Death by a thousand fees: the realities of online selling

Jerome Tan

At the height of the Covid-19 pandemic, online selling platforms were seen as the antidote to the lockdown-induced collapse in consumer purchases, offering a space for all businesses, big or small, to stay connected to their customers. 

But behind the industry’s continued growth—and promise of empowering businesses to expand their reach—looms the ever-growing avalanche of fees, regulations, and taxes imposed on online sellers. Such fees can reach as high as 30% of an order’s value, significantly cutting into meagre profit margins of the many micro, small, and medium enterprises (MSMEs) who depend on the platform for their income.

Why charge fees in the first place?

Additional fees, typically branded as “platform fees” or “transaction fees” have always been a part of e-commerce platforms, and they are the backbone of any e-commerce platform’s revenue. Initially a small percentage of a product’s value, these fees are vital for maintaining the digital infrastructure needed to operate the platform, paying employees, running marketing campaigns, and others.

Sellers could also pay platforms an additional commission to receive preferential benefits from the platform. Shopee’s Mega Discount Voucher and Live Xtra program allow sellers to pay extra percentage fees to the platform in exchange for promotional benefits, while Lazada’s Sponsored Solutions offers marketing and growth benefits at the cost of additional fees. 

During the pandemic, low fees were commonplace to encourage businesses to register as sellers, allowing platforms to receive tens of thousands of new registrants. Platforms also established programs designed to entice businesses to digitalize their operations, such as Shopee’s Seller Support Package and Lazada’s Bounce Back Together, which lowered or waived transaction fees and provided free access to digital tools for new sellers.

The rise in fees

Even after the return to normalcy, demand for online shopping remained remarkably resilient for its convenience and accessibility. As platforms’ user base and market value continued to grow at a rapid pace, so did their operations, and more importantly, their need to demonstrate profitability.

Despite a massive surge in online transactions and soaring market caps, profits often eluded e-commerce platforms, with losses being covered by investors and other ventures. Shopee posted its first yearly profit in 2025 after years of being subsidized by parent company Sea Limited’s other divisions, including video game distributor Garena, while Lazada and TikTok Shop have yet to report an annual profit despite explosive revenue growth.

Hence, platforms have turned to raising commission fees in order to cut their losses. In 2025, all three announced a flat P5 “processing fee” per order, regardless of order value, hurting businesses that rely on selling cheap products at high volumes. In addition to the base commission fees—which have increased considerably—there are also transaction fees, service fees, and the aforementioned processing fees.

All in all, these fees can amount to 15-30% of an item’s value, depending on the type of product and platform being used. Additional costs for sellers include delivery fees for returned items, the optional marketing fees to boost a product’s visibility, and various other miscellaneous fees.

Government gets involved

Seeing the need to protect consumers against a tripling in cases concerning counterfeit and defective products, primarily driven by e-commerce platforms, the government passed the Internet Transactions Act (RA 11967) designed to regulate online selling. Among its provisions are mandatory permits for selling certain items and the PH Trustmark digital badge, or a certification that a business is registered and engaged in legitimate activities.

Trustmark has become a source of controversy in the online selling community over its P1,130 annual fee, which sellers argue would disproportionately harm MSMEs. Trustmark adds to existing regulatory requirements, including a Certificate of Registration from the Bureau of Internal Revenue and a Certificate of Business Name from the Department of Trade and Industry.

Finally, in 2025, the 12% Value Added Tax (VAT) was finally imposed on all online transactions under RA 12023, ending the exception that allowed local online sellers with under P3,000,000 in gross sales and most foreign merchants to sell tax-free. While intended to stop brick-and-mortar retailers who are required to pay VAT from being put at a disadvantage against online sellers, it adds to the woes of online sellers already facing rising platform fees and regulatory requirements.

No going back

But even after all the fees and taxes, online selling is here to stay. More than half of all Filipinos regularly shop online, with a core group of “e-shopaholics” buying almost all their needs online. Social media promotions and livestreaming greatly boost product visibility, as evidenced by the “live-selling” phenomenon and overnight rise of TikTok Shop.

That being said, sellers are looking for their own ways to evade high fees on the mainstream online platforms, but each carry their own trade-offs. Subscription-based self-hosting platforms allow sellers to create their own website in exchange for flat monthly fees, giving sellers more leverage to scale their business at the cost of needing to organize one’s own logistics network. Alternative marketplaces like Facebook Marketplace carry little to no fees and no VAT, but are prone to scams and lack the expansive reach of mainstream platforms.

For consumers, mainstream e-commerce platforms offer protection against scams and a hassle-free shopping experience, yet for MSMEs, trust and convenience carry a high price. While high platform fees and ever-increasing regulations make online selling a far less sustainable livelihood than it used to be, losing the visibility and trust that comes with the platforms would be an even bigger blow to incomes.

The dilemma of online selling

For all parties involved, there is no easy way out. Platforms cannot run deficits forever, buyers clamor for greater consumer protections, sellers demand sustainable livelihoods, brick-and-mortar stores call for fair competition, and the government is anxious to keep tax revenues flowing. 

But at the core of the issue is the erosion of the promise that e-commerce once offered to MSMEs: a marketplace that would let even the smallest sellers compete for consumer attention. For many sellers, that promise seems to have been replaced by an endless list of fees that hurt the ones at the bottom the most.