Analysts at Bank of America Corp (NYSE:BAC) (BoA) believe Amazon.com Inc (NASDAQ:AMZN) could see a “modest” revenue benefit and a possible shift to Amazon Logistics (AMZL) after it imposes a new 2% fee on non-AMZL third-party merchants using Amazon’s Seller Fulfilled Prime (SFP).
SFP allows merchants to handle logistics independently of Amazon while still being marketed as Prime delivery, the analysts noted.
They forecast, with thousands of merchants using SFP set to start paying the 2% fee in October and assuming 5% to 10% third party units are shipped via SFP with no loss of sellers or shift to AMZL, a revenue benefit of $450 to 900 million per year, which the analysts said could recoup annual Prime subscription losses.
“However, the biggest driver of the fee could be to shift sellers to AMZL, as fees are higher and logistics capacity utilization appears to be still well below 2018 levels on several metrics, including units per square foot, which we estimate at 60 in 2022 (versus 77 in 2018),” they wrote.
The analysts also noted that Amazon is expanding its sponsored product advertising to third-party apps and websites, including Pinterest, BuzzFeed and Ziff Davis Brands amid reports that the Federal Trade Commission (FTC) is investigating policies it believes force merchants to use AMZL and advertising services.
The expansion of product ads could drive incremental unit sales on Amazon and, combined with the new fee is a sign that Amazon is ready to fight FTC challenges, the BoA analysts wrote.
“The new SFP fee could be interpreted as punitive for merchants not using AMZL but implies that Amazon believes the company is in a good position to fight FTC challenges in court,” they wrote.
“According to Politico, Amazon and the FTC are conducting final meetings that could be the last step before a case is filed, potentially this month.”
They maintained their ‘Buy’ rating on the stock with a US$174 price target.
Amazon shares traded at $133.25 at noon on Friday.
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