Amazon as Marketplace vs. Amazon as Retailer: 1P vs. 3P
Amazon operates two fundamentally different business segments that many sellers do not clearly distinguish:
Amazon 1P (First Party / Retail)
When Amazon itself appears as the seller ("Sold and shipped by Amazon"), this is the 1P model. Amazon purchases goods directly from manufacturers or distributors, stores them in its own warehouses, and sells them under its own name. In this scenario, the manufacturer is the supplier, not the seller.
The 1P model works like a traditional retailer: Amazon bears the inventory risk, sets the selling price, and controls the entire customer journey. For manufacturers, 1P is convenient but limiting — Amazon dictates the terms, and the manufacturer has little influence over pricing or product presentation.
Amazon 3P (Third Party / Marketplace)
The 3P model is the marketplace. Here, independent merchants — that means you — sell directly to end customers. You set the price, you handle customer service (unless you use FBA), and you bear the inventory risk.
In return, Amazon provides you with the platform, the customer traffic, and optionally the logistics (FBA). Amazon earns fees on every transaction.
The Numbers: 3P Dominates
According to Amazon's own annual report, third-party sellers now account for over 60% of total sales on the platform. This figure has risen consistently over the past decade. Amazon has recognized that the marketplace model is more lucrative than the retail model in many respects — more on that shortly.
---
How Amazon Makes Money from Sellers
Amazon has built a multi-layered monetization model that generates revenue at virtually every point of the seller journey:
1. Referral Fees
The most obvious revenue source. On every transaction, Amazon collects 8-15% of the selling price as a referral fee. In most categories, it is 15%. On a EUR 30 product, that amounts to EUR 4.50 per sale.
Extrapolated across millions of daily transactions, this creates an enormous revenue stream — without Amazon having to purchase inventory or assume stock risk.
2. FBA Fees (Fulfillment by Amazon)
When you use FBA, you pay for storage and shipping. FBA fulfillment fees in Germany in 2026 run approximately EUR 3.00-5.50 per standard package, plus monthly storage fees of EUR 18.01-24.22/m3. Amazon profits not only from the transaction but from the entire logistics chain.
FBA is a dual win for Amazon: the fees generate revenue, and Prime delivery increases customer satisfaction — which in turn brings more buyers to the platform.
3. PPC Advertising (Sponsored Products, Brands, Display)
Amazon Advertising has grown into the third-largest advertising network in the world — behind Google and Meta. Sellers pay per click to feature their products prominently in search results and on product pages.
Average CPC costs on Amazon rise year over year because more sellers compete for the same placements. For Amazon, this is a perfect auction model: more competition means higher click prices, which means higher advertising revenue.
4. Seller Subscription (Professional Selling Plan)
EUR 39 per month for the Professional account. With hundreds of thousands of active sellers in Europe alone, this represents a substantial recurring revenue stream — before a single product is sold.
5. Additional Revenue Sources
- Brand Registry and A+ Content: Free, but locks sellers into the platform
- Vine Program: Paid by sellers (EUR 200 per ASIN), generates reviews
- Transparency / Project Zero: Brand protection programs with fee models
- Amazon Lending: Loans to sellers, including interest
Taken together, Amazon has created a system where sellers pay fees at every stage of their business activity. The marketplace model is more profitable for Amazon than its own retail operation because Amazon bears neither purchasing nor inventory risk, yet earns from every transaction.
---
> Already selling on Amazon? A repricer helps you protect your margin despite rising fees — by finding the optimal price, not the lowest one. Try arbytrage.io for free
---
The Flywheel Strategy: Amazon's Growth Engine
Jeff Bezos sketched the Amazon Flywheel on a napkin back in the early 2000s. The concept explains why Amazon is so difficult to compete with:
More sellers bring more selection. More selection brings more customers. More customers bring more sellers. Higher volume enables lower costs. Lower costs enable lower prices. Lower prices bring even more customers.
Each element reinforces the next. The flywheel spins faster the longer it runs.
What the Flywheel Means for You as a Seller
You are part of this flywheel. Amazon needs you to expand its catalog. At the same time, you benefit from the customer traffic Amazon generates. But the flywheel has a dark side: Amazon continuously optimizes for lower prices and better customer experience. This means pressure on your margin.
Competition intensifies with every new seller. Advertising costs rise, prices drop, and anyone who does not reprice automatically loses market share to sellers who do.
The Flywheel and Price Efficiency
Amazon wants customers to find the best price on its platform. That is why the Buy Box algorithm rewards competitive pricing. That is why Amazon suppresses the Buy Box when all offers exceed the "fair market price." The entire system is designed to push prices down — to the customer's benefit, but at the expense of seller margins.
---
Seller Types on Amazon: Who Actually Sells Here?
Various business models coexist on Amazon. Each has its own dynamics, margins, and challenges:
Retail Arbitrage
Arbitrage sellers purchase products in brick-and-mortar retail or online stores at discounted prices and resell them on Amazon at a markup. Low startup capital, high time investment, highly variable margins.
Online Arbitrage
Like retail arbitrage, but purchasing happens exclusively online. Advantage: scalable from a desk. Disadvantage: the best deals are found by everyone simultaneously, leading to rapid price erosion on the ASIN.
