for products in the mother and baby category have risen from 4% to 9.5%, while other items have seen increases from 4% to 10%.

This table illustrates the impact of Shopee’s fee increases on various product categories:

Product Category	Previous Fee	New Fee	Increase
Electronics Accessories, Watches, Bags	3%	9%	6%
Mother and Baby Products	4%	9.5%	5.5%
other Items	4%	10%	6%

Recommendations for a fairer E-Commerce Ecosystem: A Path Forward

To foster a more equitable e-commerce environment, several steps can be taken:

Increased Transparency: Platforms should provide clear and detailed explanations for their fee structures and any changes made to them.
Fair Notice: Sellers should receive ample notice before fee increases take effect, allowing them to adjust their pricing and business strategies.
Negotiation and Mediation: Mechanisms for negotiation or mediation between platforms and sellers could help resolve disputes over fees.
Regulatory Oversight: Government agencies should actively monitor e-commerce platforms to ensure fair competition and protect the interests of both sellers and consumers.

by implementing these measures, the U.S. can create a more sustainable and equitable e-commerce ecosystem that benefits both businesses and consumers.

Navigating the Changing E-Commerce Landscape: Strategies for U.S. Sellers

As e-commerce platforms continue to evolve and adjust their fee structures, it’s crucial for U.S. sellers to stay informed and adapt their strategies accordingly. Here are some practical steps sellers can take:

Monitor Fee Changes: Regularly review the fee policies of the platforms they use and stay updated on any changes.
Optimize Pricing: Carefully analyze their pricing strategies to balance profitability and competitiveness.
Explore Alternatives: Consider diversifying their sales channels by exploring other e-commerce platforms or building their own online stores.
Negotiate with Platforms: If possible, negotiate with platforms for better fee arrangements, especially for high-volume sellers.
* Advocate for Fair Practices: Join industry associations and advocate for fair and transparent fee structures in the e-commerce industry.

Conclusion: A Call for action

The rising fees on e-commerce platforms are a growing concern for online sellers in the U.S. and globally. Transparency, fairness, and regulatory oversight are crucial to ensuring a level playing field and protecting the interests of both businesses and consumers. As the e-commerce landscape continues to evolve, it is essential to address these challenges proactively to foster a healthy and sustainable online marketplace. The future of U.S. e-commerce depends on it.U.S. and Vietnam should consider diversifying their sales channels and building their own brand presence. Here are some strategies:

Develop a self-reliant website: Creating your own e-commerce website allows you to control your brand, customer data, and pricing. While there are setup costs,ranging from $1,500 to $30,000 for design and potentially $40 to $4,000 per month for hosting,the long-term benefits can outweigh the initial investment.

Build an email list: Email marketing remains a powerful tool for reaching customers directly and promoting your products.

Engage on social media: building a strong social media presence can help you connect with customers, build brand loyalty, and drive traffic to your website.

Explore niche platforms: Consider selling on smaller, niche platforms that cater to specific customer segments.

Negotiate with platforms: Don’t be afraid to negotiate with e-commerce platforms for better fees or terms, especially if you are a high-volume seller.

The Future of E-Commerce: A Call for Balance

The situation in Vietnam underscores the need for a more balanced e-commerce ecosystem, where both platforms and sellers can thrive. As e-commerce continues to grow, it is indeed crucial for platforms to consider the impact of their fees on small businesses and to work collaboratively to create a sustainable and equitable marketplace.

The U.S. e-commerce market should take note of the challenges faced by Vietnamese sellers and proactively implement strategies to mitigate risk and ensure a healthy and competitive online marketplace for all.