Amazon's fees surge, many sellers' profits decline this year

Recently, Amazon sellers counted their work this year and found that sales of many sellers increased but profits declined, or the profit growth lagged far behind revenue. The reason is that new costs such as warehousing configuration fees have been a big drag. Domestic and foreign sellers have been talking about this and saying bluntly that the costs are too high and there is no money to be made.

One seller bluntly stated that for investors with idle funds and the ability to trial and error, Amazon is still a good investment channel, but it is already very difficult for those with nothing to gain initial accumulation through starting a business on Amazon, so it is not suitable to enter the market at this time.

Amazon fees surge, profits fall for many sellers

Amazon sellers reviewed their work in the first quarter, and many reported that their performance was embarrassing, with sales rising slightly while profits fell instead of rising.

"In the first quarter, sales and order volume increased by about 50% year-on-year, but gross profit margin decreased by 5% year-on-year."

"Comparing the orders and profits in March this year with the same period last year, the orders have increased, but the profits have decreased a little."

"Looking at the performance in the first quarter of this year, our sales and gross profit both fell by about 20% year-on-year. The pressure will be on the second quarter."

"The order volume increased by more than 50%, but the profit increased slightly by 5%."

The reason is that this year's FBA delivery and warehousing costs have risen sharply, which is greatly eating into sellers' profits. When Amazon raises fees, sellers rarely follow suit, but once the platform fees are reduced, sellers will immediately reduce prices to increase sales. In mid-April, the platform slightly reduced delivery fees, and soon after, sellers found that competitors had reduced prices, and the intensified price involution further eroded profits.

A foreign seller has discussed the current status of Amazon business with many peers, and the conclusion is that many sellers believe that profits have been crushed, and it is meaningless to focus on Amazon. "The sales are there, but why do you have to sell 1 million on Amazon to get the same profit as selling 200,000 DTC? The platform is too much..."

One seller said that most of his listings had good sales, with a 30% year-on-year growth in March, but his profit was 2% less than last year because the FBA inventory fees and warehousing configuration fees he had to pay were much higher than last year.

Similar feedback is more common in China. "The configuration fee and various other fees are too high, and there is no money to be made." "I didn't pay attention to the new policy, thinking I would ship first and then calculate later, but when I checked the freight bill, it was really much more expensive."

Sellers complained: "If you don't pay the configuration fee, the shipment will be distributed to the East Coast and Central America. Amazon is forcing the original transshipment warehouse costs to be allocated to the sellers. In order to find the most cost-effective shipping solution, it now takes me 2-3 times longer to create a shipment and calculate the costs, which greatly reduces my work efficiency."

After the implementation of the warehouse configuration fee, FBA shipments were seriously divided into warehouses. To deal with this situation, cross-border logistics companies collectively reduced the first weight of the goods received and implemented the same price for large and small goods. However, after a period of time, some companies cancelled the low first weight plan, and the price rebounded. The reason was that the volume of goods was too large, the workload of the warehouse soared, and it was beyond their ability. Other freight forwarders also complained: " Damn Amazon's warehouse division, there are too many small goods , some more than 100 tickets, some almost 200 tickets , it really exhausted the warehouse. "

Sellers of large products are particularly troubled.

According to Leckey, Amazon raised prices for goods weighing more than 50 pounds in February this year , and then introduced new policies for warehousing goods. These policy changes are unfavorable for medium and large items. Sellers need to split goods into several warehouses for storage, which makes it more difficult to warehouse some large products. A full container of goods may need to be warehoused in multiple batches, resulting in higher distribution costs and more difficult distribution. Therefore, some large sellers want to switch to the FBM model and choose third-party overseas warehouses to solve the problem of stocking and last-mile delivery.

As costs rise, veteran sellers advise those who want to enter the market

After the configuration fee, the low inventory fee also began to be reflected in the bill. A seller accidentally found that a product with a lot of inventory was also charged a low inventory fee of US$ 0.36 , so he opened a case to ask customer service. The other party said that the low inventory fee is mainly based on the inventory status of all SKUs under the entire parent body. The seller has two colors of this product, one with a lot of inventory and the other is out of stock, resulting in a low overall inventory score and being charged.

It can be said that Amazon has blocked almost all solutions that sellers can think of, and the deductions are unambiguous.

The industry has done some calculations and found that from the moment of shipment, sellers are faced with 16 fees, including warehousing configuration fees, warehousing defect fees, low inventory fees, FBA processing fees, return processing fees, removal and disposal fees, monthly storage fees, peak season storage fees, and storage utilization surcharges. With the addition of new fees, Amazon's requirements for inventory rates are very strict, which places higher demands on the level of operations. In the future, operators who can accurately grasp the inventory rate will be more popular in the recruitment market.

Sellers lamented that the risks of doing business on Amazon are getting bigger and bigger. The bigger the business and the more inventory, the higher the risk. Stable policies are crucial. As competition on the platform becomes more and more fierce, the price involution trend continues to increase. Sellers who can be more competitive in terms of supply chain and team costs will have a greater chance of winning.

Because of this, sellers this year are generally discouraging those who still want to enter the market despite their weak funds.

Yun Feiyang, a senior seller at AMZ, said: “ For investors with idle funds and the ability to make mistakes, Amazon is still a good investment channel today due to its stable business and high compound interest income.

But it is very difficult for a poor boy with nothing to try to accumulate capital through starting a business on Amazon, because there is no excess profit and low traffic dividends, and the cost of trial and error is very high, on the one hand, financial cost, on the other hand, time cost. It is now a slow business. Entering the market at this time may make you debt-ridden. This pond is no longer suitable for young people to get their first pot of gold. "

This view has been recognized by peers. However, for sellers in the game, even if the profit is reduced, the return on investment in Amazon is much higher than that in other industries. For quite a long time, Amazon's market position can still bring sellers some prosperity and wealth.

Since last year, Temu’s impact on Amazon has made many sellers worried.

By spending sky-high advertising fees and offering low prices, Temu has cracked the US market and completed the ice-breaking from 0 to 1. Although its 1% share is only a small piece of cake compared to Amazon's market share of about 40%, it is enough to arouse Amazon's vigilance. The same women's clothing on Temu is 2 to 4 times more expensive on other US websites . This year, Amazon reduced the commission for low-priced clothing products on multiple sites, which is generally understood as a low-price strategy to deal with Temu .

Analysts believe that it is more difficult for a newly established e-commerce company to increase its market share from 0 to 1 % than from 1% to 5% , and Temu has already completed the most difficult part of development in the U.S. Once a brand is familiar to people, it will be easier to sell more goods to consumers, and at a higher price.

But recently, some analysts believe that perhaps because the novelty has faded , Americans' willingness to shop at Temu may have weakened. Amazon's position remains solid. It is predicted that by 2024, Amazon will account for 40.4% of US retail e-commerce sales, reaching approximately US$491.65 billion.