The Amazon retail marketplace evolution shows Amazon leaning heavily on advertising, service fees, and pricing shifts, creating tougher conditions for sellers already dealing with higher costs.
According to Amazon’s 2024 earnings report, third-party sellers accounted for over 60% of the company’s $638 billion in sales. These independent brands now account for over 60% of all sales in Amazon’s store.
While sellers remain the core of the marketplace, Amazon’s own priorities have changed. The company’s focus is no longer on retail but on high-margin services like advertising and logistics.
This Amazon retail marketplace evolution has serious consequences. For the sellers who depend on the platform, the landscape is becoming more complex, more expensive, and more competitive.
Amazon's Focus Shifts from Retail to High-Margin Services
Lauren Foster, University of Virginia, Darden School of Business"For sellers, the curse of the conglomerate is that their retail business depends on a company whose decisions are driven by AWS, advertising, and AI - not just by what happens on Amazon.com."
Amazon’s business has fundamentally changed, according to a report from Marketplace Pulse. Its retail operations now account for just 40.5% of the company’s total revenue, marking a new milestone in its evolution.
The company’s service businesses now represent nearly 60% of income. In the third quarter of 2025, services delivered $107 billion, far surpassing the $73 billion from retail sales.
This trend is reflected in Amazon’s public statements. In a recent Q3 earnings announcement, 80% of the company’s highlights emphasized AI, AWS, advertising, and supply chain services.
Only 20% of the highlights focused on traditional retail operations. This clearly shows where Amazon sees its future growth and margins.
The New Cost Structure for Sellers
Third-party sellers are the primary engine of this transformation. The marketplace generated $42.5 billion in seller services during Q3 alone.
Sellers are responsible for 62% of all units sold on the platform. In exchange, Amazon now collects approximately 50% of all seller revenue through its various fees.
Advertising revenue is critical to this new model, generating $17.7 billion in Q3. This high-margin income is essential to subsidize Amazon’s retail business, which would otherwise operate at a significant loss.
Building the Infrastructure for All Commerce
Amazon has also developed an end-to-end supply chain solution. This infrastructure is designed to serve businesses both on and off Amazon’s own platform.
Key components of this logistics network include:
- Amazon Global Logistics for freight
- Amazon Warehousing & Distribution (AWD) for bulk storage
- Multi-Channel Fulfillment (MCF) for shipping external orders
The MCF service, which ships orders for competitors like Shopify and TikTok, grew 70% year-over-year in 2024. This trend confirms Amazon’s real business is now selling the infrastructure that powers everyone else’s commerce.
Seller Sentiment Sours as Amazon Celebrates 25-Year Milestone
Insights from Amazon & Walmart News Updates by Will Haire highlight a major disconnect between Amazon and its third-party sellers. This gap was clear during Amazon’s recent celebration of its 25-year marketplace anniversary.
While Amazon’s experiment with independent sellers has generated over $2.5 trillion in cumulative sales, many sellers are not celebrating. The platform’s success, driven by sellers who now account for over 60% of all sales, is being overshadowed by deep-seated frustrations.
The Seller Frustration Gap
Amazon promoted its powerful growth tools like FBA, Brand Registry, and new AI Seller Assistants. These tools have undeniably helped many small brands scale globally.
However, the anniversary announcement was met with hundreds of negative comments from sellers. They voiced frustration over a relationship that feels increasingly one-sided, prioritizing Amazon’s profits over seller margins.
The Amazon retail marketplace evolution has left many partners feeling abused by the platform they helped build. Key seller complaints include:
- Rising and exorbitant seller fees
- Strict inventory storage limits
- Delayed or denied reimbursements
- Opaque and unfair policy changes
- Unfair listing suspensions
- Blocked inventory removals
Some sellers also accused the company of using their private data to source and launch competing products. The general sentiment is that Amazon’s public gratitude does not match its daily treatment of sellers.
