[HN Gopher] Amazon Takes a 50% Cut of Seller's Revenue
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Amazon Takes a 50% Cut of Seller's Revenue
Author : pmoriarty
Score : 118 points
Date : 2023-02-18 18:55 UTC (4 hours ago)
(HTM) web link (www.marketplacepulse.com)
(TXT) w3m dump (www.marketplacepulse.com)
| miles wrote:
| 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 wrote:
| 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_.
| JohnFen wrote:
| 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.
| bobby_bbb wrote:
| 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 wrote:
| 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.
| rocket_surgeron wrote:
| I don't know if I would characterize them as having monopoly
| control of the market because nearly 100% of all of my
| purchases are made online and 0.0% of my purchases have been
| made using amazon.com (or walmart.com).
|
| Generally speaking I prefer to buy a product directly, or
| from a specialized retailer.
|
| Last week I purchased a stethoscope from an online
| stethoscope retailer. A benefit of doing this is that they
| offer laser engraving-- something that Amazon, with its
| warehouses of robots and robot-like employees, cannot easily
| do.
|
| The specialty retailer also carries a wider array of color
| and finish combinations, because that's their product niche.
|
| Using a specialist retailer has allowed me to flex on my
| fellow volunteer EMTs with a personalized Technicolor
| stethoscope, which is dumb but nice.
| ClumsyPilot wrote:
| You are looking at the wrong side of the market. You need
| to look at the market from the perspective of the seller v
|
| For examples, do the 7 bigges supermarkets in britain,
| Tesco, Lidl, etc, have a monopoly?
|
| I can buy all my food from the snaller shops and market
| markets, as a buyer.
|
| But if I am a seller, and I need to sell mass market food,
| and all the big supermarkets refuse to carry it, you will
| go bankrupt.
| m463 wrote:
| 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.
| AbrahamParangi wrote:
| 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]
| benj111 wrote:
| 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...
| dymk wrote:
| Does Amazon have a monopoly on the market, then? Because if
| not, I don't see your point
| JohnFen wrote:
| It depends on the exact market segment (Amazon does not
| have a monopoly on groceries, for instance), but yes, I
| think Amazon is effectively a monopoly. Or at least part of
| an oligopoly, which is no better.
| scarface74 wrote:
| Amazon has a monopoly on creating a web page and selling a
| shipping stuff? There are literally thousands of merchants
| that setup their own sites or sell through Facebook,
| Instagram or Etsy
| danuker wrote:
| Amazon had 13% of global e-commerce:
| https://www.statista.com/statistics/664814/global-e-
| commerce...
|
| Only Alibaba has more market share than it. But it is
| indeed quite far from a monopoly.
| danuker wrote:
| "Take" can also mean "accept" or "require".
| Mizza wrote:
| 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.
| AlexanderDhoore wrote:
| 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://www.washingtonpost.com/technology/2019/05/21/mission...
| seymourhersh wrote:
| ICO
| belval wrote:
| > 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.
| wewtyflakes wrote:
| If the seller has to ship the product to Amazon anyway, why not
| just ship it to the customer instead and not pay the extra
| fees? What need is Amazon fulfilling that Fedex or DHL do not?
| nonethewiser wrote:
| You mean the 200 different customers?
| omgomgomgomg wrote:
| Logistics and order destination and they will work 247, give
| or take.
|
| There is quite some overhead if you have to schedule all the
| pick ups and update the order and shipping status. They have
| all this automated and they have warehouses strategically
| located everywhere.
|
| This is something that many of the chinese sellers still do
| not use. They are relatively new and inexperienced, they
| struggle to do the corporate onboarding paperwork etc. They
| will get around, though, some have improved fast.
| ianburrell wrote:
| Storing the product and packing it up. If you have small
| volume, then garage might work and can pack yourself. But
| Amazon and customers have expectations on speedy shipping.
