Shopee, TikTok Shop fee hikes to squeeze vendors’ profits

TikTok Shop, the Chinese social media e-commerce platform known for its many live-stream sales, will raise its commission range for regular shops from 1-3% to 1-4% on April 1.

For mall shops, which belong to popular brands, the fee will rise from 1-5.78% to 1.21-7.7%.

Shopee, the Singapore-based platform that dominates the Vietnamese e-commerce market, will raise its fee from 4% to up to 10%.

Sellers of smartphone accessories, sportswear, camping equipment, watches, and suitcases, for example, will have to pay 9% instead of the current 3%.

Minh Tuan, an electronics vendor in Hanoi who is paying 1-4% on Shopee, will have to pay up to 9.5% next month. His fee will be 4% on TikTok Shop.

"It is a shock to people who sell solely on e-commerce platforms, especially to Shopee vendors," he said.

Huyen Tran, a vendor in HCMC, plans to shut down her e-commerce business.

The government’s focus on collecting e-commerce taxes and platforms’ fee hikes would make it difficult for her to stay in business, she added.

The seller of household and lifestyle items will have to pay up to 9.5% on Shopee and 4% on TikTok Shop.

Fashion vendors like Gia Bao will be subject to the biggest hikes of up to 10%, and every shirt he sells will cost him 16.5% in fees and taxes.

"People used to sell clothes on Shopee for reduced costs, but that will no longer be the case with the fee hikes."

Although TikTok Shop has a more reasonable fee of 4% for clothes, he said the large expenses for running live stream sales on this platform is also a cost burden.

An estimated half a million vendors on e-commerce platforms are set to be affected by the fee hikes. By the end of last year there were over 204,000 sellers on TikTok Shop and 276,000 on Shopee, data from market researcher Metric shows.

The hikes are expected to drive away small vendors from the two platforms.

Last year 88,000 of them quit Shopee, while the overall number of sellers on TikTok Shop dropped by 15,500.

Analysts said the fee hikes would serve to filter out small vendors, which will help strengthen large brands, especially on Shopee, which had 16,000 official brands present last year, 2,000 more than in 2023.

Le Si Dung, CEO of e-commerce solutions provider Fixecom, said Shopee is the most expensive platform.

"Small vendors will find the costs of selling on Shopee less appealing compared to other platforms."

He estimated that vendors would have to pay 6.5-15% per order, and this means that when salaries, advertising and logistics expenses are taken into account, overheads would rise to 50% of the price.

"The game has changed. Big vendors, and official brands, along with manufacturers who sell their own products, will have an upper hand, while intermediary shops will face large challenges."

Tran Lam, an e-commerce teacher, said the fee hikes would be a "blow" to vendors.

Individual sellers would see most of their profits disappear when overheads add up to 50% of prices, he added.

But the fee hikes seem to have been calculated carefully by Vietnam’s two largest online platforms.

Shopee had 67% of the e-commerce market last year, and TikTok Shop, 27%, according to data provider YouNet ECI.

Lazada, another Singapore-based e-commerce company, and Vietnam’s homegrown Tiki together had a share of 6%.

A Shopee spokesperson told VnExpress that the fee hikes have been made after a thorough analysis of the market, including buyers’ demand, industry trends and vendors’ feedback.

Consumers are increasingly demanding higher product quality and services, and changes toward sustainability and growth are therefore prioritized, it added.

"The recent fee adjustments are part of these strategies. They allow Shopee to invest more in resources to support vendors."

The incentives Shopee plans to continue offering shoppers include shipping discounts and livestream sessions with celebrities.

It will also help vendors go digital and distribute Vietnamese agriculture produce in Thailand, Malaysia, Singapore, the Philippines, and Taiwan.

Lam advised small vendors to either cut costs or enlarge their business, developing their own brand, to increase their profit margins.

Dung urged vendors to prioritize high-quality products instead of trying to win the price race.

Some vendors are however taking a different approach, going back to selling on social media like Facebook or Zalo, which used to be their main distribution channels before the rise of e-commerce apps.

Tran said: "I am building my own customer data base to sell more on Zalo, which will help reduce my dependency on e-commerce platforms."

Tuan said his investment in his Facebook page, which began two years ago, has proven to be the right strategy, even though many said at the time that the days of selling on social media were over.

"Selling only on e-commerce platforms is an ineffective strategy."

The Vietnam Federation of Commerce and Industry has said the e-commerce law, which is being drafted, should protect both buyers and sellers, pointing out that the rights of vendors are often neglected.