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Businesses

Amazon Is Taking Half of Each Sale From Its Merchants (bloomberg.com) 112

Posted by msmash from the aggressive-expansion dept.
Grappling with slowing sales growth and rising costs, Amazon is squeezing more money from the nearly 2 million small businesses that sell products on its sprawling online marketplace. From a report: 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.
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Amazon Is Taking Half of Each Sale From Its Merchants More

Amazon Is Taking Half of Each Sale From Its Merchants

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  • Drop shipper (Score:5, Insightful)

    by darkain ( 749283 ) on Monday February 13, 2023 @11:44AM (#63289577) Homepage

    As much as I don't like monopolies, I do gotta question this one. If Amazon is providing that many services, are you even a retailer yourself anymore? This sounds a hell of a lot more like drop shipping at this point.

    • You are getting paid 50 percent of the sale to be a greeter for Amazon. Still not a bad gig if you aren't well off.
    • Would be interesting to see how much they charge for people who actually physically deal with the product they sell.

      • Re: (Score:3, Informative)

        by Anonymous Coward

        (Anonymous Coward for obvious reasons)

        I have first hand knowledge of this, selling used and new CDs and DVDs on Amazon for about 18 years now. I ship all items myself.

        Here is a breakdown of fees:

        $40 / month to be a Professional Associate Seller, no matter how much you sell.

        Then, commission and seller fees on each individual sale.

        As an example, for the period 11/28/2022 to 12/12/2022:

        Total sales charged to customers: $668.95
        Total Fees paid to Amazon: -$230.16

        Also:

        Total shipping charged to customers: $165.60

        • Re: (Score:2)

          by lsllll ( 830002 )
          I won't count sales tax because that goes into the government's pocket (not that your profits don't). But that seems very steep.

          You sold 334/week, made 8 on shipping, and lost 10 because of the PA Seller fee. So you made 332/week. Assuming your cost of goods was half, your cost was 334/2=167. You paid 230.16/2=115 to Amazon. So Amazon took 115/167, almost 69% of your profit, granted the cost of goods could be lower than 50%, but not likely.

          The question is, would you have sold as much if you were

          • The question is, would you have sold as much if you were on eBay? Because your profit margins would be higher there.

            Good question. Amazon is a smart company. They will bleed their marketplace merchants as much as possible while keeping them alive, but barely. Even feudal lords know that keeping the peasants alive is important to maintaining their wealth. The key is determining the subsistence level.

            The problem with eBay is that it doesn't provide as much logistics support, so shipments take longer and the costs get passed onto customers. Amazon passes those costs onto the subsistence vendor instead, allowing the cus

    • Amazon owns the store and distributer, and sellers are like wholesalers who do extra work. 100% markup is not unusual in many industries, especially for shoes (where Amazon really blew up after moving away from being simply a book seller). I feel like everything about Amazon's customer service, returns, and selling new and used items either fits into the model they use for books or for shoes. A book publisher doesn't get 50% of the cut for a sale either. Not that I want to be in the position of defending Am

    • Not a fan of Amazon. They cancelled my account for disuse like I was taking up space or something and refused any kind of reactivation (service was minimal and scripted, but present.) So I became petulant and hateful towards Amazon. And since it's not a person, it didn't care. So I didn't care about it. But if you're a person I might. So start your own site and invite me to visit and buy your stuff and stop all that loser talk about how you can't because Google and let's all figure out a way to get around t

    • If Amazon is providing that many services, are you even a retailer yourself anymore?

      If the customer sends the product back, do you think Amazon returns their 50% cut? If there's a recall or other issue, do you think Amazon claims 50% responsibility? Amazon takes 0% of the risk and collects 50% of the profit.

      This sounds a hell of a lot more like drop shipping at this point.

      Sounds more like Amway or other multi-level marketing scams (except there's only two levels and the retailers don't even get the prom

      • Is someone forcing these people to sell on Amazon and not a different website? There are other market places and one could always decide to setup their own website (doesn't chatGPT do that now?) and pay for advertising.

        Since more people are not going this route, Amazon must be charging a competitive rate. Pray they don't alter the deal further.

