Discussion keeps the world turning.
This is Roundtable.
In China's blazing ecommerce marketplace, every add to cart sets off a ripple of costs layered shifting and often hidden.
So who's really footing the bill today?
We pull back the curtain on platform fees and what China's draft rules forebode for merchants, platforms and the shoppers caught in between.
Coming to you live from Beijing, this is Roundtable.
I'm He Yang. For today's program I'm joined by Steve Hatherly and Yu Shen in the studio, first on today's show.
Online shopping is so easy these days.
Browse a sea of options, a few taps, pay and boom, your order's on its way!
But while we're busy adding to cart, there's a lot happening behind the scenes.
For merchants, selling online isn't just about good products.
It's about navigating complex platform rules, unclear service fees, and ever -changing commissions.
Many sellers feel squeezed by rising costs and opaque policies.
The relationship between platforms and sellers?
Sometimes more like landlord and tenant than partners in business.
Now China's market regulator has dropped a new draft guideline.
that could shake things up pushing for fee transparency fair charges and Stronger protections for the merchants who keep these platforms running Essentially so guys tell us a bit more about this draft guideline and you shouldn't let's go to you first so recently China's State Administration for market regulation or SAMR released draft guidelines for public consultation aimed at Regulating fees charged by online transaction platforms, amid efforts to promote the orderly development of these platform economy.
So to be clear, the 28 article document, which the SAM are published to gather public feedback until June the 25th, outlines principles to ensure fee fairness, reduce burdens on merchants, strengthen platform accountability, standardize charging practices and also enhance supervision important to point out here this is again it's a draft guideline right so this isn't new law put into place this is something that's put out by the SAMR and again to get feedback from those involved from people who will share their opinions on this right it's long right it's a 28 article document but yeah that's the point
is to get feedback on this.
Yes. So this is the opportunity if you are a seller, a small business owner, who's got online outlets where you present your products, then if you have some worries or woes, this is the time to go on to the Web site and provide your public input, essentially.
And this is an important part of, you know, But before the legislation or a rule comes into effect.
And so much of our economic life revolves online these days.
From hailing a cab, ordering takeout, shopping online, booking hotels and trips and so on.
What type of platforms does this draft guideline aim to regulate?
Yeah, you have already mentioned some of these.
The draft guidelines are primarily about regulating fees charged by online trading platforms. The specific focus of the guidelines is on platforms where online trading takes place, particularly e -commerce platforms, and these platforms collect various fees from the businesses operating on them, including commissions, technical service fees, marketing fees, etc. Also, Cui Lili, professor at the Department of Digital Economy at Shanghai University said these issues are also particularly prominent in sectors like ride -hailing and food -delivery e -commerce compared to consumers.
The protection of the rights and interests of small and micro businesses is still insufficient because on these platforms, you can be as a merchant or just small vendors and you sell no matter it's the product or the service on it.
Yeah, so this isn't about consumers per se.
You could say that yes, there is a direct impact on consumers because if there's better conditions for the sellers for the small businesses, then that could be passed down to the consumers.
But sure, this is more about the small business, the entrepreneurs who are using these platforms to sell their goods.
So basically the sellers, which are millions of small and medium sized businesses And this could be a side job for someone.
This could be the main job for someone as well, since e -commerce is a fast -growing and thriving sector in our economy.
And who stands to benefit from this draft recu - Well, this draft guideline?
Well, the most direct beneficiaries of this are meant to be the merchants or the operators within these trading platforms. And the guidelines themselves, they're a direct response to complaints that have been put forth from merchants about issues like unclear pricing, complex calculation methods, a lack of transparency, unreasonable fees charged to them, and then various arbitrary issues like fines or deposit seizures.
And the goal here, the aim is to standardize the fee practices, and by doing that, then you can improve transparency, and then you can ease the operational burdens faced by the businesses.
So I guess, simply speaking, is that sometimes fees are, you know, you get the bill.
The businesses get the bill.
And then, okay, well, here's the amount that I have to pay.
But what why am I paying this amount and what what exactly is this for?
They're asking for more transparency That's one of the things and after that after the platforms can be well regulated and the cost maybe can be saved by these merchants and then passed down to to, you know, the consumers, by protecting their rights and contributing to fair competition and also sustainable development of the whole platform economy.
Yeah, if you think about it as an ecosystem, right, improvements made here would lead to a healthier market environment for the businesses, for the merchants, the sellers, but it would lead to benefits for everyone involved with that ecosystem, including the platforms themselves.
And then, yeah, Yuxin, as you mentioned, the customers too.
