Amazon's Squeezing Sellers Again - Fees Up, Prep Gone, Profits Soaring

Strategy

13 May

Amazon's Latest Seller Changes: Fees, Prep Services & Q1 Results

Three headlines, one theme: Amazon is squeezing more profit out of the same business, and sellers are absorbing most of it. Ali and Zamir break down a new fee that quietly kicked in last month, a services cut that's about to land on UK sellers, and the Q1 numbers that explain why all of this is happening now.

In this episode: Ali and Zamir on Amazon's new search charge, the end of prep services, and what Q1's profit and advertising numbers reveal about where the pressure on sellers is headed next.

Key takeaways

A new "search charge" kicked in from 17 April: 3.5% in the US, 1.5% in the UK and Europe, added on top of existing FBA fees and framed as a fuel and logistics cost increase.
In real terms that's roughly 20–50 US cents or 5–20p per unit, small individually, but these increases rarely reverse, and history shows multiple fee rises can land within the same year once inflation is running high.
Amazon is phasing out prep services (labelling, bubble wrap, stickering) from 1 July in the UK, having already removed them in the US back in January. Brands relying on Amazon to prep stock now need to rework that process in-house or through a 3PL, and not every 3PL is set up to absorb it cheaply.
The sellers most exposed aren't the smallest (already used to doing it themselves) or the largest vendor-model brands (who typically prep their own stock already), it's mid-sized marketplace sellers who've leaned on Amazon's prep service and now have to solve this fast.
Amazon's Q1 results beat Wall Street forecasts by around $5bn: $181.5bn total revenue (up 17% year on year), advertising revenue up 24% to $17.24bn, and AWS growth reaccelerating to 28%, its fastest pace in 15 quarters.
Amazon's ad revenue is still only around 15% of what Google generates, despite roughly 61% of US product search starting on Amazon, a strong signal Amazon intends to keep growing that business, and a cost pressure worth planning for.
Two ad models are competing for seller budgets industry-wide: attention advertising (Meta, up 33% year on year) versus intent advertising (Google, up 15%, now also monetising AI search), and shifting some spend toward upper-funnel, attention-based advertising is one way to hedge against rising costs on both Amazon and Google.

Timestamps

00:00 — Cold open: 61% of US search starts on Amazon
00:31 — Intro: three headlines this week
00:41 — Headline preview: fees, prep services, Q1 profits
00:53 — Headline 1: the new search charge, breaking down the numbers
01:29 — What sellers can realistically do about the fee increase
03:45 — Why further price increases are likely, not a one-off
04:46 — Headline 2: Amazon prep services are being phased out
07:14 — The cynical read: is Amazon shifting away from smaller sellers?
10:09 — Who actually gets hit: mid-size marketplace sellers
11:20 — The real risk Amazon's taking: customer experience
11:40 — Headline 3: Amazon's Q1 earnings
12:13 — The numbers: $181.5bn revenue, ad revenue up 24%
14:11 — Attention vs intent advertising, and why it matters for sellers
15:56 — What Amazon's ad growth means for your own ad costs
17:41 — Wrap-up

The detail

The new search charge, and what to actually do about it
Since 17 April, every FBA seller has been paying a "search charge" on top of existing fees, 3.5% in the US and 1.5% in the UK and Europe, justified by Amazon as a fuel and logistics cost increase. In cash terms it's modest per unit (20–50 US cents, or 5–20p), but the honest read is that this kind of fee rarely reverses, and when inflation runs hot, history shows Amazon has pushed through as many as three separate fee increases in a single year. The realistic response isn't waiting for it to drop back: it's finding efficiencies in ad spend and production, and treating this as one line item among several cost increases already stacking up in freight and cost of goods.

Prep services are going away, and who it really hits
From 1 July, Amazon is removing prep services (labelling, bubble wrap, stickering) for UK sellers, mirroring what already happened in the US in January. Amazon's official line is that sellers have "matured" and mostly handle their own packaging now, though the more cynical read among industry observers is a deeper strategic shift toward larger sellers. The sellers actually caught in the middle aren't the tiniest operations (already used to doing this themselves) or the largest vendor-model brands like the GSKs and Bayers of the world (who typically prep their own stock, or don't sell FBA at all), it's mid-sized marketplace sellers who've relied on Amazon's service and now have to rework packaging fast, through their manufacturer or a 3PL, with real risk of stock arriving damaged or out of stock in the meantime. This sits inside a broader shift toward pure profitability that's been building since Andy Jassy's letter on where Amazon's capital is going next. For practical ways to bring fulfilment costs down elsewhere, see FBA Mastery: Strategies to Slash Fulfilment Costs.

Q1 by the numbers: profit is up, and so is Amazon's appetite for ad revenue
Amazon's Q1 earnings beat Wall Street's forecast by roughly $5bn: $181.5bn in total revenue, up 17% year on year, advertising revenue up 24% to $17.24bn, and AWS growth reaccelerating to 28%, its fastest pace in 15 quarters. The advertising number stands out specifically because Amazon's ad business is still only around 15% the size of Google's, despite an estimated 61% of US product search starting on Amazon rather than Google. That gap looks less like a ceiling and more like room Amazon intends to fill, which matters directly for sellers, since ad revenue growth on Amazon has historically come from rising costs passed on to advertisers, not just more advertisers showing up.

Attention vs intent: what this means for your ad strategy
Two advertising models are competing for budget across the industry: attention advertising, which is essentially all of Meta's revenue (up 33% year on year), and intent advertising, Google's traditional strength (up a comparatively modest 15%), now also expanding into monetising AI-powered search as a defensive move against falling intent-search volume. Amazon sits firmly in the intent camp and, given how far behind Google it still is on ad revenue, is likely to keep pushing costs up there too. Spending more time on upper-funnel, attention-based channels is one practical hedge, since that kind of advertising can drive sales directly without routing through Amazon or Google search at all. For a closer look at planning ad budgets against this kind of cost pressure, see What Are the Best Tools for Forecasting Amazon Ad Spend?