New report claims Amazon is squeezing revenue from sellers

Power

A recent report by the Institute for Local Self-Reliance is claiming that Amazon is abusing its position as gatekeeper to collect over a third of all revenue earned by independent sellers on the platform.

Amazon stays on-brand, saying that the report is inaccurate, but the author points out a few things that suggest otherwise. 

Is Amazon squeezing its third-party sellers?

Marketplace. Retailer. Logistics Company. 

Earlier this year, Amazon’s Q3 earnings report revealed that it doubled its fulfillment network since the pandemic began. It now has over 400,000 drivers, 40,000 trucks, and a fleet of over 70 cargo airplanes.

Now, CNBC reports that the ecommerce giant is on track to become the largest delivery service in the US by 2022—bigger than long-standing rivals FedEx and UPS. 

According to Amazon CEO of worldwide consumer, the two decades Amazon has spent expanding its logistics network allowed the company to walk into the pandemic in a really good place. 



Aside from planes and ships, Amazon also boasts an expansive network of warehouses spread across the country as well as its own air hubs designed with nothing but fast delivery in mind. 

As of writing, estimates have Amazon delivering 66% of its own packages without relying on third-party logistics and it can also handle off-Amazon orders through the Multi-Channel Fulfillment (MCF) service under FBA. 

This development raises concerns about Amazon’s seemingly unmatched power over the ecommerce ecosystem, as it is, all at once, a marketplace, a retailer itself, and now, a leading logistics service provider.

FTC Investigates Retail Giants Over Supply Chain Issues

While on the topic of Amazon’s striking monopolistic tendencies, the Federal Trade Commission has launched a new investigation involving Amazon, Walmart, and other retail and wholesale giants to get to the bottom of the raging supply chain crisis, which is causing empty shelves and sky-high prices. 

Ecommerce inflation is now a reality, and this new inquiry by the FTC will shed more light into what exactly is causing not just the soaring prices of goods sold in physical stores, but also of those sold on online marketplaces. 

Other big names include Kroger, Procter & Gamble, and Kraft Heinz. 

In particular, the inquiry attempts to understand the specific reasons behind the disruptions and whether they are causing bottlenecks and anti-competitive practices among retail companies. 

The Special Orders require these big companies to detail the factors disrupting their ability to restock and ship products as well as which suppliers and inputs are most affected. It also asks them to provide internal documents with information on their strategies, marketing and promotions, and market share, among others. 

The FTC is also welcoming comments from suppliers, retailers, and consumers on how these major supply chain issues are affecting competition in the market.

The companies are given 45 days to respond. Be sure to check out the EcomCrew Blog for all the juicy tidbits that come out of the inquiry and everything else ecommerce. 

Amazon Seller Valuations Have More Than Doubled

Remember back in 2020 when a 4x valuation was the mythical unicorn? According to Marketplace Pulse, Amazon private sellers are now getting valuations of 4x–8x, at least insofar as surface-level benchmarks go. 

It seems that the market for Amazon businesses is now catching up, with more and more ecommerce aggregators raising capital to acquire and grow private label brands. In a recent podcast episode, Mike sat down with Fortunet Co-Founder Yael Cabilly to break down Fortunet’s Buyers Survey, which details what Amazon aggregators are really looking for when evaluating brands. One juicy tidbit: Intellectual property matters more to aggregators than having multiple sales channels. 

The research concludes that these rising multiples come as a result of the industry’s growing sophistication over the years and predicts that they are likely to continue to increase in the foreseeable future. 

Suspended Chinese Sellers Fight Amazon’s Arbitration Bid

Earlier this year, Amazon dropped the hammer on over 50,000 Chinese sellers for violating the ecommerce platform’s policy on reviews, such as offering gift cards in exchange for product reviews. 

The Chinese sellers’ accounts were terminated, and a class action had commenced, claiming that they are owed money being withheld by Amazon. 

These Chinese sellers are now crying foul over Amazon’s invocation of the arbitration clause contained in the sellers’ agreement with Amazon, which would send the lawsuit to an arbitrator and delay the sellers’ claim to the withheld amounts. 

According to the sellers, the arbitration clause is unfair because all sellers agreeing to do business with Amazon have no actual choice but to sign the arbitration clause, arguing that it is “procedurally and substantively unconscionable.” 

Recently, Amazon has been cracking down on violations to its long-standing (but relatively under-enforced policies) against fake reviews and off-Amazon rebates and coupons.