Recently, JD.com has quietly launched its delivery service, potentially shaking up the commission structure within the food delivery market—something that consumers are likely to appreciate.

During a national market supervision conference held on December 23, 2024, the State Administration for Market Regulation announced that guidelines for the compliance of fee structures on online trading platforms would be expeditedThe intention is to lower the cost burden on merchants operating within these platforms and to encourage fair and beneficial pricing practices, thereby fostering win-win scenarios among all stakeholders in the platform economy.

How should we rationally evaluate platform fees and their commission rates? To tackle this question, a thorough analysis from both practical and theoretical perspectives is necessary.

Defining the Scope of Platform Fees

Before diving into the intricacies of commission rates, we first need an understanding of what platform fees entail and their various components.

Platform fees generally refer to the costs incurred by platforms to facilitate transactions between multiple partiesThese fees pertain to the transactions of products or services carried out on the platform, ultimately influencing pricingKey participants affected by these fees include providers, businesses operating on the platform, third-party service providers, and consumersThe characteristics of these fees are diverse, including numerous types of fees and varying rate rules, although they are primarily charged to the merchant businesses.

Platforms provide a range of services such as information mediation and transaction matching to both supply and demand sides, which justifies the collection of service fees

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However, public concern often focuses on the proportion of these fees.

Let’s consider a straightforward exampleIf a product is priced at 100 yuan, and the merchant receives 70 yuan, both the merchant and the consumer might attribute the 30 yuan difference entirely to platform fees, leading to a generalized conclusion that “platform commissions reach as high as 30%.”

However, research reveals that the price discrepancies found on a platform are not solely the platform's earningsThe transaction process may involve factors like collection on behalf of the merchant, platform subsidies, and rebatesTaking the 100-yuan product again, after promotional discounts, it might sell for 90 yuan (with a 10-yuan difference benefitting the consumer). Out of the 90 yuan, 10 yuan might represent a delivery fee (benefiting the delivery personnel), meaning that from the 30-yuan difference, only about 10 yuan would actually belong to the platform.

Certainly, the actual processes are more complicated, and to simplify our analysis, if we were to estimate, the effective commission rate in this case is only around 10%, contrasting significantly with the previously mentioned rate of 30%.

This leads to a pertinent question: Who stands to benefit from the platform?

In fact, apart from the platform itself, delivery personnel, content creators, and consumers are also significant beneficiariesThus, it’s crucial not to exaggerate the level of platform charges or to generalize across different forms of charges.

Commissions are Just One Component of Platform Fees

An analysis of both domestic and international e-commerce platforms shows that platform charges generally fall into five categories: entry fees, commissions, advertising and marketing fees, delivery fees, and value-added service fees.

Entry fees, also known as membership fees, may be required to ensure consumer rights, and it is also common for platforms to charge merchants a security deposit.

Commissions typically accrue based on the transaction amount or per transaction (but mostly based on transaction amount).

Advertising and marketing fees relate to traffic direction and search ranking costs.

Delivery fees entail the expenses incurred in transporting goods or services from the merchant to the customer, usually varying according to urgency and distance, thus differing for long-distance shipping and rapid urban delivery.

Value-added service fees mainly cover the costs associated with services like lending and insurance for the merchants, with commonly seen fees being payment guarantee services that provide financial backing to resolve business disputes between merchants and consumers

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Recently, consumers have encountered fraudulent practices that bypass the platform, with payments going directly to merchants, making after-sales rights protection difficult without platform guarantees, a situation that warrants consumer caution.

It is important to note that the previous analyses focus predominantly on fees charged to participating merchants, which pertains to the fee structure of dominant e-commerce platforms.

Some platforms, however, primarily charge consumers membership and usage fees, with payment structures typically organized annually (or monthly/daily) or based on the number of uses, with specific content priced separatelyFor example, certain short video platforms have varied pricing for different series, while others may offer flat monthly viewing optionsEssentially, these scenarios reflect a consumer buying relationship concerning platform content, differing substantially from the commission charged between the platform and merchants as a middleman's cut during sales.

This article focuses primarily on analyzing commissions to uncover the profit-sharing relationship between platforms and merchants.

Hence, the conclusion reached regarding what fees platforms are extracting is that they include entry fees, commissions, advertising and marketing fees, value-added service fees, with commissions representing just a fraction of this.

Factors Influencing Commission Levels

With a clearer understanding of what fees platforms implement, it becomes crucial to delve deeper into the factors determining commission rates.

Research indicates considerable disparity across different business types in commission rates, while differences amongst platforms for the same business type remain minimal

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For instance, commission rates for Meituan and Ele.me are fairly similar, while Didi and Gaode Dache maintain rates around 28% and 29% respectively, and Taobao charges merchants only 0.6%.

