Amazon fee cuts on cheap apparel may see more brands lose coveted buy box to resellers

It’s unusual for Amazon to reduce the commission fees it charges merchants — indeed, it has raised fees for most sellers over the year — but in December, the company announced that it would lower the commission on clothing products priced below $15 to 5%, effective Jan. 15. The fee on clothing priced from $15 to $20 would fall to 10%. Previously, Amazon took a 17% cut from sales of such items. Amazon unveiled the fee reduction as part of a broader revision of its seller fee structure. 

Both the selection and sales of under-$20 clothing on Amazon have risen since the fee change went into effect, according to an analysis of hundreds of millions of product listings by market intelligence firm Momentum Commerce, which handles Amazon sales on behalf of brands like Crocs, Chaps and Woolly.

The number of clothing items priced below $20 climbed 27% from mid-January of this year through the end of August. Over the same period the prior year, selection rose only 5%. Meanwhile, the share of clothing sales across Amazon’s low-cost apparel offerings jumped by 13% — well above the less than 1% decline in share observed over the same period last year. 

Brands are adjusting prices to take advantage of the commission adjustment. The share of clothing products priced between $15 to $16 declined from 3% to 2.2% year over year. Meanwhile, the share of products priced between $20 to $21 fell from 1.9% to 1.1% year over year.

If the goal of Amazon’s fee change was to capture some of the demand that drives major sales for Shein and Temu, then the company appears to have succeeded. The data signals that more low-cost apparel brands are entering the market. At the same time, sellers are repricing their products to stay competitive, attracting value-conscious shoppers in the process.

CEO Andy Jassy highlighted how Amazon’s decision to lower seller fees on apparel has paid off when the company reported second-quarter earnings in August. “Lowering apparel fees has spurred substantial year-over-year unit growth in apparel,” Jassy said on the company’s earnings call. He added that Amazon saw lower average selling prices during the quarter because “customers continue to trade down on price when they can.”

But while Amazon has made inroads in its price war with Shein and Temu, the fee change may lead to a rise in retail arbitrage on its marketplace as more resellers of impacted products win the coveted “buy box” away from first-party brands, according to Momentum Commerce.

“It gave brands peace of mind that retail arbitrage on Amazon wasn’t viable because it was really tough to make the economics works,” Momentum Commerce CEO John T. Shea said. “But when that commission rate changes from 17% down to 10% or 5%, depending on the price band, all of a sudden it’s more likely an opportunistic reseller can make money on it.”

Reducing the referral fees on low-cost apparel items drives competitive prices and better selection for customers, company spokesperson Mira Dix said in an emailed statement. The company also questioned Momentum Commerce’s findings related to resellers. 

“Reducing the referral fees for the apparel category drives even greater selection and competitive prices for customers. “We have not seen an outsized increase in resellers as a result, and we’ve seen no evidence of the claims in this report, which makes several assumptions using unverifiable methods with limited samples of data,” Dix said. “All retail and independent sellers’ offers compete to be one of the featured offers based on the same criteria, such as low price, fast delivery and a track record of good customer service.”

Winning the buy box

In Shea’s estimation, a side effect of the apparel fee change is that first-party sellers that sell directly to Amazon — oftentimes these are popular, well-known companies — are more likely to lose the so-called “buy box” to resellers. That’s because it’s now more profitable for resellers to list inexpensive apparel items directly on Amazon, which then compete with the marketplace’s own first-party listings. First-party brands sell products to Amazon at a wholesale rate, and Amazon controls the price, Shea explained. But resellers that procure a product may start selling at a lower price, winning the buy box and ultimately undercutting the actual brand.

According to a sample of 1,000 clothing products priced under $20 that have been on Amazon since at least 2022, brands won their own products’ buy box more than 89% of the time from February through August 2023. That number dropped to about 77% over the same period in 2024.

The buy box is a highly coveted driver of sales on Amazon and can ultimately make or break a business. The Federal Trade Commission is investigating the practice as part of a lawsuit it filed last year against Amazon.

The cost of fast fashion

To Laura Meyer, a former Amazon employee who founded Envision Horizons, a marketing company, the uptick in low-cost apparel on Amazon could have negative implications for the environment. 

Research has shown that fast fashion is correlated with overconsumption. Clothing production has doubled since 2000, exceeding 100 billion garments for the first time in 2014, according to a report from McKinsey.

Meyer speculated that Amazon’s generous return policy exacerbates the issue of fast fashion in its marketplace. Apparel generally has higher rates of return compared to other categories, Meyer said, because customers like to try on multiple sizes at home and return the ones that don’t work out. Amazon’s return policy makes that even easier because it offers customers free returns on many apparel items. 

“We see return rates for apparel ranging from 2% up to 45% depending on the product and the category,” Meyer said, who represents about 50 brands. Around 20% of returns end up being donated, incinerated or sent to a landfill, she added. 

“The carbon footprint of fast fashion is atrocious, and it just builds really bad habits,” Meyer said. “There needs to be consumer habit changes, but it should be encouraged by businesses.”

Amazon has taken strides to drive down costs associated with returns. For example, when Amazon announced lower seller fees for low-cost apparel items, Amazon also said it would add a new returns processing fee for most items with high return rates.

Amazon reiterated its progress on advancing sustainability initiatives in an email statement. “This year alone we reached our goal of 100% renewable energy seven years early, removed 95% of plastic air pillows from our delivery packaging in North America, and grew our electric delivery vehicle fleet to 24,000 globally,” Dix said. “Through our Climate Pledge, we’ll continue to drive our net-zero emissions path forward, and deliver for our customers, partners, and the planet.”

Despite Amazon’s push into low-cost apparel, the company has made a concerted effort to woo more premium brands, including luxury clothing companies, to its marketplace. 

All told, the rise of fast-fashion apparel on Amazon might sour some brands on Amazon’s marketplace, but that doesn’t mean they’ll exit the platform, Shea said. As he put it, “The challenge with Amazon is they’re too big to quit.”