A recent study by Marketplace Pulse has shed light on a significant shift – Amazon is now taking more than half of each sale from its third-party sellers. This change comes as the e-commerce giant grapples with slowing sales growth and rising costs.
The Rising Cost of Doing Business
For the first time in 2022, Amazon’s average cut from each sale surpassed 50%. This calculation includes various components such as the commission on each sale, fees for warehouse storage, packing and delivery, and money spent on advertising – a critical aspect given the intense competition in Amazon’s marketplace.
While sellers have witnessed a gradual fee increase over the past six years, the recent surge is notable due to slowing sales growth and a more deal-conscious consumer base. With the easing of pandemic lockdowns, online shopping has experienced a dip, impacting Amazon’s historically robust sales growth.
The Dilemma for Sellers
For many sellers and tiny businesses, maintaining profitability on Amazon has become increasingly challenging. The continuous rise in fees and the pressure to offer competitive prices have left sellers with thinner profit margins. The example below shows the £11.99 cost of selling on Amazon, which is 53% of the sales value – £22.56.
What’s in Our Control
Amazon’s advertising services, once a lucrative space for sellers to enhance visibility, are also undergoing shifts. The study indicates a slowdown in advertising revenue growth, with sellers choosing discounts over advertising to resonate with deal-conscious shoppers.
All the fees except advertising are in control. Therefore, it is becoming essential for sellers to review advertising costs and optimize them to the best they can.
Use the free profit calculator above and enter your cost of goods to see the actual profit. If any product is not profitable due to the ad cost, it is time to stop advertising for that particular product.
Navigating the Future
While Amazon continues to dominate e-commerce, the delicate balance between profitability and competitiveness becomes more challenging as fees rise. We are left to explore alternative ways to generate sales. If you want to chat about your account and profitability, get in touch to discuss more.
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