ILSR estimates seller fees netted $24 billion. AWS netted $13.5 billion in 2020, according to Amazon’s financial data.
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That revenue translates to a lot of profit - more than even Amazon Web Services (AWS), Amazon’s cloud computing platform typically believed to be the company’s most profitable arm. Amazon will pull in $121 billion from seller fees alone, ILSR estimates. And while seller fees accounted for 14 percent of Amazon’s entire revenue in 2014, that figure is up to 25 percent in 2021. That’s almost doubled to 34 percent in 2021. The new ILSR report found that Amazon’s seller fees accounted for an average of 19 percent of sellers’ earnings in 2014. The cost to sellers is increasing every year, according to ILSR’s analysis, making business unsustainable for some sellers while Amazon’s profits grow. “The trade-off that any seller is dealing with is you get access to a huge audience, you get access to scale, the ability to scale your sales, but it comes at a cost to margin,” Andrew Lipsman, principal analyst at eMarketer, told Recode.
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Amazon isn’t providing that platform for free. So when you buy a product on Amazon, chances are it was sold by an independent business using Amazon’s platform. In his 2020 letter to shareholders, Jeff Bezos said it accounted for nearly 60 percent of Amazon’s retail sales, which come from nearly 2 million sellers. Marketplace is a huge part of Amazon’s business. Marketplace: The gift that keeps on giving (to Amazon)
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But Mitchell says many sellers feel compelled to pay those ostensibly optional fees if they want their businesses to stay afloat. “This report highlights how Amazon’s tactics can lead to that result and why Congress must act to set clear rules of the road for the digital giants that dominate our online economy.”Īmazon disputes the report’s findings, calling it “intentionally misleading” for lumping its mandatory fees and optional services together as “seller fees.” Amazon maintains that all of its fees - mandatory and optional - are competitive with what similar services charge, and that many sellers are successful without taking advantage of those optional services. Amy Klobuchar, chair of the Senate Judiciary Antitrust Subcommittee, told Recode. “It is important to understand how tech platforms can exploit their power to hurt small businesses and raise prices for consumers,” Sen. They say it’s further evidence that action must be taken to curb Amazon’s power - and some of them are already working on legislation. These are some of the same issues identified by regulators and lawmakers who have accused Amazon of abusing its market dominance. “This important study makes clear that Amazon is crushing sellers through abusive policies that make it nearly impossible for everyday businesses to get ahead.” David Cicilline, chair of the House Judiciary Antitrust Subcommittee, told Recode. “Amazon’s dominance is bad for businesses, jobs, and America’s competitiveness,” Rep. But a growing number of others argue that Amazon’s dominance over the e-commerce market and its power over its sellers has given rise to anti-competitive practices that hurt Amazon’s competitors, competition in general, and consumers. And some sellers on Amazon’s platform say they’re happy with the arrangement - at least, for now. You might consider this to be a good business strategy on Amazon’s part, as it’s certainly paid off for the company.
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“It’s exploiting its monopoly power over these small businesses to pocket a huge and growing cut of their revenue.” “Amazon is the only winner here,” Stacy Mitchell, ILSR co-director and author of the report, told Recode. And because sellers are paying Amazon high fees, customers may face inflated prices, even when they shop beyond Amazon’s borders. These fees have become so lucrative for Amazon that they now represent the company’s most profitable segment as well as its fastest-growing revenue stream, according to ILSR. The report, which comes from the nonprofit Institute for Local Self-Reliance (ILSR), asserts that Amazon takes a larger and larger cut of sellers’ earnings through the various fees it levies on them. But a new report says those benefits are increasingly lopsided - in Amazon’s favor. Amazon has always presented its Marketplace, where outside businesses sell products through Amazon’s platform, as one of its biggest success stories: mutually beneficial to Amazon, sellers, and customers alike.