    • Even with just plain retailers marking up products 100% or more is not uncommon, clothing in particular has monstrous retail markups. That's why this and the efforts claiming the Apple store cut of 30% are "too much" are disingenuous. They aren't doing anything that brick and mortar retailers haven't done since the beginning of time.

      Now if people want to start talking about should there be some cap on profit margins (think like anti-price gouging rules during disasters, but all the time), then we can talk

      • Apple store cut of 30% are "too much" are disingenuous.

        It is too much since the App Store is a fancy file server with a piss poor search with some payment processing that cost Apple/Google/Samsung 3%.
        30 is too much.

        • Re: (Score:2)

          by bn-7bc ( 909819 )
          No tje app store is a trusted source ( yes also the only source to date) with oayment details of most apple users already on file. This is huge as it makes impulse purchases a matter of a few clicks instead of having to give all that info to yeat another random store this is also why I'm excited to see how third party stores will do onece apple allows it ( iirc they will need to do that by 2024-12-31T23:59:59.99 CET lest the EU might just be angry enough to ban sale of apple devices

          • Re: (Score:2)

            by bn-7bc ( 909819 )
            Never mind alterntive app stores on apples mobil/smart tv devices will be possible once IOS/IPADOS/TVOS release 17 is released later this year
          • Google is also a trusted source. Companies can actually analyze the software in bulk, whereas you can't with the app store. Or maybe you can, with the anti virus apps that are on there. Or maybe all of the Chinese apps were compromised and nobody noticed until it was far too late... or the white hats who only got ejected after they admitted their apps we intentionally malicious. Literally, only an idiot serious trust them at this point.

      • Fast fashion should cost as much as it possibly can. If you silly enough to think you have to keep up with a fashion trend, you should be parted with as much cash as the market will allow.

    • > are you even a retailer yourself anymore?

      It isn't a mutually exclusive choice.

      Amazon is a retailer (especially selling rebranded products with their own Amazon Basics label slapped on), virtual mall, AND distributor.

  • Changing focus (Score:4, Interesting)

    by John.Banister ( 1291556 ) * on Monday February 13, 2023 @11:50AM (#63289605) Homepage
    It seems Amazon is becoming more investor centric all the time. This will make life easier for their competitors.

    • Re:Changing focus (Score:5, Interesting)

      by wakeboarder ( 2695839 ) on Monday February 13, 2023 @11:56AM (#63289631)
      Cory Doctorow says it best: https://pluralistic.net/2023/01/21/potemkin-ai/#hey-guys

      • Thank you for that link. Cory nearly always says things best, and that's an excellent read.

      • Excellent article.

      • you know even slashdot can handle links so I don't have to copy/paste the URL...

    • Which competitors? I am somebody who cross-shops most purchases with amazon, ebay, walmart, and google.com/shopping (which is just a web search after all).

      Other places do undercut amazon and get my business sometimes, but amazon still wins more often than not. Why? If it is robbing its vendors blind and soaking customers, why are there not vastly better deals available for those willing to shop around like I am?

      • Re:Changing focus (Score:5, Insightful)

        by Darinbob ( 1142669 ) on Monday February 13, 2023 @03:33PM (#63290229)

        Amazon could be undercutting in an attempt to drive others out of business. I know Walmart does this to get a foothold in a new town and they will raise prices back up when the competition closes up shop. Amazon though is probably too big for this.

        I go to egghead sometimes, they may be more expensive but they've got a better selection and Amazon seriously dumbs down its descriptions of products, especially technical ones, so you're never really sure what you're getting. I really only use Amazon if someone has requested a specific gift, or I just cant get it elsewhere (or I'm shut in due to covid). The closure of Fry's really impacted this as there's no local store anymore, even in silicon valley, for technical supplies at a good price.

    • Re: (Score:1)

      by PoiBoy ( 525770 )
      Disagree strongly as an occassional shareholder. For the most part Amazon only focuses on revenue growth, not profitability, especially in their retail division.

  • So, lemme get this straight: Amazon does logistics, storage, packaging, delivery and handles the payment.

