7 ms·

Amazon Takes a 50% Cut of Seller's Revenue

143 points by pmoriarty 4y ago

miles 4y ago
The current headline on both the article and HN submission ("Amazon Takes a 50% Cut of Seller's Revenue") is not accurate; the actual base rate is 8-15% according to the article. If a seller elects to use Fulfillment by Amazon, that adds another 20-35%, and advertising on Amazon can add up to another 15%, again according to the article.
- hef19898 4y ago
  FBA prices are ok-ish. You can undercut them by using your own ligostics. But to do so you have to know what you do logistics wise, and most sellers don't. Multiplatform selling was one of the main reasons to quit FBA, but Amazon started, if memory serves well, a service that covers sales over different marketplaces. Plus, FBA gets you Amazon Prime and that coveted Buy Box, doing the same as a marketplace seller is possible but hard.
  - TMWNN 4y ago
    >Plus, FBA gets you Amazon Prime and that coveted Buy Box, doing the same as a marketplace seller is possible but hard. Correct. My FBA and FBM margins are very comparable. What is not comparable is the colossal boost in sales that comes from getting the buy box and Prime logo. Walmart takes a different approach, and as a result its FBA equivalent isn't nearly a sales booster. <https://np.reddit.com/r/WalmartSellers/comments/xh2zd5/walmart_fulfillment_services/ip68xw9/?context=3 https://np.reddit.com/r/WalmartSellers/comments/xh2zd5/walma...>
- JohnFen 4y ago
  The 50% figure is accurate, though. It's written in the most shocking way possible, but it's not incorrect. I'm not saying that I agree that 50% is overpriced, since electing to do your own fulfillment and advertising elsewhere will still represent an expense. Sellers may very well be pay just as much or more if they take care of their own fulfillment and advertise elsewhere. I don't know.
- aliswe 4y ago
  FBA is not a fuction of the unit price though, you say 20-35% which may just be what it ends up in, but its based upon package dimensions and weight.
  - omgomgomgomg 4y ago
    Ah, nice to see someone with insights to the inside:-)
bobby_bbb 4y ago
They don't "take." They offer a price for selling on their site, and sellers choose to pay it or not. They built that better mousetrap.
- blowski 4y ago
  If they have a monopoly control of the market, then the prices could be higher with sellers having little choice between paying and not selling at all.
  - m463 4y ago
    I think you might be getting at Monopsony, which is the only place for sellers to sell to. Monopoly means the only place to buy from.
    - benj111 4y ago
      Well the sellers aren't selling to Amazon. Monopoly is the most generic term so I don't think it's 'wrong', and technically neither are correct so...
    - AbrahamParangi 4y ago
      Monopoly also means "exclusive or near exclusive access or control of something" for instance "she is monopolizing her time" and in that usage the original poster is using it correctly. In fact, I think we should retire the term monopsony exactly because its actual usage is a subset of the usage of monopoly and nobody ever cares about the distinction.
      - deleted 4y ago
        [deleted]
  - dymk 4y ago
    Does Amazon have a monopoly on the market, then? Because if not, I don't see your point
belval 4y ago
> The 15% transaction fee has stayed the same for over a decade. It varies by category and can be as low as 8%. Fulfillment by Amazon (FBA) fees have steadily increased. Amazon has raised fulfillment fees every year and introduced increases in storage fees. Selling on Amazon is tied to using FBA, so it’s rare for sellers to be successful without using it. This really is a questionable spin of something that really isn't that complicated. If you sell through Amazon's warehouse, shipping and logistics system they take a larger cut but if you do that you also don't really have to think about how your product reaches the customer. You just ship them your stock and they take care of it. So in that context I'm not sure I understand why this would be a bad deal. Doing the last mile delivery, sorting and storing stocks is a big part of costs for a seller so while the number might look high that's the cost of doing business.
- moltar 4y ago
  This is exactly it. And the increase in total fees is a transfer of marketing budgets from other platforms like Google Ads and Facebook ads to Amazon Ads. If anyone thinks 50% cut is a big margin they probably haven’t operated an e-commerce store the traditional way.
  - belval 4y ago
    Apple, Steam, Google et al. charge 30% on *digital* goods. With Amazon you get <50% for physical goods. If anything that's impressive.
    - shanebellone 4y ago
      "If anything that's impressive." I'm conflicted about this statement. On one hand, it's almost passive revenue for the seller. On the other hand, Amazon offloads the risk of carrying inventory and takes half the revenue. I'd argue that it's impressive with one caveat: the "partnership" heavily favors the house.
      - deleted 4y ago
        [deleted]
marstall 4y ago
100% retailer markup is the norm, no? and also, they made their name as a discount bookseller and still have the best price on books, correct? So presuming they're not marking books up 100%
- yardie 4y ago
  More like 200%-900% on a lot of items. When I was a sales associate at big box retail the big ticket items were sold nearly at cost (~10%). The addons were where the money was made and fat commissions. If you were selling Playstations the charging stands, USB cables, HDMI cables cost the store a few cents but marked up $10-$50.
- scarface74 4y ago
  I use to work at Radio Shack in college. You would be surprised by the retail vs wholesale prices of accessories and small ticket items. But simple question. How much do you think movie theaters and restaurants pay for food and especially fountain drinks?
Mizza 4y ago
I'm just surprised some MBA hasn't reinvented company scrip yet. Maybe they'll try it internationally first, Walmart was using scrip in Mexico until 2008.
- seymourhersh 4y ago
  ICO
- AlexanderDhoore 4y ago
  It's literally in the wikipedia page about scrip. "On May 21, 2019, The Washington Post published an article highlighting Amazon's new system of "gamification", which rewards employees who complete high numbers of orders with Swag Bucks in a game-like system, which can then be used to buy Amazon-themed merchandise.[19]" https://en.wikipedia.org/wiki/Company_scrip https://en.wikipedia.org/wiki/Company_scrip https://www.washingtonpost.com/technology/2019/05/21/missionracer-how-amazon-turned-tedium-warehouse-work-into-game/ https://www.washingtonpost.com/technology/2019/05/21/mission...
dymk 4y ago
If it's not worth it, why are sellers using Amazon and not, say, Shopify?
- smallerfish 4y ago
  Because many of the most successful sellers either own dozens of products, and have spent years optimizing their listings and winning the trust of the algorithm, or are direct fronts for Chinese manufacturers, who don't have the cost of the middleman. In either position, selling at volume on Amazon is profitable, and the eyeballs are there.
  - dymk 4y ago
    So it is worth it, then
mabbo 4y ago
In an interesting sense, this is because of Apple. It used to be simple. You set up an online store; you put some ads on Instagram and Google; you earn back what you paid for the ads quickly. With each additional sale, targeting of customers gets easier, and cheaper. Apple dropped their privacy changes. Don't get the idea that they had good intentions and are protecting the user- they've got an ad product on the way and just wanted to raise prices across the market. So now in order to get those first sales, you need to put your ad in front of a lot more people because you can't tell which ones will be interested. That raises the cost of acquisition for your customer base, often beyond what's economically viable. So who wins? Amazon, because they own a massive customer base and if you pay them enough, they'll put your product in front of customers. They have market power and they happily take advantage of it.

