Amazon Hammers Partners

New research shows that Inc. (NASDAQ: AMZN) takes about half of its resellers’ total revenue. This is according to a study by MarketPlace Pulse: “Amazon is pocketing more than 50% of sellers’ revenue – up from 40% five years ago. Sellers are paying more because Amazon has increased fulfillment fees and made spending on advertising unavoidable.”

Most of the money is for referral fees. However, as much as 10% is for advertising, one of Amazon’s fastest-growing lines of revenue. Looking back to 2016, the total percentage sellers gave to Amazon was about 35%, so 50% is a huge jump.

Amazon needs the money, no matter how much it undermines seller sales. Amazon’s huge e-commerce business barely breaks even today. Its bottom line is carried by Amazon Web Services, its huge cloud services business, which is the largest in the world.

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Last year, Amazon’s North American e-commerce business lost $2.8 billion on $316 billion in revenue. Its international e-commerce business did worse. It lost $7.7 billion on $118 billion. Worrying that these losses will worsen due to legacy infrastructure costs and slowing revenue improvement has kept investors out of the stock. (Click here for the 21 companies making the most profit per second.)

Amazon’s shares remain down by almost 40%, despite a modest recovery recently. Investors do not believe management can fix a system that may be too expensive but is also at the center part of a permanent decline in growth. Amazon may dominate E-commerce, but retailers across the industry have shown more and more ingenuity, and Amazon’s path to higher market share has been blocked.

Whether or not resellers or the public think Amazon is being fair, it needs the money.

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