Re:Amazon's Toll Road – How it funds its monopoly empire
by legitster on Friday December 03, 2021 @01:24PM
(#29433286)
> To sell $10,000 worth of clothing today, Steve explains, he must pay Amazon $1,700 in referral fees and spend another $1,500 to $2,000 on ads
So hold up... the "fees" include fulfillment and optional advertising expenses? And it's still only 34%? That's a bargain! In brick and mortar retail, you are lucky to get 50% margin on a product, and that's just in the stocking (fulfillment) costs - let alone advertising!
It's also worth noting those referral fees are not just free money for Amazon - they are buying ad space on other sites on behalf of their customers (likely at a loss). So their report that Marketplace is secretly crazy profitable is mostly bunk - it basically assumes Amazon incurs no costs to ship and advertise products.
The real problem they are dancing around here is that Amazon allowed the direct inclusion of international storefronts in the marketplace. Companies abroad can operate at much lower margins, and the traditional e-retail business model (buy from wholesalers, resell at markup to consumers) basically doesn't make sense anymore.
So hold up... the "fees" include fulfillment and optional advertising expenses? And it's still only 34%? That's a bargain! In brick and mortar retail, you are lucky to get 50% margin on a product, and that's just in the stocking (fulfillment) costs - let alone advertising!
It's also worth noting those referral fees are not just free money for Amazon - they are buying ad space on other sites on behalf of their customers (likely at a loss). So their report that Marketplace is secretly crazy profitable is mostly bunk - it basically assumes Amazon incurs no costs to ship and advertise products.
The real problem they are dancing around here is that Amazon allowed the direct inclusion of international storefronts in the marketplace. Companies abroad can operate at much lower margins, and the traditional e-retail business model (buy from wholesalers, resell at markup to consumers) basically doesn't make sense anymore.