    What exactly does the marketplace seller do for his half of the deal?

    • Seriously, Amazon should offer this service for free. If the vendors didn't provide goods, there wouldn't be anything to sell.

    • They also handle returns and fraud.

      • Re:Well... (Score:5, Interesting)

        by Anonymous Coward on Monday February 13, 2023 @12:16PM (#63289719)

        They also handle returns and fraud.

        Yes, and charge the seller.

        More times than I can count I have had customers order our product, place a competitors inferior product in the box and return it to Amazon. Amazon DOES NOT CARE. We paid for the return shipping, and amazon sent us the junk to dispose of. We simply eat it and raise our prices to cover it.

        • Re:Well... (Score:4, Interesting)

          by Diss Champ ( 934796 ) on Monday February 13, 2023 @05:00PM (#63290509)

          They also handle returns and fraud.

          Yes, and charge the seller.

          More times than I can count I have had customers order our product, place a competitors inferior product in the box and return it to Amazon. Amazon DOES NOT CARE. We paid for the return shipping, and amazon sent us the junk to dispose of. We simply eat it and raise our prices to cover it.

          Given the claims that they mix inventory between sellers for things they think are the same, could it be that those customers actually received the competitor's inferior product when they ordered yours? I.E. it's not the customer doing the substitution but Amazon?

        • I did an Amaon Fire trade-in programme thing. You know trade-in isn't going to work because it's not really part of the website - there are no links to it, and you get one email every blue moon to tell you what's going on.

          Anyway, guess what... tablets returned, but no trade-in, so they charged me for the £20 of credit they'd given me when I started the trade in. I complained... they can't just say "oh sorry about that, here's £20" - instead, they had to rummage through my recent purchase history

    • The marketplace seller buys the goods from the factory and gets them to the Amazon warehouse. They take the risk of them not selling. They eat the refunds from Amazon's liberal return policies. They pick how to spend their ad dollars if they choose to. They might answer product questions posted to Amazon.

      When a product appears in Amazon Basics, Amazon has simply decided to do these steps instead of the middleman. A lot of the time I support this because Amazon exercises quality control over Amazon Basics pr

    • Re: (Score:2)

      by Rashkae ( 59673 )

      The assume all the risk. They pay up front for the inventory,, and when the business goes sour, they are left on the hook for it.

  • This explains the poor quality of merchandise (Score:5, Interesting)

    by jsepeta ( 412566 ) on Monday February 13, 2023 @11:56AM (#63289633) Homepage

    If Amazon takes 50% then 3rd party sellers may be restricted to selling utter GARBAGE in order to generate a profit.

    • If Amazon is getting 50% of the sales of GARBAGE, it has lots of incentive to bend the rules and look the other away when the sellers of GARBAGE treat the customers like GARBAGE.

  • It's more than that (Score:3)

    by thegarbz ( 1787294 ) on Monday February 13, 2023 @11:59AM (#63289649)

    This 50% doesn't count seeing if your product is popular and then cloning it in China to sell it as part of the Amazon Basics line of products.

    • Cloning? All they do is call the same factory and have their name stamped on a product then drop shipped - just like the 3rd party merchant that is complaining, when in reality they do the same thing as their non Amazon competitors.

      • Cloning? All they do is call the same factory and have their name stamped on a product then drop shipped

        No they don't. In fact in some cases there's a very significant difference in quality of materials used as well as subtle design differences. At best they are made from different materials. They don't just drop ship the same thing with a different name on them. Sometimes they clone the concept only.

  • Cancel prime and use other retailers when possible. I haven't had prime for a few years now, yeah I have to wait an extra 1-3 days for packages, but I've probably saved hundreds in the process and I don't have to support a company that I don't agree with. Amazon is pretty much the equivalent to the steel companies of the early 20th century
    • And scatter my personal info into the winds? No thank you.
      For all the shit Amazon is, I like shopping in one place. If not Amazon, I would switch to Walmart. Failing that, Target.
      Walmart doesn't have a good record either. It just Amazon is currently kings of that shit pile.
      • And scatter my personal info into the winds? No thank you.