And this is just a win win win win.
How many wins could there be there for everyone involved when you have a transparent and honest ecosystem where everyone is aware of exactly what's going on?
Yeah, that sounds like the ideal world.
And usually reality is far from ideal.
And we've heard in previous years about sellers complaining that, yes, I get the Yes, I get a fixed amount, or I get a clearly stated amount, let's say 5 % of a certain fee.
And then the platform charges me that.
If I don't comply, then I can't do business here.
And then when you look at it, this is sort of the fact of the land in all online platforms, regardless of country, regardless of platform.
And these platforms can do this.
Basically, sometimes people argue arbitrarily, charge up very expensive fees so that these small businesses can sell stuff or services on my platform.
Why? Well, I can't afford, I can afford to be the bully on the playground because guess what?
I own the playground.
Well, okay. So that's one side of the coin.
But the other side of the coin reminds me of the conversations that I've had with various famous musicians over the years who in the beginning of their career, and this is what they they told me in the beginning of their career.
You know, signing to a big record label is a very exciting thing, but then there's a trade off.
Right. When you're signed to a large record label, then you're going to get things that cost you.
Right. But the benefit is, is that you're using their platform, they're labeled.
They're gonna promote you.
They're going to help to bring you fans, right?
Can you do it independently as an artist?
Sure you can. But the reason you sign to a label is because of all those added benefits.
So I draw that comparison, because yes, from a small business point of view, you can do things on your own if you want to.
but being a member or signing up to one of these platforms, using these platforms to sell your goods.
You're using their resources.
Yeah, exactly, and they're helping to bring customers to you.
So I'm not saying that there shouldn't be transparency.
I'm not saying that we should vilify these platforms 100%, but also there is another side to that coin.
There are benefits for these merchants, too.
Yes, and that's why I think these platforms or this kind of draft is encouraging the fee reductions and support because of course when there is a beneficial system and a good ecosystem for both sides it can create a quite good cycle for both the merchants and the platform.
The guideline encourages platforms to actually adopt flexible pricing strategies and to offer fee reductions for small and medium -sized merchants.
And that is intended to help alleviate their operational pressure and lower their operating costs.
Yeah, and that makes sense, because not every merchant is created equal, right?
Some of the businesses will be bigger than others.
And if they have options available to them for what types of fees they want to pay, what is best for their business, then that just helps out everyone involved.
having a kind of a blanket strategy for everyone wouldn't make sense.
Indeed and actually this does remind me as I'm trying to look for international examples and I know Steve you have under your sleeve an Amazon example but let me provide a Apple example first because this is something that has been in the news a lot in the last few globally.
As you probably know, Apple's App Store famously charged a 30 % commission fee to most paid apps and in -app purchases.
And this has been subject to severe criticism.
And Apple has made some changes and exceptions.
Since 2021, Apple offers a reduced 15 % fee for developers earning under 1 million U .S. dollars a year.
Well, that's a lot of money.
And also, it's been experiencing ongoing global pressure.
Apple has faced lawsuits and regulations.
For example, Epic Games took Apple to the court in 2021, and it demanded a alternative payment method being available.
And then Apple didn't like it.
And Apple took Fortnite, which is the top game of Epic Games company, off its App Store.
And then that was key to the court case.
And the court actually ruled that, well, first of all, Apple's App Store is not a monopoly and it allowed the alternative payment method being available.
So these are also in the EU market the Digital Markets Act has been pushing back over Apple's App Store charge as well.
Pushing for lower fees and third -party payment options and this all sort of points to this power struggle between the online platform and the individual sellers.
So this is a power struggle that's happening all over the world.
Yeah, you mentioned Amazon before.
So I'll reference a couple of different websites that I visited.
One is intentwise .com, and this is from 2024.
The cost to sell on Amazon depends on your selling plan, your product category, your fulfillment strategy, and other variables as well.
But the options are flexible, so you can find the combination that works best for your business and for your goals.
And that's a long way of saying there's no straightforward answer to know how much it costs to sell on Amazon.
It's going to be different for every business.
But let's just talk about a couple of the the different fees that you'll find on there.
So the seller's fees, you have to pay Amazon just for the ability to sell on its platform, right?
Everybody knows that and it makes sense.
You can choose there though between two different account types, an individual account and then a professional account.
And if you opt for an individual seller account, you pay 99 cents on every sale you make regardless of the cost of the product.
That's a per item charge.
And that's why most brands opt for a professional seller subscription fee because when you choose that one, you pay a $39 .99 price per month, no matter what.
