Amazon collects a third of seller revenue
A new study claims that Amazon makes far more from fees on its Marketplace platform than even the cash cow known as AWS, reports TechCrunch.
According to the report by the Institute for Local Self-Reliance, sellers now give the company about 34% of their earning in the form of fees and advertising payments, bringing Amazon some $121 billion in 2021. That’s twice the estimated $60 billion from 2019.
Jeff Bezos attempted to counter this narrative when he told Congress that the increasing amount of money going from sellers to Amazon is something of an optical illusion, due to more of them choosing to pay for add-on services like better placement on keyword searches and using Amazon’s own shipping and warehouse infrastructure.
But Stacy Mitchell, the author of the report, points out that the add-ons have gone from optional to must-have as Amazon has given serious advantage to sellers that use them. The number of ads and sponsored listings on common product searches have increased dramatically. And this is without considering the shady business of duplicating successful products.
Amazon did not address the claim that sellers are spending 4-5 times as much on ads and placement today as they did in 2016, contributing to the huge increase in income. The company merely said there is a range of ad types and processes, and that it’s “a great way for sellers to help increase the visibility of their products.”
The report also claims that Amazon is using creative accounting to mask the enormous revenues generated by seller fees, grouping the huge profits of the Marketplace division with the losses incurred in building out their shipping infrastructure.
“We conclude that seller fees likely generate more profit than AWS. This contradicts conventional wisdom about the company; news stories commonly describe AWS as the source of most of Amazon’s earnings. But this report finds that the tech giant has a second cash cow, which it keeps quietly out of view.” writes Mitchell in the summary.
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