I recently bought an item from Amazon Marketplace. The seller sent me a hand-written confirmation dispatch email, which happened also to forward me the email Amazon sent them. From it, it was clear that Amazon’s cut for Marketplace sales, at least of books, is 15% of the total price, or 20% of the price before shipping. (With only one data point, I can’t tell which.)
Just thinking about the sort of volumes they must do, and the tiny amount of actual computing resources it takes to make such a sale once the system is set up, I suspect they are making what is technically known as a boatload of money.
Amazon is brilliant company. They not only do good in terms of sales, but realize that technology is also an asset, and can be sold as a service (S3, EC3, marketplace, honor system, etc.). Don’t forget their impact on the concept of “affiliate programs”. Even SpreadFirefox, though non-monetary owes a little to their ideas regarding linking and marketing.
Generally speaking their services are expensive, but best of breed. 15% is a lot of commission, but they can bring in a ton of sales as well. S3 isn’t cheap in some respects (bandwidth is expensive), but it’s extremely reliable and scales well letting you purchase as little or as much as you need.
I tried to find an investment article that talked about this but I know that I have seen in the Fool or the NYTimes that Amazon’s entire profit (or at least a substantial percentage) is from their affiliates. Things like Prime and free shipping on orders above $25 cut into the profit by raising cost. Clearly, Amazon has decided that it is important to do and get people through the doors buy from the merchants.
That’s nothing compared to new books. I was told that amazons cut on those is up to 50% over here in germany. You have to define a fixed bookprice here. I just did a book with lulu (http://www.lulu.com) and the price formula is (simplified) very simple: (production cost + lulu share + your share) times 2 …