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this post was submitted on 29 Sep 2023
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I don't get it
I worked in retail on and off for 7 years and every store charged markup. Some products were marked up 70-80%. One place I worked was Best Buy. I regularly sold USB cables where the store cost was $2 for $32.
Amazon fees are essentially their markup. It's impossible to run a store without it
The difference is who pays the markup. Amazon charges that to the seller, and passes that "discount" to the buyer effectively locking in buyers because nobody else can afford to compete
Yeah. And that's fine.
Cost is a concept in retail that gets manipulated a lot. In my previous example there is no way the actual "cost" of the USB cable was $2. When you factor in employees, rent, bills, logistics, customer service, etc etc the cable was likely more like $5. Best Buy made have paid $2 for that cable, but the actual cost to sell it, taken as a whole, was more like $5.
That other $3 is essentially what Amazon is making. If you sell on Amazon they build and maintain the website, logistics, warehousing, etc etc. You can create an online store and have exactly 0 employees or logistical infrastructure. Amazon has spent literally billions and billions of dollars building all of that.
Amazon is the mall Best Buy is paying rent too. It's not a store itself but overhead the store pays.
To use your example if the cost of the cables is $2 and the selling price is $20, Amazon's rent is $10 of that. Leaving $8 as Best Buy's profit margin.
Exactly. Amazon is essentially running a huge chunk of a retail business for their customers, the people buying and selling products. The reason you pay these fees is so you don't need to run a website, build and maintain warehouses, pay staff like HR, etc etc
This is why the mall or bazaar analogy make more sense. Kind of.
When you buy things from Amazon which Amazon purchased from a wholesaler, this is the same as going to a retail store. (In recent years, Amazon has become their own wholesaler / manufacturer.)
But what has become more common is the “retail stores” are buying from wholesalers and then listing items on Amazon.
So, if you’re selling pet goods and you pay $2 for a bone wholesale that you’d typically resell for $5, Amazon is cutting into your profit and making it more difficult for you to market your product among competitors.
Although, there’s been a couple times where I’ve gone to a seller’s website and found the same product they had on Amazon for less money. So I wonder if sellers aren’t marking up products that are less competitive to account for Amazon’s cut.