The cost of selling on Amazon has now exceeded 50% of each sale for the first time. Bloomberg reported that in 2022 the average cut of each Amazon sale was now above 50% according to a study by Marketplace Pulse. The study added up the total cost of selling on Amazon including commissions, delivery, packaging, advertising, and fees for warehouse storage. This is the 6th year in a row that sellers have been paying Amazon more per transaction.
A changing consumer landscape
With interest rates rising across the world and consumer spending power slowly being chipped away the future looks tricky for Amazon sellers. It is getting harder and harder for sellers to make a profit on Amazon. The concern is that sellers could eventually start to diverge their businesses away from Amazon if the benefits are not worth it for them.
The problem Amazon has is that slowing sales means it is harder for its core online retail business. Aside from Amazon’s Web Services, the company would have posted a $10 billion operating loss last year. Amazon is trying to address some of these issues by cutting jobs and focusing on the company’s key growth area. Amazon increased the annual price of a US Prime subscription last year by $20. It also announced plans to put fees on online grocery orders of less than $150. However, charging customers more has risks. The company which famously has made a business cutting into other companies’ margins, runs the risk of not managing to cover its own margins.
At the moment it is hard for sellers to find cheaper alternatives elsewhere to source their logistics, delivery services, and advertising, etc. However, how this story develops will be key to Amazon’s longer-term stock price.