| For larger volumes, you need warehouse and people to package
| orders. Doing yourself makes sense if already have own store
| but otherwise probably easier and cheaper to pay Amazon.
|
| Also, my impressions is that Amazon shipping is cheaper since
| they have volume discounts, use their planes for long-haul,
| and use their trucks for cities.
| wewtyflakes wrote:
| That makes sense I think. So as a seller, I could buy bulk
| from some producer, get it bulk shipped to Amazon, and they
| will take care of meting it out to individual purchasers.
| Did I get that right?
| smallerfish wrote:
| Yes but competition between sellers in most niches is so
| tight that as a new seller you'll struggle to make
| profit, even if you've innovated on the product, because
| you'll be paying Amazon for search engine ads and also
| dropping your price as far as you can to win sales. You
| essentially end up as an unpaid employee of Amazon,
| managing and optimizing a listing.
| brianwawok wrote:
| Mostly 1 and at worst 2 day delivery for the entire
| continental US. You would need between 3-6 warehouses around
| the US to meet this. Which isn't a small starting place for
| most sellers.
| stickfigure wrote:
| Next day delivery for "free".
|
| Price out overnight service from Fedex or DHL. It's
| frightfully expensive.
| bobbyi wrote:
| Maybe they get more sales that way?
|
| If I can pick between two items on Amazon for the same price
| and one is fulfilled by Amazon, I buy that one.
| AussieWog93 wrote:
| I actually run an FBA business.
|
| For me to ship 500x units to the warehouse, from my home in
| Australia, it costs around US$200. Factor in the FBA fee of
| around $3 per unit, and you get a total shipping and
| logistics cost per batch of $1700.
|
| For me to ship 1x unit from my home in Australia to the US,
| it would cost around US$20 and take 2 weeks to get there. In
| this instance, I've paid $10,000 and the customer experience
| is worse.
|
| Even if I were based in the US, I'd be looking at $6 per
| package via USPS, plus all the fucking around to label and
| box up those 500x units. (That's maybe $3200 total including
| packaging, plus about 10 hours' labour distributed over the
| course of two months.)
|
| I guess the point is that making use of highly-efficient
| logistics services allows both small businesses and courier
| companies to access Amazon's economies of scale.
| hammock wrote:
| Ever ask that of your grocery store? Do you order cereal from
| Kelloggs.com?
| darth_avocado wrote:
| The FBA fees are interesting. I briefly talked to someone who
| runs a store on Amazon. Yes you're paying Amazon a fee for
| storage and other logistics, but as a seller get the added
| benefit of your product just being delivered to the customer
| with strong delivery guarantees (even fedex and ups give Amazon
| packages a higher priority over your regular packages). All you
| have to worry about is get your product to them and they will
| distribute it over a chain of warehouses by doing their own
| forecasting of demand to get the optimal delivery experience.
| Sellers actually don't mind paying this part because you'd have
| to do this out of pocket anyway and letting Amazon do it has
| its perks, including Amazon guaranteeing a certain sell volume.
|
| The downside of this though is that sometimes Amazon demands a
| certain volume from you for your product, and you have to do it
| even if you don't think it makes sense because they think the
| demand would go in a certain direction. When it doesn't happen,
| Amazon asks you to get it off their hands and figure out how
| you want to offload it. You eat the FBA costs and the costs to
| get it back, on top of any other costs you may incur while
| getting rid of this inventory.
|
| This system works for some sellers, but not for others who can
| eat up these losses.
| lots2learn wrote:
| This only describes one model of selling on Amazon i.e. as a
| vendor. The vast majority of sellers are not vendors and
| manage their own inventory quantities. The way the system
| qorks changed several times over the years, and was notably
| very constrained during COVID, but these days Amazon just
| provides a recommended qty per sku and an overall hard limit
| on total square footage each seller can use. The limit is
| determined by sales volume, so higher volume sellers get more
| space. If product doesn't move, the seller pays storage fees
| and eventually (more expensive) long term storage fees.