        What are you talking about? I never have to provide any personal information on those extremely rare occasions I go to either Walmart or Target. I go in, find my stuff, pay for it, walk out.

        What scammie stores are you going to that require your personal information?
        • Each and every web site that forces account creation to purchase something online.

          • So instead of going to the physical store and picking up the item without having to provide any personal information, you sit on your fat ass and complain about having to provide personal information which is why you still use the scammie site called Amazon.

            Makes perfect sense.

            • That is assuming that the item I want is in a physical store.
              WalMart doesn't sell enthusiast computer parts and CompUSA closed YEARS ago.

    • Re: (Score:2)

      by Kokuyo ( 549451 )

      I have cancelled and I'm interested to see if I'll have to pay way more in shipping like that.

      Prime shipping isn't what it used to be anyway. Since I have a drop-off address in Germany that isn't always open, I usually have to schedule pickup anyway and often don't profit all that much from speed.

      Used to be most things were next day deliveries and easy to anticipate. These days you haven't got a clue when stuff arrives. Could be in the 2 to four day range as advertised... sometimes they arrive next day desp

    • Cancel prime and use other retailers when possible.

      I'm all for this, but I haven't been able to get my wife and daughter onboard with the plan.

  • This sounds terrible, but I'm not sure if it really is. Without know what it would cost for a small business to handle this themselves, it is impossible to say whether Amazon is over charging (or even under charging). I have no idea what it would cost for a company to handle warehouse storage, packing and delivery, advertising, logistics, and paying people to handle all of this. And I would think a lot of small business don't know what it would cost either, which is why they go with Amazon. They don't have

    • Answer is simple. Start off with Amazon and when your sales are large enough to justify a warehouse and shipping staff consider bringing it in-house.

  • As someone who sells on Amazon.... (Score:5, Interesting)

    by Anonymous Coward on Monday February 13, 2023 @12:12PM (#63289707)

    Posting anon so Amazon doesn't kill my seller account for posting this...

    I have first hand experience here. We sell a lot of our products on Amazon because our customers constantly ask for it because they want it "prime" with free shipping. But what the customer doesn't understand is that we mark our products up significantly when we sell them on Amazon vs what we sell them for on our own website.

    What sellers can't tell you because of Amazon policies.

    1) Amazon shipping isn't free. We raised the price to cover it.
    2) Amazon returns aren't free. We raised the price to cover it.
    3) We had to cost reduce the version we sent to Amazon.
    4) Since Amazon won't let us send our brochures in our products we can't tell you about how to get accessories, support, and customer service directly from us rather than an amazon chat box.
    5) Our products are significantly lower priced on our own website.

    But our volume on Amazon is 100x what our own website brings in.

    • Re: (Score:2)

      by crow ( 16139 )

      Yes, I've seen that. For cheaper stuff, it's not worth it for me to go to another site and order it there, but for more expensive stuff, it's always a good idea to check out the brand's direct site. Even if you don't order there, the specifications on the vendor's site are often more accurate, and you will often get a clearer idea of whether you're ordering the current version or a previous one that is still in inventory.

    • Interesting. Thanks for letting us know.

    • I used to use Froooogle way back before Google inexplicably killed it along with their Wallet product. For a long time I considered Amazon the last resort that would always have what I wanted but at a price. Even back then when shopping with them was considered quite cheap they were actually often one of the most expensive places.

      Of course now that most suppliers won't run their own storefront and of those that do so many are fake, Amazon is free to ratchet up the price and skimp on customer service. Whi

    • 4) Since Amazon won't let us send our brochures in our products we can't tell you about how to get accessories, support, and customer service directly from us rather than an amazon chat box.

      So put a link to your site on your product's packaging, so that customers can register for support. Then, send them an email confirming the registration, with links to whatever's appropriate on your site. I'd hope that Amazon doesn't forbid things like that, and if they do, they shouldn't.

    • Amazon's site is often better organized than the original seller's site (altho Amazon is getting worse). Amazon often ships faster and doesn't try to hide the shipping price.