If you sell fewer than 40 products a month, they recommend the individual one because then it's not going to add up, but if you're selling more than that, then that's going to cost you a lot more.
Now the fulfillment fees that I mentioned before, what are those?
What does that mean?
So Amazon has two shipping and fulfillment options for brands.
One is the fulfillment by Amazon.
They call that the FBA and that allows sellers to let Amazon handle the shipping and fulfillment of their products.
basically you're using Amazon's really impressive and put -in -place infrastructure for shipping right and that comes with a big benefit to the seller too because the purchaser the customer they know that and if they know that then they feel more comfortable they say because everybody kind of knows that Amazon is quite well known for its speed of shipping the other one is the FBM fulfillment by merchant that's where the seller maintains control of the shipping and fulfillment process.
Now let me skip over, I apologize, this is getting a little lengthy, but let me skip over to the other website that I found.
This is from prospect .org.
The website is the American Prospect.
Now in 2025, this is new.
The previous policy was that when the fulfillment by Amazon, the FBA, lost or damaged a third -party seller's inventory for a sale, it reimbursed the seller at the full retail cost. that's kind of inevitable when you're shipping so many things it's going to happen, right?
But starting March 10th, Amazon only reimburses for a product's manufacturing cost and that is significantly lower than the sale price.
This is a big, big deal for sellers because previously, you got full reimbursement for a lost or damaged product.
Now, only a portion of that is going to be returned.
These deals, I could go on and on about that.
They're so complicated.
There are so many different fees.
There are options for the for the sellers, but to sell on these platforms, it's not free It's gonna it's gonna cost you and sometimes it can be very complicated in terms of how that's done And it can be very expensive and Amazon after losing to the fierce local competition in China has actually retreated from the Huge Chinese market but here in China with its thriving e -commerce we see there are similar situations right?
Well let's bring in the context of these draft guidelines once again and what do you see as maybe the key behaviors it aims to regulate and maybe a lot of them has something to do?
To offer a comparison with the Amazon example.
Yes, in comparison, mostly in China's online platforms They charge your fees or commission in a certain percentage of your sales.
Domestic newspaper 21st century reported one example of, out of every 100 yuan in sales, at least, or probably 30 yuan goes to traffic promotion cost, and I will explain what that is later.
This is an example of Lingling, who is a creative product seller on a very famous online shopping platform and she's been running this store for about six or seven years and around 90 to 80 percent of her you know business used to come from this platform which means is her livelihood and currently this you know traffic promotion cost account for over 30 % of her whole revenue and that's a conservative estimate that that's what she said.
So this traffic promotion cost refer to fees paid to gain more exposure on this platform such as maybe higher product visibility, better placement in search results, and you know more user impressions.
But these feeds do not guarantee more sales because you're just getting seen more.
So what so what that means is if somebody does a general product search let's say I don't know smartphone cover I don't know what she's but for example, smartphone cover, that will have her come up near the top of the list when people do a general search. Okay, yeah, but like you said, that doesn't guarantee somebody is going to buy something from her.
It's just the ability to be seen better.
And that's so important.
For someone as lazy as He Yung, I only look at the first page, the top five items that come up in my search. I'm not gonna go to page two.
I can't even be bothered to scroll first, So exposure is everything if you're an online merchant.
That's got to be like working in some way, right?
Of course if you're paying a lot of money for the platform, and it has to be something to do with the sales or at least boost a little bit of sales for these merchants.
But that's not all.
Lingling said that when you include other platform fees the total can reach 40 % to 50 % of their commissions, like technical service fees, penalties, or you're like these consumers may ask for refunds without returns.
That's one of the policies that we mentioned in previous shows.
And you know, you name it, they charge it, it can be very expensive.
Going back to that website prospect .org, they talked about that too.
This is what they said.
Amazon has for a decade engaged in a slow squeeze of its third -party sellers.
In 2014, the platform was taking a 19 percent cut of seller revenue, but by the first half of 2023, this was up to 45 percent extracted through a variety of commissions, shipping and logistics fees and increasingly mandatory advertising purchases.
Amazon's total take from third -party sellers in 2023 was an astronomical $140 billion.
That is, I was reading to you from from their website, that's a pretty big chunk of money.
Yes, it is. And the more you read, especially those big figures come up, the more I feel for the small seller, because especially if you're just a small or medium sized business, and then so much of your revenue depends on these online platforms. And these online platforms are humongous.
How do you bargain with them, right?
And also even just going back to my previous example of the Apple App Store versus Fortnite slash Epic Games, well, you have to be as big as Fortnite to even be able to launch a case like that.
