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Why does Amazon cap the advertising fee at 4% for electronic products?

by Roell
15 replies
I'm new to the Amazon associates program and am wondering why they cap the advertising fee at 4% for electronic products?

In comparison to general products where the advertising fee goes up in accordance with the volume of products shipped.

Do any of you have websites based around electronic products? What's been your experience as far as sales/commission?
#advertising #amazon #cap #electronic #fee #products
  • Profile picture of the author minsight
    That's a competitive market and their margins are most likely much lower on those products, leaving less to pay affiliates with.
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  • Profile picture of the author PaulaC
    The actual profit that most companies make on electronic products is generally quite low to begin with. That's why they need to compensate for it by reducing the affiliate commission.
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  • Profile picture of the author Clyde Dennis
    I'm guessing it has something to do with their profit margins,
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  • Profile picture of the author Michael Franklin
    For my electronic product sites, they've still done well. Of course, I gear them towards higher priced products, so even at 4%, the commission is very good.
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    • Profile picture of the author Roell
      anyone else promote Amazon electronic products on their site?
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      • Profile picture of the author Michael Shook
        Because they can still get people to promote them even at a low commission rate.

        The 4% commission is most likely the result of a very reputable price test. that is the number they came up with that will get them the most profit as a company.

        Amazon is one of the best marketing compnaies in the world. I would venture to say that everythign they do in their business is by design.
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  • Profile picture of the author tritrain
    You could make 15% on their Endless.com and smallparts.com subsidiaries as well.
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  • Profile picture of the author DireStraits
    That's something you'll have to ask them, surely? :p

    Either way, I'm not sure it really matters why they cap the commissions - just that they do, and it's unlikely to change any time soon.

    Decide whether or not you're still prepared to promote any products that fall under the categories for which commissions are capped, and press on.

    I promote a lot of products through Amazon UK, and pretty much everything has a commissions cap, there. It's slightly naff, but I'm prepared to tolerate it because Amazon converts like crazy, and I get so many orders (and commissions) for so much stuff beyond what I was promoting, it's not even funny.

    So you see, what Amazon lacks in the way of higher, uncapped commissions, it makes up for in other ways.
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  • Profile picture of the author winds
    As said previously, having worked in retail the majority of my life, electronics just don't have the same margin of profit of other products. Like car salesmen who only make 2% average commissions, the more expensive a product is the more likely the production competition is tighter, which leads to a tighter margin on the sales end - when it's harder to make money on the top of the pyramid, the bottom receives the same punishment.

    In short - they probably sell a lot of the big ticket items at cost, if not under cost, and hope the upsells (cords, power strips, batteries) cover the lost profits and then some. When you lose the ability to push your salesmen to add extras, you have to cut commissions and ensure you make at least a close to break even sale.
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    • Profile picture of the author ExRat
      Hi,

      This - JMichaelZ said -

      Because they can still get people to promote them even at a low commission rate.
      People are naturally inclined to buy electronics from the internet for a variety of reasons, whereas with many other items they often have more of a preference towards buying them offline, therefore the former are an easier sell online.
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      Roger Davis
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      • Profile picture of the author Michael Shook
        Originally Posted by ExRat View Post

        Hi,

        This - JMichaelZ said -

        People are naturally inclined to buy electronics from the internet for a variety of reasons, whereas with many other items they often have more of a preference towards buying them offline, therefore the former are an easier sell online.
        And they can still get people to promote them with a 24 hour cookie. With a high traffic site, having an amazon widget or a button makes a lot of sense, otherwise it seems you really have to rank well to make a good sales volume.
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  • Profile picture of the author Steve Faber
    Spent years at many levels of the electronics industry. Margins are quite slim, especially in video. They can't probably justify more than 4%.
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  • Profile picture of the author Dosty
    Some of the Amazon products sold as WSO's here advise staying out of the electronics niche altogether for this very reason. My issue with electronics is the faster turnover in product names. Seems that a new model comes out at least twice a year which can be a problem if you have backlinked a former model

    The good news is that electronic products are counted towards your number of orders so you can still use them to go up a tier in commission percentage (i.e. from 6% to 7% with 8 orders).
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    • Profile picture of the author PatriciaJ
      In the UK electronics is capped at £7, so a £700 item would be as low as 1%. But I have a bunch of electronics sites and they have been doing really well for the main products and the extras so I'm not complaining
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