The Marketplace Boom   //   December 15, 2022

Why more Amazon sellers are looking to bring their products to rival marketplaces in 2023

More Amazon sellers are looking to lessen their dependence on the e-commerce giant, particularly as they grow discouraged with accumulating fulfillment fees.

A recent survey published by Capterra, a division of Gartner, revealed that 99% of small and medium-sized retailers that currently sell on Amazon intend to sell on other e-commerce marketplaces next year.

Half of the sellers surveyed stated they would start selling on Google Shopping, eBay and Facebook Marketplace. Moreover, 47% of respondents stated they would sell on the Walmart Marketplace. The 2022 Amazon Seller Survey also found that just 31% of surveyed Fulfillment by Amazon users presently sell on marketplaces other than Amazon. Capterra polled 306 retail companies between October and November that had been selling goods on Amazon for at least a year.

Sellers that Modern Retail spoke with echoed a similar sentiment: Amazon brands are indeed looking to diversify the number of marketplaces they sell through. Some sellers are fed up by how expensive FBA has gotten — according to data from Marketplace Pulse, Amazon has increased the fulfillment fees by over 30% since 2020. Meanwhile, others are simply betting that they will be able to grow more quickly if they sell through more marketplaces.

“While it’s not unusual for retailers to eat some elevated logistics cost during the holidays… it’s a really high dense season,” said Molly Burke, senior analyst at Capterra, covering retail and restaurants. “This is new for Amazon. I think it’s clear in the data that it’s giving some retailers pause as they consider where to sell in 2023,” added Burke.

Burke said that while these retailers may join other marketplaces including Google Shopping, or Facebook among others, they won’t necessarily be able to offer lower prices there if they continue selling on Amazon. But she added that they could potentially build more brand awareness on other platforms, reach new audiences and save a little bit on fees.

Amazon sellers have been levied with higher fees for months now. Amazon raised the FBA fulfillment fees by 5.2% in January. In April, Amazon also levied a 5% fuel and inflation surcharge on online sellers who utilize its shipping services. This, combined with other increased costs across the supply chain, are leaving some merchants wondering if the cost of using FBA is still worth it.

“There are a lot of unhappy sellers out there,” Phil Masiello founder of powdered superfood brand Uplift Florae and CEO of revenue acceleration agency Crunchgrowth told Modern Retail. “Where’s the value, right? You can’t make money out of it [Amazon and FBA] anymore,” he said.

Masiello said close to 50 of his CPG clients that clock about a couple million dollars in online sales are all planning to expand their presence beyond Amazon next year. In particular, he said that one of his clients — a hot sauce and pasta maker that had been an FBA seller for years — also started selling on and other retailers in the first quarter of 2022 after Amazon hiked its fee for the first time this year.

“I understand that customers are there, but what happens when you raise costs? The only way to recoup it is you have to raise your prices,” added Masiello. But, that is made more difficult by the fact that Amazon discourages sellers from listing their products for less elsewhere.

While Capterra’s survey was anonymous, Burke said it pulled a lot of responses from the apparel industry followed by electronics and beauty and personal care. “So, clothing and accessories was the most popular product category that these retailers sold. But beyond that, consumer electronics, which tends to be a little bit difficult to sell on Amazon, because they’re sometimes a little bit heavier, a little bit more technical. That can be a difficult category to compete in on Amazon,” Burke explained.

Masiello said a number of his clients are trying to sell their products on, Faire and Bonanza in particular. He added that diversifying to different marketplaces starts to make more sense for brands once they get to a million-plus in annual sales, because they can handle fulfillment more easily.

“It becomes a different economic equation,” he said.

For Lesley Hensell, who has been a merchant on Amazon since 2010 selling health and beauty products, the shift in strategy stems from more than just the higher costs. “Most of the sellers we know who are expanding to their own Shopify store or other platforms are doing so to diversify and ensure they are available across multiple channels.”

Still, Hensell pointed to a few reasons why sellers aren’t shifting away from Amazon so drastically. For starters, not all marketplaces offer fulfillment services for sellers. “If a seller wants to offer their items on Target Plus or Shopify or eBay or Wayfair, they must have a shipping operation that can handle all of their fulfillment — whether that is in-house or via a third-party logistics company,” Hensell said. Furthermore, even for sellers who have started carrying their products on other marketplaces like Walmart’s, Amazon still makes up the lion’s share of sales. “While Walmart online is growing, it still generally makes up only 10 percent or less of the sellers’ sales,” she added.

Ultimately, Hensell said, for some merchants Amazon is the right fit when it comes to fulfillment and shipping expenses. “When you shake out the expenses for those, Amazon often ends up looking like a pretty decent deal,” she said.