143 points by pmoriarty 4y ago

The current headline on both the article and HN submission ("Amazon Takes a 50% Cut of Seller's Revenue") is not accurate; the actual base rate is 8-15% according to the article. If a seller elects to use Fulfillment by Amazon, that adds another 20-35%, and advertising on Amazon can add up to another 15%, again according to the article.

hef19898 4y ago
FBA prices are ok-ish. You can undercut them by using your own ligostics. But to do so you have to know what you do logistics wise, and most sellers don't. Multiplatform selling was one of the main reasons to quit FBA, but Amazon started, if memory serves well, a service that covers sales over different marketplaces. Plus, FBA gets you Amazon Prime and that coveted Buy Box, doing the same as a marketplace seller is possible but hard.
- TMWNN 4y ago
  >Plus, FBA gets you Amazon Prime and that coveted Buy Box, doing the same as a marketplace seller is possible but hard. Correct. My FBA and FBM margins are very comparable. What is not comparable is the colossal boost in sales that comes from getting the buy box and Prime logo. Walmart takes a different approach, and as a result its FBA equivalent isn't nearly a sales booster. <https://np.reddit.com/r/WalmartSellers/comments/xh2zd5/walmart_fulfillment_services/ip68xw9/?context=3 https://np.reddit.com/r/WalmartSellers/comments/xh2zd5/walma...>
JohnFen 4y ago
The 50% figure is accurate, though. It's written in the most shocking way possible, but it's not incorrect. I'm not saying that I agree that 50% is overpriced, since electing to do your own fulfillment and advertising elsewhere will still represent an expense. Sellers may very well be pay just as much or more if they take care of their own fulfillment and advertise elsewhere. I don't know.
aliswe 4y ago
FBA is not a fuction of the unit price though, you say 20-35% which may just be what it ends up in, but its based upon package dimensions and weight.
- omgomgomgomg 4y ago
  Ah, nice to see someone with insights to the inside:-)

bobby_bbb 4y ago

They don't "take." They offer a price for selling on their site, and sellers choose to pay it or not. They built that better mousetrap.

