The overall cost of selling products have increased by more than 50% since last year, according to a new study from Marketplace Pulse. “Amazon is pocketing more than 50% of sellers’ revenue – up from 40% five years ago,” the e-commerce analytic firm wrote in a blog post on Monday.
The post said the study used profit and loss reports from a sample of sellers to calculate the cost of hawking merchandise on Amazon. Almost 2 million businesses sell using Amazon, Amazon said in March 2022.
Besides the base transaction fee (called a “referral fee” by Amazon), the study discussed two other crucial elements of selling on Amazon: advertising and using Amazon’s fulfillment network, called Fulfillment By Amazon (FBA). Advertising can be important to get products listed higher up in search queries, and using FBA is one of the only ways to have your products available on Amazon Prime, which presents a sales advantage.
Because these services are necessary to acquire sales (and have risen in price), so has selling on Amazon, the study said. “Sellers are paying more because Amazon has increased fulfillment fees and made spending on advertising unavoidable,” the post wrote.
The study broke down fees as follows: Amazon takes its 8% to 15% transaction fee, FBA can cost from 20% to 35%, and advertising, it calculated, can cost up to 15%. The study said the average was 50% for 2022.
The study also said because sales have slowed down on the platform, new customers can’t cover the losses from increased costs of participating in the marketplace.
“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, CEO of Marketplace Pulse, per Bloomberg.
Amazon’s consumer retail business slumped by 2% in its most recently reported quarter.
In an email, an Amazon spokesperson told Amazon News that the numbers are not an “accurate depiction” of the cost to sell on Amazon and that the company is “investing more than ever” to support its selling partners — while noting sellers had a record-breaking holiday season. The spokesperson added that FBA is “30% less expensive than standard-shipping methods offered by other major third-party logistics providers, and an average of 70% less expensive than comparable two-day shipping alternatives.”
Amazon is still the place to be to make money. Walmart and other 3rd party warehouse solutions might be cheaper, Amazon still is the bees knees, when it comes to reaching customers to scale.
Michael Kozlowski is the editor of Amazon News Feed. A website devoted to the latest Amazon News. You will find a cohesive editorial direction. Michael covers the latest occurrences in AWS, Kindle, Fire Tablets, Fire TV, audiobooks, ebooks and company news.