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Amazon cuts shipping fees in threat to Alibaba

| Friday, June 17, 2016, 11:25 p.m.

Amazon.com Inc. is slashing fees it charges merchants to sell USB cables, smartphone screen protectors and other small, flat items that can fit in envelopes, posing a potential threat to competing marketplaces owned by Alibaba Group Holding Ltd., EBay Inc. and Wish.com that connect Chinese sellers with U.S. shoppers.

The new rates will take effect July 1, according to an Amazon email to marketplace sellers obtained by Bloomberg News. Merchants would pay $1.61 to ship three, flat, 1-ounce packages, 67 percent less than the current price, according to the email. The change differentiates between small, flat items that can fit in large envelopes and items thicker than half an inch that are subject to higher fees.

The new rates apply to merchants using the company's Fulfillment By Amazon Small and Light program, introduced last year to offer shoppers free shipping on thousands of popular small items such as makeup, mobile phone accessories and stickers. Most of the inventory comes from third-party merchants who give Amazon a cut of each sale for handling storage, packaging and delivery. Most items cost $10 or less, making low delivery costs essential for profitability.

Amazon shoppers in the United States order tens of millions of units annually that fit the small and light dimensions, according to company documents reviewed by Bloomberg News.

Amazon's program faces competition from marketplaces that help Chinese merchants ship directly to U.S. shoppers through the ePacket program, an agreement between the U.S. Postal Service and China Post that provides Chinese merchants cheap access to U.S. shoppers on small packages weighing as much as 4.4 pounds. Chinese merchants selling on Amazon also can ship orders themselves through ePacket, meaning Amazon gets less money on the sale than if it had handled packing and delivery.

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