So I guess it really matters for those in this ecosystem.
system, how necessary do you think, as having this conversation as well as in the future proper specific legislation rules on this specific issue?
Yeah, and that's what this guideline advocates for, getting back to our main topic here.
It's to reduce the burden of platform -based businesses and to standardize platform fee practices and it clearly identified or identifies eight different types of unreasonable fee practices for example charging duplicate fees charging fees without providing services or providing inadequate services passing on costs that should be borne by the platform itself charging merchants for access to their own basic operational data that one seems like something you should not have to pay for.
Another one, forcing or coercing merchants to purchase services or participate in promotional activities for a fee.
Also using unreasonable deposit requirements as disguised fees or to increase fee standards.
The list goes on a little bit longer, but you see the point of the guidelines here.
It's to protect the merchants.
And again, going back to use that word again, transparency.
And this is so important because this is such a huge industry with a need for stronger regulation and after years of development the platform economy has grown into a broad -reaching, highly inclusive and open ecosystem.
As we mentioned, so many categories in this platform economy and it involves tens of millions of online business operators and flexible workers an overnight hundred million online consumers empowering countless sectors of the real economy.
Yeah, you do highlight the importance of a guideline as such. But also, just as you guys were sort of going through the detailed entries of the draft, it just made me sort of cross my arms and think.
For example, you mentioned the first one was, like, not charging duplicate fees.
And I suspect in the writing it's not going to be promotion fees in entry one and promotion fees the same exact wording in entry two and you're being charged duplicate fees.
It's going to be far more sneaky than that and also how do you prove that, oh I'm being double charged for the same thing?
How do you prove that there's unreasonable or insufficient promotion for example and all these actions might be something of a burden on the small businesses or the merchants to prove and then that's okay that sounds like there's more work for lawyers to do and you probably need um yeah and if the merchants can band together, then this could give them a bigger bargaining chip, maybe.
This is important because, you know, do I agree that sellers need to pay fees to be on Amazon or to be on online platforms in China?
Of course. Do I agree that it should be expensive?
Probably because of the number of the traffic, the online traffic that that gets that visits these sites every single day.
But this is a tremendous advantage for small business owners, right?
How else are you going to get the name of your business or your products out to millions and millions of people here in China, right?
I'm not saying that it shouldn't cost something.
But if you don't know, as a business owner, what you're actually paying for, if you don't know where these fees are coming from, that's unreasonable, that's completely unreasonable.
and you know, they talked about Amazon before.
It's always been kind of understood, they said.
The working theory has been that, you know, Amazon's so dominant in online retail, they can't possibly push their sellers so far that it would force them off the platform.
But they're suggesting that new rule in 2025 might do that for some businesses.
If you're making things so unreasonable for businesses that they can't afford to be there, well that's not helping the platform, it's not helping the businesses, It's not helping consumers.
And it's certainly not helping the economy.
Hmm. And, as we just mentioned, even at a broad level, there are different types of online platforms, online trading platforms, not to mention the many different brands within each category.
So getting these platforms to change from their existing framework is already a major challenge in itself.
And also, as Huyang said, defining and applying these unreasonable charges or just duplicate charges is hard already, and applying these kind of criteria consistently to determine whether a fee is unreasonable.
It's a huge paperwork to do, and a huge wording to do, right?
And complex business scenarios could be subjective and potentially lead to disputes, and acquiring nuanced interpretation and application during implementation and enforcement.
So it can be quite hard to actually see the whole ideal results that we just listed before right?
But at least I would say it is also sending a positive signal to a lot of these small businesses that the overall business environment may be improving or at the direction of improving and the entire system will become more refined and transparent yeah you just gotta make sure that if you put new rules in place that there is an effective an effective way to enforce those rules that's a very good point and also we're talking about a sector that's relatively young it's not like the petroleum industry this is something that's only been around for a decade or more and also see there's something I
don't necessarily agree with what you just said Steve I think yes sure you don't want to push your merchants to the brink of survival.
But also, because this is maybe a new sector, relatively speaking, because the platforms have so much power in pricing, therefore it can afford to squeeze as much as it wants, and then the merchants feel, well, I need to make money so ultimately it gets passed to the consumer and the rules are being made in in the working I think and now we're seeing that maybe there's the regulators who are saying well how much control should digital platforms have over the business that depend on them and is that control being used fairly and that's something you can think about as well and you can feel free to contact us if you have some thoughts about this topic or any
other topic or a future topic you'd like us to discuss on the show, Roundtable Podcast at QQ .com, that's where you can do it.