Wholesale
Wholesale sellers purchase branded products in larger quantities directly from manufacturers or distributors. Stable supply chain, recurring orders, moderate margins. The model that benefits most from automated repricing, because multiple sellers compete on the same ASINs.
Private Label
Private label sellers develop their own products and sell them under their own brand. Highest margins, but also highest risk and highest startup capital. Repricing is less relevant here, since you are typically the only seller on your ASIN.
Handmade
Amazon's equivalent to Etsy. Handcrafted products with unique branding. Niche market with loyal customers, but limited growth potential.
---
Why Amazon Needs Sellers
The question sounds simple, but the answer is strategically crucial: why does Amazon allow third-party sellers on its platform even though they compete with Amazon itself?
1. Catalog breadth without risk. Amazon would need to invest billions to replicate the product variety that hundreds of thousands of third-party sellers deliver for free. Every seller who lists a new product expands Amazon's catalog — without Amazon spending a cent on purchasing or warehousing.
2. Higher revenue per ASIN. When multiple sellers compete on an ASIN, the price drops, and the conversion rate rises. Amazon earns a percentage on every transaction — whether the price is EUR 30 or EUR 25. Lower prices lead to more sales, and more sales lead to more fee revenue.
3. Logistics revenue. Every FBA seller is a paying customer of Amazon's logistics network. The more sellers use FBA, the better the utilization of fulfillment centers — and the more profitable the logistics division becomes.
4. Advertising revenue. More sellers on the same ASIN means more competition for visibility. More competition means higher PPC bids. Higher bids mean more advertising revenue for Amazon. It is a self-reinforcing cycle.
---
The Role of Repricing in the Marketplace Model
Repricing is not a niche tactic — it is a central component of marketplace mechanics.
Price Efficiency as a Core Principle
Amazon's algorithm rewards competitive prices with Buy Box access. Sellers who manage prices manually react too slowly to market changes. A repricer ensures your price remains permanently competitive — without constant manual intervention.
Understanding Buy Box Mechanics
The Buy Box is Amazon's mechanism for selecting the "best" seller for the customer. Price is one of the most important factors, but not the only one. A repricer optimizes your price so you win the Buy Box or secure the largest possible share of Buy Box rotation — while simultaneously protecting your margin.
Competition at the ASIN Level
In the 3P model, multiple sellers share an ASIN. This means your direct competitor is not another shop, but another seller on the same product page. Price changes affect your Buy Box share within minutes. Without repricing, you are structurally disadvantaged in this dynamic environment.
Pan-EU and Multi-Marketplace
When you sell across multiple European marketplaces (DE, FR, IT, ES, NL, SE, PL, BE), complexity multiplies. Each marketplace has its own competitors, its own price dynamics, and its own fee structures. A repricer with Pan-EU support handles this complexity for you.
Learn more in our guide for Amazon sellers in Europe.
---
> The marketplace mechanics work for you — when you use the right tools. arbytrage.io reprices your products across all EU marketplaces simultaneously. 6 strategies, Pan-EU support, starting at EUR 40/month. Get started free
---
Frequently Asked Questions (FAQ)
What is the difference between Amazon 1P and 3P?
With 1P (First Party), Amazon buys goods directly from the manufacturer and sells them under its own name. The manufacturer is a supplier, not a seller. With 3P (Third Party), independent merchants sell through the Amazon marketplace directly to end customers. Amazon provides the platform and collects fees. Over 60% of sales on Amazon are generated by 3P sellers.
Why are Amazon fees so high?
Amazon provides access to hundreds of millions of active customers, a functioning logistics infrastructure, and a trusted shopping experience. The fees (referral fees, FBA fees, PPC) finance this ecosystem. Whether it is worthwhile for you depends on your product margins and volume. For a detailed breakdown, read our fee guide.
Can you still sell profitably on Amazon?
Yes, but not as easily as five years ago. Competition is more intense, fees have risen, and PPC costs increase annually. The sellers who remain profitable are those who know their numbers, automate their processes, and optimize pricing with a repricer. Those who reprice manually — or not at all — continuously lose Buy Box share to automated competition.
Which business model is best for beginners?
For most beginners, we recommend starting with online arbitrage or wholesale. Arbitrage has the lowest startup capital and lowest risk. Wholesale offers more stable margins and recurring orders. Private label makes sense only once you have accumulated experience and capital. Find all details in our FBA starter guide.
---
> Ready to compete in the marketplace? arbytrage.io protects your margin and maximizes your Buy Box share — automatically, across all EU marketplaces. Starting at EUR 40/month. Sign up free
---
Summary
Amazon operates simultaneously as a retailer (1P) and a marketplace (3P) — with the marketplace model now generating the majority of revenue. Amazon earns from sellers through referral fees, FBA fees, PPC advertising, and the Professional account subscription. The Flywheel principle ensures that more sellers lead to more selection, more customers, and yet more sellers.
The different seller types (arbitrage, wholesale, private label, handmade) carry different margins and risks, but all compete within the same system. Repricing in this system is not an optional extra — it is a necessary tool to remain competitive.