      • Here's a suggestion for wannabe Amazon competitors. Make it easy for someone who would prefer not to use Amazon. Suppose I want a particular Panasonic toaster oven, and there are 5 possible sellers. Invent some sort of scraper that will tell me which 2 of those 5 actually carry it. Better, combine the listings from those 5 sellers into one list for me to peruse. Then I'll gladly go directly to one seller's site and buy.

        The above applies also to local brick and mortar stores.

    • Yep, this is the same with eBay. Many times I'll do some investigation first to see if the seller has a web site. If they do I can usually find the same products for much less. I order new XTIDE and other related components to refurbish 1970's through 1990's era vintage computers for people looking for a bit of nostalgia. It's actually cheaper for me to order the parts directly from New Zealand and/or Australia. As an added bonus I avoid all the Chinesium on eBay as well. I've found many sellers on eBay hav

      • Interesting, different to my experience - eBay is my goto place to buy. When I look for a seller off eBay, their products are often more expensive direct from them (after factoring in shipping) than buying them through eBay. Not always of course, but more times than not. I never buy normal products on amazon from a third party seller, direct from amazon can be a decent price (if on offer), but most of the time and for everything else I can always find it cheaper via eBay. And the search is a lot better on e

        • I should have clarified that I have most success with this when it comes to new items on eBay and small "maker" type items that individuals make in small batch runs. What you really need to watch out for on eBay is people drop shipping Chinese junk en mass, stating that the products are in the States when in fact it will get shipped from China. For some unknown reason Chinese junk sellers can ship to the US for damn near nothing. This skews everything out of whack when comparing products on eBay versus on m

          • Cheap Chinese shipping is relative. If you want the package in 5 days it is 3X the USPS local price. If you don't care that it takes 25 or more days to arrive then it is quite cheap. But you can't really compare to USPS, USPS doesn't offer anything over 10 days. I can track my cheap packages from China. They will often sit without moving for a week while waiting for space-available transport. Also note that Chinese shipping times get extremely long in the fall when Christmas shipping to the US reduces spac

    • For some things I'll do a google search to see if I can find the product directly from the vendor. I needed some stainless steel bolts awhile back and initially found them on amazon. But then I found what looked to be the same seller direct and ordered direct. It was slightly less expensive, but mainly it was not amazon. Did the same with some industrial felt. Most specialized stuff can be had direct.

    • Consider the opportunity cost.

      1. I have to visit your web site and build the cart all the way through Shipping, which includes using personal information, to know if you actually have better pricing with tax and shipping included.
      2. I might pay less on your web site in the end but your shipping is likely expensive and slow. I'll wait a week or more on your shipment. You probably could have negotiated a better price from your shipper but didn't bother (through volume, or using the right sized boxes, etc).
      3.

    • This is absolutely true. We used to sell on Amazon and the sales volume was good but the profit opportunity non-existent.

      Amazon is a scammers paradise, so many claims of non delivery for items that the tracking shows delivered and Amazon refunded regardless. We put up prices to account for this fraudulent activity.

      Amazon kept increasing their fees and forcing everyone to use FBA otherwise your listing didn’t appear in searches. We put up our prices further

      Amazon, not content with seller fees, pushes

    • In Australia Amazon is much smaller. I never use it.

      But I do use EBay quite a bit.

    • So sellers on Amazon might be losing money on every sale made through Amazon, but they will make up for the lost profit in volume?

      Sounds like some Amazon sellers are using Gomez Addams as their business advisor.

  • Very common for teens to buy suicide kits on Amazon.

    Most online sales have stopped doing that.

    Also Washington Post did an expose on how bad they treat their employees.
    • Comment removed based on user account deletion

    • Very common for teens to buy suicide kits on Amazon.

      This was the first I've heard of this, and apparently it involves people poisoning themselves with a high purity meat curing chemical. Considering that Walmart sells several products which also can be misused for suicide, I can't really fault Amazon for carrying a product which is clearly intended for a legitimate purpose. That's hardly a "suicide kit".

      • Are you going to tell the parents of a teen who just killed themselves that the product was used for a legitimate purpose ?

        Zero percent of suicides are legitimate.