| sashenka wrote:
| [dead]
| omgomgomgomg wrote:
| Former Amazonian here, great company and all that, I enjoyed
| it.
|
| I felt I can provide data here, FBA is not the end of the
| road, there are more levels so to say, FBA and prime etc.
|
| Now, FBA has some potential pitfalls.
|
| - VAT, Amazon will often store in a country where its most
| economical for them, ie, for German sellers, there will be a
| warehouse just after the Polish border etc. They will do this
| unless you explicitly disable this. This leads to very
| complicated VAT fillings and correction
|
| - Lost, stolen, damaged cargo. If your merchandise gets
| damaged or stolen etc, its not so easy to get new storage
| space allocated/assigned.
|
| - Recalls, if your ASIN is subject to a recall, god help you,
| if you use amazon, you will have penalty points on the
| account health page, affecting many other things. All and and
| FBA ASINs affected , whether youre selling it or someone else
| need to be removed. The recall is only finished after that.
| And youre paying for the storage or recovery or disposal.
|
| - Shipping confirmation. You are supposed to inform about any
| package and order status very soon after the order is placed.
| Same for tracking status. Now, sometimes the Amazon api for
| that is buggy and you get heavy markdowns on account health
| even though you provide the data, just the feed dont work.
|
| Still, when its all said and done, Amazon offers the best
| product and logistics if you just want to sell your product.
|
| There is no way any competitor can offer the same quality at
| a better price.
|
| Keep in mind, whatever the percentage is, the ecommerce
| business has a margin in the single digits, all of Amazon is
| subsidised by the money making machine AWS.
| Closi wrote:
| I think the complexity is around the 'Prime' flag, which has a
| huge impact on sales and can force you down the FBA route if
| you actually want to sell in volume.
|
| ('Seller Fulfilled Prime' is possible - however currently
| closed for new applicants, is more targeted towards very large
| shippers, and there is pressure from account management on
| utilising Amazon Shipping as part of this at least in the UK)
| omgomgomgomg wrote:
| Yes, you need to "earn the dues" before they enable that, I
| think its for good reasons, they protect the product and I
| would not advise a newcomer to even try prime FBS if they
| habe a certain volume and a very professional infrastructure
| is needed.
|
| They have very protective rules for sellers who sell jewlery
| and such, too.
| moltar wrote:
| 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 wrote:
| Apple, Steam, Google et al. charge 30% on *digital* goods.
| With Amazon you get <50% for physical goods. If anything
| that's impressive.
| shanebellone wrote:
| "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.
| nobu-mori wrote:
| Digital goods have very low marginal unit costs compared to
| physical goods.
| shanebellone wrote:
| Edit: I was wrong :)
| [deleted]
| Closi wrote:
| You are misunderstanding the concept of marginal unit
| costs if you disagree on that basis.
|
| AAA software is wildly expensive, but each incremental
| copy sold is not wildly expensive.
|
| With a tea kettle, each incremental copy still costs you
| metal, heating elements and plugs, so the unit margins
| are smaller.
| shanebellone wrote:
| Oh! That I failed to recall. You are absolutely correct.
| votepaunchy wrote:
| Apple, Google, maybe others charge 15% on up to $1 million
| or the first $1 million in digital sales. Or less when
| negotiated. Does Amazon offer reduced rates to small
| businesses or low volume sellers?
| JohnFen wrote:
| It tells me that the fee on digital goods is insanely high.
| StreamBright wrote:
| It is not that I think 50% is a lot but it is the same 50%
| when amazon is selling fakes. If amazon would be able to sell
| items that are original and the money would go to the right
| person maybe 50% is ok. This is not the case by a long shot.
| dymk wrote:
| If it's not worth it, why are sellers using Amazon and not, say,
| Shopify?
| smallerfish wrote:
| 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.
| marstall wrote:
| 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%
| scarface74 wrote:
| 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?
| yardie wrote:
| 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.
| mabbo wrote:
| 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.
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