Amazon is taking half of each sale from its merchants
Grappling with slowing sales growth and rising costs, Amazon.com is squeezing more money from the nearly 2 million small businesses that sell products on its sprawling online marketplace.
For the first time, Amazon’s average cut of each sale surpassed 50% in 2022, according to a study by Marketplace Pulse, which sampled seller transactions going back to 2016.
The research firm calculated the total cost of selling on Amazon by tallying the commission on each sale, fees for warehouse storage, packing and delivery, as well as money spent to advertise on a site where hundreds of millions of products jostle for attention. Paying Amazon for logistics services and advertising is optional, but most merchants consider these a necessary part of doing business.
Sellers have been paying Amazon more per transaction for six years in a row, according to Marketplace Pulse, but were able to absorb the increases because the company was attracting new customers and rapidly increasing sales. That abruptly changed when pandemic lockdowns eased and people began traveling and dining out again, sucking the oxygen out of online shopping. Last year, Amazon generated the slowest sales growth in its history.
Consumers are far more deal-conscious than they were during the pandemic, so Amazon merchants are loath to raise prices. That reality, along with the steady increase in fees, means many sellers are struggling to make money — prompting some to handle shipping themselves and to spend less to advertise on Amazon’s site.
“For these small businesses, it’s getting harder and harder to be profitable because they are spending more and more money on Amazon fees,” said Juozas Kaziukenas, Marketplace Pulse’s founder and chief executive officer. “Amazon might be tempted to keep increasing fees because it’s in a tough spot, but you have to reach some kind of equilibrium.”
Amazon sellers choose to use its logistics services because, on average, they cost 30% less than alternatives from other shipping companies, and merchants are free to buy advertising anywhere, company spokesperson Mira Dix said in an emailed statement. The fees Amazon charges reflect the company’s own costs and investments, she said.
“Many selling partners have built and run their businesses without advertising,” she said. “If they choose to advertise their products, they have many service providers to choose from. Sellers are not required to use our logistics or advertising services, and only use them if they provide incremental value to their business.”