Sellers' profits are squeezed! Amazon earns 23.5 billion euros in commissions in Europe in one year

Amazon isn't exactly unfriendly to small businesses, a recent report suggests, as the massive company has been raising fees and advertising costs for third-party sellers.

Amazon’s revenue from European sellers (including listing, delivery and digital support fees) tripled between 2017 and 2022, far outstripping sales growth, which only doubled over the same period. For sellers in the UK, France, Germany, Spain and Italy, for example, delivery and storage costs doubled in some categories between 2017 and 2023 .

Margarida Silva, a researcher at the Amsterdam-based Center for the Study of Multinational Corporations ( Somo ) , said that over the past 20 years, Amazon has been continuously expanding its monopoly on the European online market, so that all independent retailers who intend to sell online have to choose this platform. This is equivalent to the seller being tied to this platform. In essence, the seller is a captive, and all captive sellers have to become a source of income for Amazon.

Somo analyzed the accounts of Amazon EU Sarl, the European unit of Amazon, and concluded that despite a 1% drop in retail sales , commission income from sellers rose 6% last year to 23.5 billion euros. This figure does not include the cost of sellers advertising on the platform.

After analyzing the data of Amazon's advertising subsidiaries across Europe , Somo found that Amazon's advertising revenue in Europe has also grown rapidly in recent years, from a mere 300 million euros in 2017 to 5.4 billion euros in 2021. The group estimates that 51% (2.75 billion euros) of the revenue comes from independent sellers. The Amazon Online UK subsidiary, which is responsible for advertising business in the UK alone , has seen its advertising revenue increase by six times from 300 million euros in 2018 to 1.9 billion euros in 2021.

Somo said in the report that Amazon sellers are facing increasing costs, including the cost of the company's expansion of distribution centers and the digital services tax in France and China; Amazon's compression of sellers' profits is an important source of the company's business in Europe, because revenue from independent sellers is growing faster than the company's core business European retail division.

A British seller once revealed to the media that his fees on Amazon were almost equivalent to 40% of the pre-VAT price of his products . Although the sales volume of his products was satisfactory, the company's service was very unsatisfactory.

Amazon is being investigated by Britain’s competition regulator as it seeks to determine whether it gives its own brands and those using its logistics services an advantage over third-party rivals.

In response, Amazon said that its revenue growth was because European sellers "grew their businesses through Amazon" and that it had been investing funds to support sellers' business development, and that this investment was increasing. Sellers chose Amazon's logistics and advertising services because they saw the value these services added to their businesses.

Paying Amazon for storing, picking, packing and delivering products is optional, and the service is 30% cheaper than the standard service offered by other major logistics operators . Advertising services are also optional.

Amazon also strongly disputed Somo 's claim that it has a "captive market ," saying the marketplace data "fundamentally misrepresents how the retail industry works" by failing to take into account that most retail sales take place in physical stores and that " competition in retail is intense, so sellers have many choices about where to sell their products ."

But European sellers surveyed said they had to pay the platform's rising fees because of its high market share . According to the European Commission, Amazon's market share in Germany, France and Spain is as high as 70%. Another British retailer said that sellers need to continue to spend on advertising services to keep their products visible , because as long as they slow down, they will be surpassed by competitors.

Amazon did not disclose sales data for sellers in the European market, but it mentioned that independent and third-party European sellers sold more than 2.2 billion products worldwide in 2021, a figure that increased by 65% ​​in two years. Amazon's revenue from sellers increased by 85% in these two years.

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