TL;DR: Amazon takes 50–70% of seller revenue, new seller registrations hit a decade low, and Chinese manufacturers are selling direct. The marketplace is consolidating. Brands that diversify to owned channels (especially Shopify) and partner with transparent fulfillment providers will outperform those who stay Amazon-dependent.
I spent years selling on Amazon. Did well enough to learn a lot and poorly enough at times to learn even more. Like a lot of sellers, I rode the wave when the economics worked and started asking hard questions when they didn’t. We were lucky enough to anticipate the window of opportunity closing on our less than durable ecommerce business model and pivoted to the fulfillment business. It’s only gotten harder for sellers since. Amazon’s choices have me thinking about where they’re headed, and whether the sellers still on the platform are seeing what I’m seeing.
Fifty-five cents of every dollar
Here’s the number that should stop every Amazon seller in their tracks. According to Marketplace Pulse, a typical private-label seller now pays 50-60% of their revenue to Amazon in fees. Some sellers are paying 70%. That’s referral fees (15%), FBA fees (20-35%), and advertising (up to 15%). All before you pay for inventory, freight, or employees.
That’s not a partnership. That’s a landlord.
And the fees only go one direction. FBA has gotten more expensive every single year. Advertising went from optional to unavoidable. Marketplace Pulse found that few of the first 20 search results on Amazon are organic anymore. Amazon didn’t raise ad prices directly; they just allocated more screen real estate to ads until you had no choice but to pay. Average ACoS is running around 29%. Average CPC is $0.98. If you’re not advertising, you’re invisible.
Amazon earned over $150 billion in seller fees in 2024 alone. They’re now 60% a services company and only 40% retail. The question every seller should ask: when did I stop being a customer and start being the product?
The new seller cliff
The registration numbers tell a story Amazon probably doesn’t love. Marketplace Pulse reports just 165,000 new sellers signed up in 2025, the lowest in a decade, down 44% from 2024. Active sellers dropped from 2.4 million in 2021 to 1.65 million. American sellers are now just 16.3% of new registrations, down from 70.8% in 2016. Chinese sellers represent nearly 60%.
The marketplace that used to attract experimenters and entrepreneurs is consolidating around three groups: big brands, big incumbent sellers, and Chinese manufacturers who play by different rules.
Why this matters more than people think
Here’s the part I don’t hear enough people saying: third-party sellers didn’t just sell on Amazon. They built Amazon.
3P sellers were Amazon’s crowdsourced innovation engine. They took on all the risk (product development, inventory, demand testing) and Amazon got the data, the traffic, and a cut of every transaction. Sellers found the niches, proved the demand, and Amazon became the largest retailer on the planet without owning a single unit of most of its inventory. Arguably the most brilliant platform strategy in retail history.
When you’re taking 50-60 cents of every dollar and experimentation becomes prohibitive, the experiments stop. The incentive to build a genuinely better product on your platform disappears. You’re left with incumbents optimizing ad spend and manufacturers competing on cost.
That’s not a marketplace. That’s a mall.
The tariff tilt
Tariffs have made this worse in a way that specifically punishes US-based sellers. And the enforcement gap is real.
Fortune reported in April 2025 that Chinese suppliers were actively offering U.S. Amazon sellers illegal tariff workarounds, proposing to “revise the declared value on commercial invoices” to reduce duties. Some offered DDP shipping where the supplier handles customs and understates values on the seller’s behalf. A China-based consultant publicly stated that “the declared value of goods in a typical container from China to the U.S. usually ranges from $5,000 to $10,000,” a number U.S. sellers called unbelievably low.
This isn’t rumor. It’s documented in emails and WeChat messages reviewed by Fortune. U.S. sellers paying full freight on tariffs, now up to 145% on Chinese goods, are competing against sellers who frequently aren’t. Amazon’s platform doesn’t distinguish between the two.
The smart money is diversifying
This is what we see from our side. We work with 150+ brands at Thrive, and the ones that are primarily Amazon businesses are under real pressure. The well-capitalized brands with strong differentiation are fine. But the mid-market operators doing $1-5M on Amazon are getting squeezed from every direction.
The good operators are shifting energy to Shopify and TikTok. (I wrote more about why in My Bet Is on Shopify.) Not abandoning Amazon (you can’t ignore a channel that big) but treating it as defense, not offense. Hold your position, protect your rankings, but put growth capital into channels where you own the customer relationship.
AI is accelerating this in a way that’s easy to miss. The old argument for Amazon was that brand-building is hard and expensive. AI tools have dramatically lowered that cost. Meanwhile, on Amazon, AI levels the playing field in ways that don’t favor U.S. sellers. Chinese competitors can now match your listing quality, your ad optimization, your customer service. Off Amazon, AI makes it cheaper than ever to build something of your own.
Does Amazon see it this way?
This is the question I keep coming back to. Does Amazon’s leadership look at these numbers (44% fewer new sellers, active sellers down 30% in four years, over half of revenue going back to Amazon in fees) and see a problem? Or do they see a feature?
Maybe they’ve decided that fewer, larger sellers is the right model. That the marketplace doesn’t need experimenters anymore. That consolidation is the plan. If so, they may be right in the short term. Over 100,000 sellers are now doing $1M+ annually, and Amazon’s GMV keeps growing even as the seller base shrinks.
But flywheels work in both directions. The thing that made Amazon’s marketplace brilliant was the constant churn of new ideas, new products, new sellers willing to take risks. If you price that out, what’s left is a very efficient, very expensive distribution channel. And distribution channels are commodities.
From where I’m sitting, having built a business on their platform and now watching hundreds of brands navigate it, it looks like Amazon’s chin is out. The market is starting to notice.
Eric Lobdell is the founder of Thrive 3PL, a Houston-based fulfillment company working with 150+ e-commerce brands. He previously built Lonestar Trade, a $30M+ Amazon resale business.