TL;DR: Amazon now takes 50–60% of a typical seller’s revenue through fees and advertising. FBA costs have risen 96% over the past decade — 3× faster than inflation. For most brands, the economics no longer work. The best path forward is diversifying to DTC channels and partnering with a 3PL that offers transparent pricing and multi-channel fulfillment.
Jeff Bezos built Amazon on a simple premise he repeated often: “Your margin is my opportunity.” That statement was directed at competitors in the retail space, but over the past decade, Amazon has turned that same philosophy inward, against the third-party sellers who generate the majority of its marketplace revenue. Between cost of goods and Amazon’s expanding constellation of fees, most sellers have no margin left. After spending more than a decade operating in the Amazon ecosystem, I can say with certainty: the platform that once democratized ecommerce now extracts more value than it returns for the majority of brands selling on it.
This is not speculation. The data is clear, the trajectory is unmistakable, and the February 2024 fee restructuring removed any remaining ambiguity about where this is heading.
The Fee Escalation: A Decade of Margin Compression
The numbers tell a straightforward story. According to Marketplace Pulse, Amazon took roughly one-third of a typical seller’s revenue in fees and advertising costs in 2016. By 2023, that figure had reached 50 to 60 percent. A typical private-label seller now pays a 15% referral fee, 20 to 35% in Fulfillment by Amazon fees (including storage and related surcharges), and up to 15% in advertising costs just to maintain visibility on the platform.
The fulfillment fee trajectory is especially revealing. SmartScout’s analysis of FBA fee history shows that standard-size product fees have increased 96% over the past decade, while general inflation over the same period was approximately 32%. FBA fee growth has outpaced inflation by a factor of three.
The fee categories have also multiplied. In 2022, Amazon introduced fuel and inflation surcharges. In 2023, it launched the FBA Capacity Manager, imposing monthly capacity limits, reservation fees, and storage overage fees. In 2024, it added returns processing fees of $3.00 to $5.00 per item for products exceeding category return rate benchmarks. Each new fee is presented as a minor adjustment. Taken together, they represent a structural transformation in seller economics.
Amazon’s advertising revenue reached $56.2 billion in 2024, making it the third-largest digital advertising platform in the United States. That revenue comes directly from seller margins. Amazon’s search results now display multiple rows of sponsored products before a single organic listing appears, which means sellers must pay for the visibility they once earned through product quality and sales velocity alone.
The Bezos philosophy has been fully internalized, but with a critical difference. When Bezos articulated “your margin is my opportunity,” he was building a company with a long-term orientation, reinvesting aggressively to create an ecosystem that attracted sellers and buyers alike. The current leadership operates on a fundamentally shorter time horizon. No one in Amazon’s top management appears incentivized to keep the seller ecosystem healthy. Every indication points toward continued fee escalation and increased extraction. There is no evidence that Amazon’s leadership recognizes it is killing the golden goose.
February 2024: The Tipping Point
The changes Amazon announced in late 2023 and implemented in early 2024 represent a concrete inflection point for sellers. Two policy changes in particular transformed the economics of FBA inbound shipping.
First, effective March 1, 2024, Amazon introduced the FBA inbound placement service fee. Previously, sellers could ship all FBA inventory to a single fulfillment center, often a nearby location, and Amazon would handle the distribution and network optimization internally. That model is gone. Amazon now requires sellers to choose between three options: ship to a single location and pay a significant per-unit surcharge, split shipments across two or three locations for a reduced fee, or split across four or more Amazon-designated locations to minimize the fee. Each shipping plan now requires sellers to run the math across five or more potential shipment configurations to determine the least costly option. The operational complexity alone represents a meaningful cost increase, and the fees themselves add $0.27 to $1.58 or more per unit depending on product size and the number of locations.
Second, Amazon announced a low-inventory-level fee effective April 1, 2024. This surcharge applies when a seller’s inventory falls below 28 days of supply relative to sales velocity. The fee ranges from $0.32 to $0.97 per unit. Combined with the existing aged-inventory surcharges that penalize excess stock, Amazon has created a narrow band of acceptable inventory levels, defined entirely by Amazon, with financial penalties on both sides.
The practical impact of these changes was immediate. Sellers who had built their inbound logistics around shipping to a single DFW-area fulfillment center, as many Texas-based sellers had done for years, suddenly faced either large per-unit surcharges or the operational burden of splitting shipments across the country. The simplicity that made FBA attractive, the ability to ship inventory to one location and let Amazon handle the rest, ceased to exist.
These were not minor adjustments. They represented a fundamental change in the cost structure and operational requirements of selling through FBA.
The Death of “Grown on Amazon”
Five or six years ago, a brand built entirely on Amazon could be sold for a healthy multiple. The Amazon aggregator boom proved it. Companies like Thrasio raised billions of dollars acquiring Amazon-native brands at three to five times annual earnings. The thesis was straightforward: Amazon was such a powerful distribution channel that a brand built on the platform had durable, scalable value.
That thesis has collapsed. Thrasio filed for bankruptcy in February 2024, after reaching a peak valuation of $10 billion. Funding for Amazon aggregators declined 88% between 2022 and 2023. The aggregator model failed for exactly the reason that matters to every Amazon seller: when your entire business depends on a platform that takes more of your margin every year and can change the rules at any time, you do not own a durable asset. You own a revenue stream that someone else controls.
