In the ever-evolving landscape of e-commerce, Amazon has long been revered as the go-to platform for explosive growth. It has catapulted numerous brands to success and assisted countless sellers in achieving massive reach seemingly overnight. However, despite the platform’s continuous expansion of its customer base and infrastructure, many brands are experiencing shrinking profit margins. So, what has changed in the dynamic world of Amazon selling?
In 2014, sellers paid Amazon approximately 19% of their revenue in combined fees. Fast forward to today, and that number can exceed 50%, factoring in referral fees, Fulfilled by Amazon (FBA) costs, storage fees, and the now essential ad spend required for visibility. Despite the platform’s exponential growth, many brands are finding themselves earning less per sale than they did a decade ago.
To understand this shift, it is crucial to acknowledge that Amazon is not arbitrarily increasing costs. Rising logistics and operational expenses have prompted the company to transfer more of that burden onto sellers to safeguard its own margins. For instance, in 2024 alone, Amazon introduced new charges like the Low-Inventory-Level Fee and the Inbound Placement Service Fee—both aimed at optimizing fulfillment efficiency but also contributing to increased seller overhead.
Even sellers managing their logistics through Fulfilled by Merchant (FBM) are facing escalating costs, as Amazon now applies fees even when it is not directly handling fulfillment. These changes signify a broader strategic effort to influence seller behavior, favoring certain product types and sales models while nudging others off the platform.
Although Amazon continues to reign supreme, emerging platforms present compelling alternatives for growth. Platforms like Shopify, TikTok Shop, Faire, Walmart Marketplace, UNFI Marketplace, and other wholesale networks offer unique opportunities for brands looking to diversify their sales channels and reduce dependency on Amazon.
For many consumer packaged goods (CPG) brands, Amazon remains a valuable sales channel, albeit with some caveats. Amazon still holds the title of the largest e-commerce marketplace in the U.S. and boasts unparalleled customer trust. Brands with a solid product-market fit, operational efficiency, and effective advertising strategies can still flourish on the platform. However, Amazon is no longer a “set-it-and-forget-it” cash cow; it now requires a strategic and thoughtful approach as part of a broader sales strategy.
While Amazon continues to be a pivotal player in the e-commerce landscape, it is no longer a one-size-fits-all solution for every brand. The evolving terrain demands a more nuanced approach, with brands considering Amazon as one piece of a larger sales strategy. Whether leveraging TikTok, Shopify, or forging retail partnerships, brands today have an array of tools at their disposal to build sustainable and scalable revenue streams beyond the confines of any single platform.
At Wizard Accounting, we specialize in helping CPG brands accelerate their growth through expert-level bookkeeping and cash flow support. If you are seeking assistance in navigating the complexities of e-commerce finance and maximizing your profitability, we are here to help. Let’s connect and discuss how we can support your brand’s financial success.
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