The Path Forward is Diversification
This 25-year milestone highlights both the immense opportunity and the significant pressure of selling on Amazon. The challenges for sellers are now as massive as the potential rewards.
The key takeaway for sellers is the need to treat Amazon as just one part of a broader channel strategy. Brands that diversify into DTC, Walmart, and other emerging marketplaces will be best positioned to balance their growth and maintain control.
Amazon Retail Marketplace Evolution Shifts to 1P Purge, Price Hikes, and Ad Automation
Analysis from Marketplace Mastery by Jordi Ordonez outlines several key trends reinforcing a difficult seller landscape. Amazon is actively shutting down 1P Distribution accounts that do not meet high revenue thresholds, such as $2 million in the U.S.
This move is paired with continued layoffs in Vendor support services like SVS and AVS. The clear strategy is for Amazon Retail to work only with massive brands, pushing all other sellers to the 3P marketplace.
Simultaneously, Amazon is competing at the low end by launching Amazon Bazaar. This new platform, similar to Temu and Shein, offers ultra-cheap products in 14 countries and aims to make the low-cost model profitable through superior logistics.
On its main platform, Amazon prices have risen almost 13% year-to-date, according to DataWeave. This is significantly more than Walmart (5.3%) and Target (5.5) because third-party sellers, who are more exposed to import costs, are passing those costs to shoppers.
This Amazon retail marketplace evolution is also evident in new advertising tools, as detailed by Premp Gupta’s unBoxed announcements. The focus is heavily on AI and automation, which will change how sellers manage ads.
Key platform announcements include:
- Sponsored Products Video (SPV) – A new format that integrates 1-5 product videos directly into existing Sponsored Products campaigns and allows for video-specific bid adjustments.
- Unified Campaign Manager – An AI-powered platform that combines Sponsored Ads and Amazon DSP into one dashboard, cutting bid optimization time for beta users by 26%.
- Ads Agent (AI Assistant) – A tool to automate campaign planning, launching, and optimization, which signals Amazon’s intent to reduce the need for manual ad management.
- Creative Agent (AI Creative Partner) – An AI tool that helps create video, display, and Streaming TV ads at no cost, using Amazon’s data to dramatically cut production time.
Amazon Prices Rise Sharply as Third-Party Sellers Absorb Tariff Costs
A recent report from CNBC, analyzing data from research firm DataWeave, shows that Amazon is hiking prices more than its retail competitors. Tariffs have given all retailers another cost to manage, but the impact is uneven.
Amazon prices have risen 12.8% on average this year through September. This is more than double the increases seen at Target (5.5%) and Walmart (5.3%) during the same period.
The price discrepancy was consistent across major shopping categories. DataWeave’s analysis of 16,000 items on each site found Amazon’s prices rose faster.
- Apparel – 14.2% increase on Amazon
- Indoor & Outdoor Home Goods – 15.3% increase on Amazon
- Pets & Consumables – 11.3% increase on Amazon
- Health & Beauty – 13.2% increase on Amazon
- Hardlines (e.g., electronics) – 11.9% increase on Amazon
This trend highlights how the Amazon retail marketplace evolution directly impacts shoppers. The platform’s reliance on third-party sellers, who are more exposed to tariff costs, is a key reason for the sharper price hikes.
According to e-commerce experts, sellers lack the scale and inventory flexibility that large retailers like Walmart and Target use to offset costs. This leaves sellers with no choice but to pass the higher costs on to the consumer.
This complex cost structure is often why a seller partners with an Amazon agency to manage pricing strategies and protect margins. Despite the increases, Amazon’s shoppers do not seem fazed, as the company’s online store sales grew 10% in the third quarter.
Amazon disputed the DataWeave findings, stating that the analysis “cherry-picked” products. The company maintained that its prices remain competitive and that it continues to earn customer trust as a destination for low prices.
Wall Street Journal analysis"On Amazon, prices for everyday items like deodorant and protein shakes rose 5.2% from January to July, with imported goods and products using imported components seeing even steeper increases compared to domestically made items."
