Amazon has long been seen as the go-to platform for skyrocketing growth. It has given rise to countless breakout brands and has helped thousands of sellers build massive reach seemingly overnight. As the platform continues to expand its customer base and infrastructure, you’d think sellers would benefit more than ever. So why are profit margins for many brands shrinking?

What Changed?

Back in 2014, sellers paid Amazon roughly 19% of their revenue in combined fees. Today, that number can exceed 50% when accounting for referral fees, Fulfilled by Amazon (FBA) costs, storage, and the now-essential ad spend required for visibility. Despite the exponential growth of the platform, many brands find themselves earning less per sale than they did a decade ago.

Understanding the Shift

To be fair, Amazon isn’t arbitrarily increasing costs—at least not entirely. Rising logistics and operational expenses have led the company to offload more of that burden onto sellers to protect its own margins. For instance, in 2024 alone, Amazon introduced new charges like the Low-Inventory-Level Fee and the Inbound Placement Service Fee—both of which are designed to optimize fulfillment efficiency, but also increase seller overhead.

Even sellers who manage their own logistics (via FBM—Fulfilled by Merchant) face mounting costs, as Amazon now applies fees even when it isn’t handling fulfillment directly. These changes signal a broader strategic effort to shape seller behavior, rewarding certain product types and sales models while nudging others off the platform.

Exploring Other Growth Channels

While Amazon continues to dominate, new and rising platforms offer compelling alternatives:

• Shopify: Gives brands complete control over their storefront, customer data, and margins.

• TikTok Shop: Rapidly growing in reach and engagement, especially for trend-forward products.
• Faire: A strong B2B channel for wholesale distribution to independent retailers.
• Walmart Marketplace: An increasingly powerful player with lower seller fees and growing traffic.
• UNFI Marketplace & other wholesale networks: Particularly valuable for CPG brands seeking retail placement and scale through distribution.

Is Amazon Still Worth It?

For many CPG brands, the answer is still yes, but with caveats. Amazon remains the largest eCommerce marketplace in the U.S. and holds unmatched customer trust. Brands with strong product-market fit, operational efficiency, and sharp ad strategies can still thrive. However, it’s no longer the set-it-and-forget-it “cash cow” it once was. Instead, Amazon is now one piece of a larger strategy. It works best when brands approach it with clear margin goals, product differentiation, and a long-term performance marketing plan.

Amazon is still that girl in eCommerce, but it’s no longer a universal fit for every brand. The landscape has evolved. For some, it’s now a lower-margin, high-volume channel, for others, a proving ground for new products. Either way, it demands a more thoughtful, strategic approach.

The good news? There’s never been more opportunity for brands to diversify and find the channels that fit them best. Whether through TikTok, Shopify, or retail partnerships, brands today have the tools to build sustainable, scalable revenue far beyond the confines of any single platform

Hi, I’m Jessica, owner of Wizard Accounting. We help CPG brands accelerate their growth with expert level bookkeeping and cash flow support. If that sounds like something you’re in need of, let’s chat.