Today, building a business exclusively on Amazon with the expectation of selling it for a meaningful multiple is not a realistic strategy. The economics no longer support it.
The Customer Data Wall
The strategic problem extends beyond fees. In April 2021, Amazon stopped sharing buyer contact information with FBA sellers. Prior to that change, sellers received buyer names and shipping addresses on FBA orders. Amazon replaced real customer email addresses with anonymized relay addresses and restricted the circumstances under which sellers could contact buyers.
Amazon explicitly views marketplace buyers as its customers, not the seller’s customers. This is not an interpretation; it is Amazon’s stated position, reflected in its terms of service and enforced through its messaging policies.
The implications for brand building are severe. A seller cannot build an email list from Amazon purchases. A seller cannot retarget Amazon buyers through owned channels. A seller cannot develop the direct customer relationships that drive lifetime value and repeat purchase rates. Every sale on Amazon is effectively a one-time transaction from the seller’s perspective, regardless of how strong the product or brand experience may be.
This single policy change makes it impossible to build long-term customer lifetime value through the Amazon channel. For any brand with repeat purchase potential, this represents an enormous strategic limitation.
The Multi-Channel Imperative
The conclusion from all of this is not that sellers should abandon Amazon. Amazon remains the largest ecommerce marketplace in the United States, accounting for roughly 40% of all online retail sales. You need Amazon to protect your brand and intellectual property. You need it because it is still where the majority of product searches begin. Walking away from that volume is not rational.
But the role Amazon plays in a brand’s portfolio must change. Instead of treating Amazon as the primary profit driver, sellers should treat it as pay-to-play infrastructure that serves specific strategic purposes: testing new products with immediate market feedback, establishing base sales volume that strengthens supplier negotiations, and building top-of-funnel and mid-funnel brand awareness. Profit and long-term enterprise value must come from elsewhere.
The channels exist. Shopify and WooCommerce provide direct-to-consumer infrastructure where a brand owns the customer relationship, the margin, and the data. Walmart.com is growing rapidly as a marketplace alternative. eBay remains a viable channel for many product categories. TikTok Shop has emerged as a significant commerce platform. Wholesale and B2B channels provide revenue streams that no marketplace can tax or disrupt.
The critical requirement is connecting directly with customers through owned channels: social media, email lists, SMS lists. These are the assets that create long-term enterprise value. A brand with 50,000 email subscribers and a 3% conversion rate on owned channels has a fundamentally different valuation than a brand doing the same revenue exclusively through Amazon. The first brand owns its customer relationships. The second brand rents them.
The Jungle Scout State of the Amazon Seller 2025 report found that nearly 40% of enterprise brands expressed concern about profitability on the platform. The SmartScout Voice of the Amazon Seller 2025 report confirmed that over 50% of surveyed sellers were less profitable in 2024 than the prior year. The market is telling us the same thing the data tells us: you have to have more than just Amazon.
Aligning Fulfillment to a Multi-Channel Strategy
Recognizing the multi-channel imperative is the first step. The second, and equally important step, is aligning fulfillment operations to support it.
Amazon trained American consumers to expect free two-to-three-day shipping. That expectation does not stay on Amazon. When a customer orders from a Shopify store or Walmart.com, they carry the same delivery speed expectations with them. A multi-channel brand that cannot meet those expectations on its non-Amazon channels will struggle to retain customers and drive repeat purchases.
The obvious but incorrect solution is to spread inventory across multiple fulfillment locations to minimize shipping zones. In practice, this creates an inventory management nightmare. Splitting stock across four or five locations means forecasting demand by location, managing transfers between facilities, and accepting higher carrying costs and greater stockout risk. For most brands doing under $50 million in annual revenue, the complexity outweighs the benefit.
The more effective approach is partnering with a centrally located third-party logistics provider that specializes in multi-channel fulfillment. A single fulfillment center in a geographically central location can reach the vast majority of the U.S. population within two to three business days via ground shipping. This provides the delivery speed consumers expect while maintaining a single inventory pool, which simplifies demand planning, reduces carrying costs, and eliminates the operational overhead of managing multiple warehouse locations.
Critically, this fulfillment infrastructure must be independent of Amazon. Brands that rely exclusively on FBA for fulfillment have no ability to ship Shopify orders, wholesale orders, or orders from any other channel without paying Amazon’s fees and operating within Amazon’s constraints. An independent 3PL provides the operational foundation for genuine channel diversification, the kind that creates real enterprise value. If you’re evaluating your options, here’s how our pricing works.
The Path Forward
The era when Amazon was the easy button for ecommerce is over. The platform remains important, but its role has changed from growth engine to cost center, from partner to landlord. The brands that will build lasting value in the next phase of ecommerce are those that use Amazon strategically while building the infrastructure, customer relationships, and fulfillment capabilities that exist independent of any single platform.
The Bezos maxim still applies. Amazon will continue to find ways to capture seller margin. That is not going to change. What can change is how much of your business depends on a platform that views your margin as its opportunity.
Robert Parr is CEO and Co-Founder of Thrive 3PL, a Houston-based fulfillment company helping e-commerce brands build resilient, multi-channel operations. Get a custom quote.