{"id":1537537,"date":"2024-05-26T08:03:40","date_gmt":"2024-05-26T12:03:40","guid":{"rendered":"https:\/\/www.practicalecommerce.com\/?p=1537537"},"modified":"2024-05-26T19:11:13","modified_gmt":"2024-05-26T23:11:13","slug":"amazon-marketplace-fears","status":"publish","type":"post","link":"https:\/\/www.practicalecommerce.com\/amazon-marketplace-fears","title":{"rendered":"Amazon Marketplace Fears"},"content":{"rendered":"

The Amazon marketplace is a jungle. Savvy merchants can reach a massive audience and sell a lot of merchandise, but like a real jungle, there are reasons to be afraid.<\/p>\n

Contributing to sellers’ fear are Amazon’s dominance in the U.S. market, advertising challenges, and Google’s generative search results. Let’s consider each.<\/p>\n

King Amazon<\/h3>\n
\"Amazon

In 2023 Amazon Logistics transported more packages than each UPS and FedEx, a first.<\/p><\/div>\n

I set out to address the amazing Amazon Logistics and how it helps small and mid-sized ecommerce businesses.<\/p>\n

The impetus was an annual Pitney Bowes report<\/a> stating, “2023 is the first time in the Index history that Amazon Logistics surpasses UPS in parcel volume.”<\/p>\n

The king of the ecommerce jungle, Amazon, transported 5.9 billion parcels in the United States in 2023, compared to 4.6 billion for UPS and 3.9 billion for FedEx.<\/p>\n

Only the United States Postal Services (6.6 billion boxes and envelopes) had more parcel volume than Amazon Logistics. Of the big four \u2014 USPS, UPS, FedEx, and Amazon Logistics\u2014 only Amazon’s parcel volume increased in 2023, up some 800 million parcels from the prior year.<\/p>\n

I asked a few Amazon marketplace pros about the impact on SMBs.<\/p>\n

Two services \u2014 Amazon Logistics and Fulfillment by Amazon \u2014 streamline storage, packing, shipping<\/a>, customer service, and returns<\/a>, freeing sellers from the complexities of order fulfillment. Consumers love the service, with many packages \u2014 purchased on Amazon from small businesses and emerging DTC sellers \u2014 delivered the same day as ordered.<\/p>\n

It is a strong opportunity, but not without risks. Those same experts noted that while Amazon’s dominance enables SMBs to sell and compete<\/a> with massive retailers, it also makes them dependent.<\/p>\n

“It shows how reliant sellers are on Amazon,” said Jon Elder, the founder of Black Label Advisor<\/a>, a Texas-based Amazon consultancy.<\/p>\n

“Amazon is nearing 50% of all ecommerce revenue in America, so it’s almost a monopoly now,” Elder said, adding that the dominance has allowed Amazon to raise its selling fee significantly.<\/p>\n

“Margins are getting crushed,” Elder said.<\/p>\n

Some in the industry have estimated that new logistics-related fees in February 2024 add about 15 cents to the cost of each item sold on the marketplace and managed via FBA. In Amazon’s defense, the increase was reportedly consistent with or even below the increases by other parcel carriers.<\/p>\n

Nonetheless, a merchant that depends on Amazon for most of its revenue has no obvious choice but to pay.<\/p>\n

Effective Advertising<\/h3>\n

Many marketplace sellers are reliant on more than shipping and fulfillment. Amazon Ads is vital, too.<\/p>\n

Amazon’s advertising platform has several advantages over Meta Ads and Google Ads, such as:<\/p>\n