Amazon (AMZN) is getting 50% of the revenue from every third-party sale on its platform, according to a new survey from Marketplace Pulse.
Sellers often end up paying the 15% referral fee (MP refers to this fee as a transaction fee), the 20-35% in Fulfillment by Amazon fees (which includes storage and other fees), and up to 15% for advertising and promotions on Amazon.
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These totals represent an overall increase of 10% over the past five years.
While the cost of selling on Amazon has risen as a whole for sellers over the past five years, the 15% referral fee has been the same for over a decade, according to Market Pulse.
The estimates comes from profit and loss statements provided to the e-commerce market watcher by sellers.
The numbers presented in the study aren't an "accurate depiction of the cost to sell on Amazon," according to a company spokesperson.
"It is true that Amazon is investing more than ever in supporting the growth of our selling partners and helping them achieve a record [holiday] sales."
A Big Part of the Company
Amazon reported third-party seller service revenue of $117.7 billion in fiscal 2022, according to FactSet. Seller service revenue represented 23% of Amazon's total revenue -- coming in second only to online store revenue that totaled 43% at $220 billion.
Products from third-party sellers represent nearly 60% of the units sold in Amazon's store, according to the company.
"Sellers who choose to purchase optional logistics or advertising services from Amazon do so because they see incremental value to their business," Amazon said.
The company says that Fulfillment by Amazon is on average 30% less expensive than standard shipping methods offered by other major third -party shipping partners, and 70% less expensive that "comparable two-day shipping alternatives."
This is a point that MP concedes.
"Fulfillment services by 3PLs (third-party logistics companies) are not always cheaper than FBA. Amazon fees pay for a lot of value," Market Pulse said.
But while the company claims that "many of our selling partners have built and run their business without advertising," Marketplace Pulse says the Amazon ecosystem makes it nearly impossible to succeed without advertising.
"Advertising on Amazon is not optional. Most of the best-converting screen space is allocated to advertising; thus, sellers inevitably have to advertise to have a chance to be discovered," according to MP.
"Every year, Amazon sellers pay more fees as a percentage of their sales. The increase is not a result of sellers using more services. The same services have gotten more expensive (FBA) or unavoidable (advertising)."
Rising Tide
Amazon says that third part sellers are selling more than ever on its platform, so everyone must be winning in this equation.
But is this a case of a rising tide lifting all boats? Market Pulse doesn't seem to think so, but it does see Amazon as a better alternative than the company's rivals in some ways.
"Walmart, for example, is cheaper than Amazon, especially for new sellers for which it offers transaction fee discounts. But it’s also an order of magnitude smaller than Amazon," the company says.
The bottom-line is sellers are selling more on Amazon, but the percentage of money they are taking home seems to be shrinking at the same time.
"Sometimes it’s only at the end of the tax year that they realize how little net profit they have left. A few sellers showed paying 60% and even 70% of their revenue to Amazon in fees. They still had to pay for inventory, freight, employees, and other expenses," MP said.