  • Hm. I wonder what Etsy's cut is (Score:4, Funny)

    by roc97007 ( 608802 ) on Monday February 13, 2023 @12:39PM (#63289835) Journal

    Maybe it's time to switch.

  • Every single amazon story... (Score:3)

    by kaatochacha ( 651922 ) on Monday February 13, 2023 @12:49PM (#63289869)
    Every single story about Amazon is, essentially, a giant "Don't use Amazon" tale. Stop using Amazon.

  • Worst Experiences from Merchants on Amazon (Score:5, Insightful)

    by theshowmecanuck ( 703852 ) on Monday February 13, 2023 @01:01PM (#63289901) Journal

    All my worst experiences buying via the Amazon site have been when I bought from merchants using their service. I'd say 25% of my experience with non-Amazon sellers have been good, while 90% of buying from Amazon have been good. So generally I avoid "merchants" on Amazon and check the 'Amazon' box in the 'Seller' filter. And if Amazon doesn't sell it, I'll look on other sites or order from a local store.

  • The key question is, what is the alternative?
    Who is building the less evil version of Amazon?

    I don't mean to seem insensitive to the plight of the small sellers, but in a lot of cases, there's no easy way to find the goods on thousands of individual sites and purchase directly, There's plenty of people who dislike Amazon, but until an alternative makes it easy, you won't move the customer mass.

    • At least with Amazon you can find what you are looking for.
      Rakuten is a clutter of stores and the search function is AI supported so you will only see what brings in the most revenue for Rakuten.
      With Yahoo Japan you get scammed with delivery fees while Yahoo Japan approves of this because it adds to their profits.
      Amazon is still the most reasonable option in Japan.
      Although the shipping fee scam is now also popping up on Amazon.

  • Amazon's average cut of each sale surpassed 50% in 2022, ...

    Amazon is the new Apple. :-)

  • Ok, I'll say it: It's obviously worth the price. (Score:5, Interesting)

    by eepok ( 545733 ) on Monday February 13, 2023 @03:41PM (#63290249) Homepage

    Let's do a thought experiment:

    Ask all the vendors on Amazon this question- "If Amazon disappeared today, what would happen to your business? How much money would you have to spend to retain/regain your audience?

    Almost everyone will say, "My business would take a massive hit. I don't want that to happen. I just want to keep more of the money."

    Let's get real here. Amazon provides a general marketplace that has literally no comparable competitor. If Amazon is "#1" in this sector, then the next best can't even be considered #2... it would have to be considered something like #206 with everything in between being absolutely no one. Would you honestly swap over to Alibaba, Sears, or Walmart online to seek out your shopping order of DDR5 Ram, stretchy boot laces, and imported Iranian body soap? No. Of course not. We all know Walmart's website is absolute crap and the vendors are completely unreliable.

    Amazon has built a MASSIVELY EXPENSIVE online marketplace and delivery system that has its flaws... but it also the best centralized marketplace in the history of human civilization. It makes sense that they charge so much.

    And the vendors just mark up to make up for it, so how does it matter?

    • Re: (Score:2)

      by indytx ( 825419 )

      Amazon has built a MASSIVELY EXPENSIVE online marketplace and delivery system that has its flaws... but it also the best centralized marketplace in the history of human civilization. It makes sense that they charge so much.

      And the vendors just mark up to make up for it, so how does it matter?

      If only you could sort by country of origin.

  • There's a name for this business model (Score:3)

    by dskoll ( 99328 ) on Monday February 13, 2023 @04:19PM (#63290371) Homepage

    It's called the Feudalism. Great for the Lord. Not so great for the Serfs.

  • So if a business wants to sell $3 worth of gear on amazon, they need to pay $3 to Amazon and charge $6 total? That’s a 100% overhead rate.

    That’s getting pretty high up there. Like, really high up there. In my world, a 20% overhead rate is lean and mean, a 50% rate is reasonable, and anything above 100% means that the organization is:

    a) pretty damn bloated, like an old-school government contractor that’s gotten fat and lazy off guaranteed government money
    b) a specialty business wi
  • Comment removed based on user account deletion

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