Amazon Sellers Face Perfect Storm: Sales Plummet, Profits Dwindle
Amazon sellers are facing a perfect storm of challenges, with sales plummeting and profitability dwindling. Between May and August 2025, many sellers reported dramatic sales declines, ranging from 60 to 80 percent compared to previous years. This downturn coincides with a broader retail sales slowdown, with a 0.33 percent monthly decline recorded in June 2025. Meanwhile, Amazon's advertising revenue soared to $15.7 billion in Q2 2025, up 22 percent from the previous year.
Sellers are grappling with multiple issues. Many struggle with product visibility and search functionality, with Amazon's algorithm-driven pricing controls making their products effectively invisible. Increased competition from international sellers, particularly those with established manufacturing relationships, is also cited as a significant factor. The fee structure has come under fire, with sellers calculating scenarios where total platform costs exceed profit potential, especially for lower-priced items. Broader economic concerns, such as high living costs forcing people to give up pets, are also impacting consumer spending patterns and sellers' bottom lines.
Despite Amazon's claims of record-breaking Prime Day 2025 sales, many third-party sellers reported underwhelming results. Some experienced no sales increase or even slow sales prior to the event. Long-term sellers are increasingly considering reducing or eliminating their Amazon operations. One seller with 12 years of experience announced their departure by October 15, 2025. Tariff-related cost increases are also taking a toll, with some sellers losing the buy box after raising prices to account for higher import duties.
Amazon's introduction of advanced AI models and agentic AI technology, aimed at improving platform support for smaller businesses and craftspeople, is yet to show tangible benefits for affected sellers. As sellers face these challenges, Amazon's advertising revenue continues to grow. With no precise date for algorithm modifications favoring smaller sellers, many are left wondering what the future holds for their businesses on the platform.
