Amazon's Latest Seller Squeeze

[Celerity]

https://prospect.org/power/2025-01-03-amazons-latest-seller-squeeze/


Amazon’s total take from third-party sellers was an astronomical $140 billion in 2023.

Third-party sellers are the backbone of the Amazon marketplace, now comprising over 60 percent of all sales on the platform. This actually fits with Amazon’s overall goal, to simply take a cut from every economic transaction. The working theory has been that Amazon, so dominant in online retail, cannot possibly push its sellers so far that it sends them off the platform. But its latest policy change will test this theory, and it’s already receiving significant pushback. Amazon has for a decade engaged in a slow squeeze of its third-party sellers. In 2014, Amazon was taking a 19 percent cut of seller revenue; by the first half of 2023, this was up to 45 percent, extracted through a variety of commissions, shipping and logistics fees, and increasingly mandatory advertising purchases. Amazon’s total take from third-party sellers was an astronomical $140 billion in 2023.

Fees for fulfillment (Amazon’s name for the warehousing and shipping services for third-party clients) also rose in 2024, and added “holiday peak” fees for the Christmas season. Now, for 2025, the company has announced it would keep its fees the same, and even lower them in a couple of instances, like for bulky packages. Some industry observers took this as a potentially ominous sign for the economy and a retail downturn. Others wondered if Amazon’s ongoing federal antitrust cases, which involve high third-party seller fees combining with the platform’s lowest-price guarantee to raise prices across the economy, had something to do with the company backing off. But Amazon has actually smuggled in what some sellers are calling a de facto fee increase for third-party sellers, under cover of changes to its refund policy.

The current policy is that when Fulfillment by Amazon (FBA) loses or damages a third-party seller’s inventory before a sale, it reimburses the seller at the full retail cost. These losses are somewhat inevitable with so many goods moving around the country; by one estimate, reimbursements constitute between 1 and 3 percent of annual revenue for the average seller. But starting March 10, Amazon will only reimburse for a product’s manufacturing cost, which is significantly lower than the sale price. This amounts to a fee for sellers who use FBA: They will not be paid as much back for inventory that Amazon’s service loses or breaks, even though any such losses are clearly not the seller’s fault. And by only getting back the manufacturing cost, sellers will lose any customs duties incurred when importing a product, shipping fees to get the product to an FBA warehouse, or handling fees to prep products for delivery to warehouses. One seller claims that these levies can equal up to 30 percent of the total product cost.

But the more important question is, how will Amazon calculate a seller’s product manufacturing cost? There are two options, neither of them palatable. Sellers could let Amazon figure out those costs through a “comprehensive evaluation of comparable products sold by Amazon, by other sellers and through wholesale channel.” That could be a wildly different estimate than the real costs sellers incur for manufacturing, and it opens them up to being harmed by Amazon’s creative accounting. It could mean that when FBA loses or damages a seller’s product, they will actually get paid less than what it cost them to produce it. But the second option is arguably worse. Sellers could hand over to Amazon proof of their manufacturing costs, to ensure proper reimbursement. But that would mean giving over proprietary data—manufacturer names, financial information—to a competitor. Amazon’s in-house brands have been accused for years of ripping off sellers on its marketplace by acquiring data on popular products and making knockoffs that undercut them on price.

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[dalton99a]

1. Kick

[2naSalit]

2. If people...

Stopped and thought about boycotting this behemoth and how much better the world would be if they did just that one thing.

[haele]

3. Amazon or Temu?

Which is worse?
Amazon used to give you the option of dealing with small sellers not in your area. Now?
Sigh.