Small businesses can benefit by diversifying from Amazon and fulfilling their own local orders, considering Amazon pockets more than 50% of sellers’ revenue, up from 40% from 5 years ago, according to a recent report.
Marketplace Pulse looked at profit-and-loss statements provided by sellers and determined that every year, Amazon sellers pay more fees as a percentage of their sale.
Source: Marketplace Pulse
Total fees vary depending on the category, product price, weight, and the seller’s business model, according to the report.
Small businesses may be further surprised to learn that advertising on Amazon is not optional. Amazon doesn’t set advertising prices, instead allocating screen space for advertising and allowing sellers to compete to be discovered.
“Every year, Amazon sellers pay more fees as a percentage of their sales. The increase is not a result of sellers using more services. The same services have gotten more expensive (FBA) or unavoidable (advertising),” writes Juozas Kaziukėnas, Founder of Marketplace Pulse.
Fees for the typical Amazon seller stack up as follows:
- 15% transaction fee, called a “referral fee” by Amazon
- 20-35% in Fulfillment by Amazon, FBA, fees (includes storage and other fees)
- Up to 15% for advertising and promotions on Amazon
Source: Marketplace Pulse
Kaziukėnas cautions that sometimes at the end of the year, sellers will realize how little net profit they have left. “A few sellers showed paying 60% and even 70% of their revenue to Amazon in fees. They still had to pay for inventory, freight, employees, and other expenses,” he adds.
Meanwhile, fulfillment services by 3PLs (third-party logistics) are not always less expensive than FBA. And direct-to-consumer e-commerce is a “fundamentally different business model,” as “the fees are not the only consideration,” Kaziukėnas acknowledges.
In-Store Fulfillment: The Antidote to Amazon Taking 50% of Sellers’ Revenue
The fact that Amazon takes a 50% cut of sellers’ revenue is a reminder of how small businesses that want to offer home delivery are often subjected to monopolistic decision-making, with little to no say. It’s also a call-to-action for small businesses to take control of what they can.
Trellus Same-Day Local Delivery strives to give local sellers the utmost control in three ways:
- Small businesses can fulfill their orders right from their place of business.
- Small businesses can put their best foot forward, packaging their goods with their best presentation. Customer loyalty is boosted when a package is handled with care and not stuffed in a box that’s thrown in the back of a truck!
- Because Trellus doesn’t take a portion of each sale and doesn’t have a complicated commission structure, small business owners are left in control of how they handle delivery costs. They can either absorb the cost or pass it on to their customer.
There’s a better way to deliver, with a service designed exclusively for the needs of small business owners. Learn more about Trellus for Businesses.