blowski 4y ago
If they have a monopoly control of the market, then the prices could be higher with sellers having little choice between paying and not selling at all.
- m463 4y ago
  I think you might be getting at Monopsony, which is the only place for sellers to sell to. Monopoly means the only place to buy from.
  - benj111 4y ago
    Well the sellers aren't selling to Amazon. Monopoly is the most generic term so I don't think it's 'wrong', and technically neither are correct so...
  - AbrahamParangi 4y ago
    Monopoly also means "exclusive or near exclusive access or control of something" for instance "she is monopolizing her time" and in that usage the original poster is using it correctly. In fact, I think we should retire the term monopsony exactly because its actual usage is a subset of the usage of monopoly and nobody ever cares about the distinction.
    - deleted 4y ago
      [deleted]
- dymk 4y ago
  Does Amazon have a monopoly on the market, then? Because if not, I don't see your point

belval 4y ago

> The 15% transaction fee has stayed the same for over a decade. It varies by category and can be as low as 8%. Fulfillment by Amazon (FBA) fees have steadily increased. Amazon has raised fulfillment fees every year and introduced increases in storage fees. Selling on Amazon is tied to using FBA, so it’s rare for sellers to be successful without using it. This really is a questionable spin of something that really isn't that complicated. If you sell through Amazon's warehouse, shipping and logistics system they take a larger cut but if you do that you also don't really have to think about how your product reaches the customer. You just ship them your stock and they take care of it. So in that context I'm not sure I understand why this would be a bad deal. Doing the last mile delivery, sorting and storing stocks is a big part of costs for a seller so while the number might look high that's the cost of doing business.

moltar 4y ago
This is exactly it. And the increase in total fees is a transfer of marketing budgets from other platforms like Google Ads and Facebook ads to Amazon Ads. If anyone thinks 50% cut is a big margin they probably haven’t operated an e-commerce store the traditional way.
- belval 4y ago
  Apple, Steam, Google et al. charge 30% on *digital* goods. With Amazon you get <50% for physical goods. If anything that's impressive.
  - shanebellone 4y ago
    "If anything that's impressive." I'm conflicted about this statement. On one hand, it's almost passive revenue for the seller. On the other hand, Amazon offloads the risk of carrying inventory and takes half the revenue. I'd argue that it's impressive with one caveat: the "partnership" heavily favors the house.
    - deleted 4y ago
      [deleted]

marstall 4y ago

100% retailer markup is the norm, no? and also, they made their name as a discount bookseller and still have the best price on books, correct? So presuming they're not marking books up 100%

yardie 4y ago
More like 200%-900% on a lot of items. When I was a sales associate at big box retail the big ticket items were sold nearly at cost (~10%). The addons were where the money was made and fat commissions. If you were selling Playstations the charging stands, USB cables, HDMI cables cost the store a few cents but marked up $10-$50.
scarface74 4y ago
I use to work at Radio Shack in college. You would be surprised by the retail vs wholesale prices of accessories and small ticket items. But simple question. How much do you think movie theaters and restaurants pay for food and especially fountain drinks?

Mizza 4y ago

I'm just surprised some MBA hasn't reinvented company scrip yet. Maybe they'll try it internationally first, Walmart was using scrip in Mexico until 2008.

seymourhersh 4y ago
ICO
AlexanderDhoore 4y ago
It's literally in the wikipedia page about scrip. "On May 21, 2019, The Washington Post published an article highlighting Amazon's new system of "gamification", which rewards employees who complete high numbers of orders with Swag Bucks in a game-like system, which can then be used to buy Amazon-themed merchandise.[19]" https://en.wikipedia.org/wiki/Company_scrip https://en.wikipedia.org/wiki/Company_scrip https://www.washingtonpost.com/technology/2019/05/21/missionracer-how-amazon-turned-tedium-warehouse-work-into-game/ https://www.washingtonpost.com/technology/2019/05/21/mission...

dymk 4y ago

If it's not worth it, why are sellers using Amazon and not, say, Shopify?

smallerfish 4y ago
Because many of the most successful sellers either own dozens of products, and have spent years optimizing their listings and winning the trust of the algorithm, or are direct fronts for Chinese manufacturers, who don't have the cost of the middleman. In either position, selling at volume on Amazon is profitable, and the eyeballs are there.
- dymk 4y ago
  So it is worth it, then

mabbo 4y ago

In an interesting sense, this is because of Apple. It used to be simple. You set up an online store; you put some ads on Instagram and Google; you earn back what you paid for the ads quickly. With each additional sale, targeting of customers gets easier, and cheaper. Apple dropped their privacy changes. Don't get the idea that they had good intentions and are protecting the user- they've got an ad product on the way and just wanted to raise prices across the market. So now in order to get those first sales, you need to put your ad in front of a lot more people because you can't tell which ones will be interested. That raises the cost of acquisition for your customer base, often beyond what's economically viable. So who wins? Amazon, because they own a massive customer base and if you pay them enough, they'll put your product in front of customers. They have market power and they happily take advantage of it.