For the first time, Amazon is taking over 50% from its sellers: Report

Amazon.com is taking more money from the almost 2 million small businesses that sell goods on its online marketplace as it struggles with slowing sales growth and growing costs, according to a Bloomberg report.

The report quoting research by Marketplace Pulse showed Amazon's average margin of each sale topped 50 per centfrom its merchants for the first time in 2022. The study used seller transactions that date back to 2016 as a sample.

According to Marketplace Pulse, sellers have been paying Amazon more for each transaction for six years in a row. But they have been able to absorb the rise in Amazon's cut because of new clients and their revenues growing quickly.

Amazon controls how much cut it takes

As the pandemic lockdowns were lifted and people started travelling and dining out again, that dramatically altered, suffocating online commerce.

Last year, Amazon generated the slowest sales growth in its history.

Amazon's primary online retail operation faces a significant challenge in maintaining earnings as sales decline.

Without its lucrative cloud computing division, Amazon Web Services, the company would have experienced an operational loss of $10 billion in 2017.

Amazon commissions and other fees, such as those for packing and delivery, are outside the control of Amazon sellers.

They only have power over advertising, and there are indications that they are restraining themselves.

Amazon's advertising revenue in the holiday quarter grew 18.9 per cent, a still robust expansion but a big slow-down from the same period a year earlier when it increased by 32.2 per cent.

More sellers to hike prices

The Bloomberg report showed for Chuck Gregorich, who sells fire pits and patio furniture, turning a profit on Amazon is becoming more challenging.He charges $200 for one of his well-liked fire pits, of which Amazon keeps $112 for commission, storage in a warehouse, delivery, and advertising.

He now has $88 left over to pay the producer, ship the item from China, and take care of other expenses.

So, Gregorich has had to take on more of the logistics work himself due to the increasing fees.

He said that other carriers could carry fire pits for around $28—roughly half of what he costs Amazon to deliver large products.That is likely to push Gregorich to hike the price of his product offering.But the improvements made by Amazon are advantageous to some merchants.

Indeed, the report showed one of Amazon's lowest delivery options for small, inexpensive items is used by Desert Cactus, a Chicago-based company that sells flags, license-plate frames, and other stuff on behalf of colleges and professional sports teams.

(With inputs from agencies)

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