Back in the 80's, my company sold compilers through third party mail order houses. They all demanded providing the product to them at 50% of their selling price.
It's what having somebody else advertise, collect orders, process payments, ship, and deal with returns is always going to cost you.
If it's unacceptable to your business, sell directly. My company did both.
Or you can not be on Amazon but "just don't sell Windows if you don't want to pay extra" didn't work for Microsoft...
Amazon charges for all of those things still. This isn't 50% off and we deal with everything it is ~50% but you still take all economic risk.
Nobody was being stupid here. Or maybe I should say that one learns the ropes fast or goes bust.
There is a difference between "let me buy from you and I need room to make a profit" and "you can sell through me but you bear all costs but I still want my profit".
On these items Amazon fully realizes they can charge 90% and the seller is still making a profit, so they do.
If you're selling appliances or TVs or computers the % is not nearly that bad.
The warehouse and shipping fees on such large & heavy items would be onerous would be my guess.
Yeah, I've done enough FBA to rank somewhere between a serious hobbyist and an actual lifestyle business.
There is a sweet spot. If you're selling lightweight crap items, even the small shipping and fulfillment costs still tend to dominate. If you sell huge stuff, the shipping will bite, but not as bad as you'd expect -- Amazon has very good rates. The big problem for bulky items tends to be warehouse fees, and also the logistics of getting it to the FBA warehouse in the first place.
I'd say 1-3 cubic feet is exactly where you want to be.
Here's the actual fulfillment fees, if you're curious (notice how reasonable the rates are in the "Large Standard" range):
https://sellercentral.amazon.com/help/hub/reference/external...
A neighbor of mine who makes high end silver jewelry was doing fine with the gallery he used (in Santa Fe). The gallery collected about 30% of his sales price in fees.
Another gallery approached him, asked to represent him instead. They took 50% in fees. He switched anyway.
His income went up (and stayed up). Presumably the new gallery provides some combination of better environs, more and/or different customers, better salespeople.
It still seems wrong that fees could be this high, for a jewelry gallery or for amzn. But it shouldn't be assumed that the high fees necessarily mean reduced income for the original seller.
I agree. It just gets passed down to the customers. Most of my shock was directed at the 50% increase in fee in just a few short years. You can't do that without having a lot of leverage.
That's a common but not an accurate belief:
As a business owner pricing a product or service, if your costs increase you can either take the marginal cost out of your net income or increase the price.
Taking it out of your net income is simple: You keep prices the same, revenue remains the same, and profit drops a bit.
Increasing the price is more complex; you are changing one component in a system of dynamic feedback: When you raise the price, fewer people buy your product, so the outcome may be less revenue and less profit. The impact of price changes on purchasing is called elasticity: Some products - e.g., fancy restaurant meals - are easily forgone and are thus price sensitive. Others, like necessary healthcare, can be priced extortionately and people will still buy it.
Arguably, if you are the mythical optimal manager, you've already priced your product to maximize revenue and therefore any change will decrease it. In that case, price increases will only worsen your profit.
The reason for your price increase is orthogonal to the customer's purchase decision - you raise the price, they buy less. They usually don't know and don't care why - do it for greed, to cover additional cost (and maintain your beloved profit margin), because your finger slipped on the price-your-goods app, whatever.
https://archive.ph/yw3Bv
In 2016, they collected 35.2%. In 2022, they collected 51.8% in fee.
That's insane.