These typical commissions are often referred to as software service fees or technical service fees, implying that utilizing platform technology inevitably incurs fees.

Then why is there such a significant disparity in commissions for different business types? This is largely determined by the revenue structure of the platformsIn cases where entry fees and value-added service fees contribute a lesser proportion to overall revenue, platforms primarily seek to balance fees between commissions and advertising and marketing fees.

Overall, the main business models of varying platforms differ, resulting in distinct primary sources of income.

Platforms that benefit significantly from advertising and marketing fees, such as Taobao and Pinduoduo, tend to lower commissions in order to accommodate the large scale of similar merchant types requiring substantial trafficThese platforms operate globally, in environments where there is intensive attention competition among similar merchants, compelling merchants to invest heavily in marketing fees to gain advertising ranking advantages and traffic privilegesHence, to maintain a substantial merchant volume, these platforms can afford to reduce portions of their commission rates.

Conversely, this reflects the principle of mutual concessions: as platforms reduce commissions, they reap high advertising and marketing feesCollectively, the variance in comprehensive monetization rates across different sectors remains relatively stable, indicating a stable overall fee level for e-commerce platforms, while proportionality in itemized charges varies by business type.

Another issue concerns the reason for the minimal differential in commissions among platforms for the same type of business

This is predominantly influenced by competition between platformsIn the early stages of platform establishment or when entering a new business sector, platforms might implement zero commissions or even provide additional subsidies to attract merchant sign-ups.

Nevertheless, this is not standardOnce normal operational procedures resume, platforms typically stabilize their commission rates near those of incumbent competitors.

This analysis reveals an interesting phenomenon: commission proportions are influenced not merely by the platforms themselves, but more so by competition within similar market sectors.

As new business formats and models continually develop, competition among platforms intensifies, resulting in standardized market marginsConsequently, varied commission rates across platforms may resemble adjustments across different categories.

When certain platforms gain substantial revenue from advertising fees, they tend to charge lower commissions; conversely, platforms that don't achieve this may increase commissionsConsequently, social perceptions and governmental regulations on platform commissions must originate from a competitive market perspective, rather than a narrow one focused solely on isolated platforms; localized views may distort the broader context.

Admittedly, various charges or commissions ultimately reflect in product prices, but whether the burden is shouldered by consumers (merchants raise prices to shift the cost) or absorbed by merchants (where product prices remain constant yet shrink merchant revenues) is determined by the product market rather than the platform.

This depends on whether the product market is seller-driven or buyer-driven, which party possesses more market leverage—the consumer or the merchant.

Generally, product markets tend to favor buyers, meaning that commissions and delivery fees are largely borne by sellers, aligning with the principles of market competition.

Government Regulation Strategies

Currently, the challenge in designing regulatory policies lies in the difficulty of measuring monopolistic powers, complicating the assessment of how far actual commission rates exceed what platforms rightfully deserve.

It is assuredly unreasonable to analyze this issue solely through market concentration metrics.

Comparing different business platforms indicates that while e-commerce, food delivery, and ride-hailing platforms generally exhibit high market concentration, commission variability across different business sectors remains substantial despite similar levels of concentration, suggesting that the latter isn't the principal determinant of commission levels

For instance, e-commerce platforms have high market concentrations while maintaining lower commission fees.

Consequently, the public should avoid exaggerating platform charging behaviors and closely analyze the specific components of their pricing structures.

Platforms can optimize commission rates by enhancing supply-demand matching efficiency and reducing operational costs, in addition to collecting operational service fees from value-added services that consumers find more palatable.

The government should not adopt a one-size-fits-all approach to managing commissions; different business platforms inherently possess unique revenue structures, and establishing a fixed commission ratio stems from a planned economy mindsetInstead, efforts should be made to regulate monopolistic practices without capping company revenues.

Previous studies have demonstrated that implementing commission caps in the U.S. can result in platforms shifting costs onto consumers, which diminishes overall market transaction volumes.

From a regulatory perspective, we propose two key recommendations.

Firstly, avoid intricate regulatory stipulations over operational practices of platform businesses; focus instead on establishing baseline requirements that protect user rights, allowing market forces to dictate operational strategies between platforms and merchants, as well as between platforms and consumers regarding issues like pricing and delivery methods.

By ensuring foundational regulations safeguard user rights, expanding consumer options, and enhancing value-added services, such as providing users with various delivery types while adjusting pricing based on consent, we can uphold user autonomy while leveraging market dynamics.

Secondly, it is crucial to increase the transparency surrounding commission rules across platforms, enabling merchants to switch freely between them, thereby fostering competition.

For instance, in May 2021, Didi Chuxing announced greater transparency in their order commission structures to ensure clearer insights for drivers

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