Once considered a golden gateway to global markets for small businesses, Amazon has become an increasingly challenging marketplace in 2025. Sellers report plummeting sales, shrinking profit margins, and growing survival pressures. What forces have created this situation, and what does it reveal about the future of e-commerce?

The Sales Collapse: Widespread Declines and Root Causes

Between May and August 2025, numerous third-party Amazon sellers reported dramatic sales drops of 60-80%. Even veteran sellers with over a decade of experience saw daily orders crash from 40-60 units to just 5-10. This phenomenon cut across product categories and fulfillment methods, affecting sellers of all types.

The sales plunge reflects broader macroeconomic pressures. According to data from the National Retail Federation and CNBC, June 2025 saw seasonally adjusted retail sales fall 0.33%—the first monthly decline of the year. Policy uncertainty and economic concerns have eroded consumer confidence, tightening household budgets and reducing discretionary spending. While Amazon's Prime Day promotion officially set records, most third-party sellers reported mediocre results, with some experiencing higher sales volumes but zero profits.

Rising Costs: The Profit Margin Squeeze

For products priced between $10-$20, sellers face crushing operational costs. Participation fees, FBA expenses, advertising budgets, returns, and shrinkage combine to erase profit margins—sometimes creating losses. New tariff pressures have compounded the problem, with some sellers facing 30% duties on incoming inventory. Attempts to raise prices often backfire by causing sellers to lose the coveted Buy Box placement, further reducing sales.

Platform Mechanics: Algorithmic Challenges

Amazon's pricing algorithms and ranking systems have drawn increasing criticism. Search results pages now overflow with sponsored products, dramatically reducing organic visibility for smaller sellers. Without significant advertising investment, products become virtually invisible. Many sellers argue that recent AI system updates favor large sellers and brand owners, systematically disadvantaging small businesses, artisans, and independent creators.

Survival Strategies: Exits and Pivots

Facing rising costs, unpredictable rule changes, and intense competition, many established sellers are leaving Amazon entirely. One seller with $1.5 million in cumulative profits announced plans to cease operations by October 15, 2025. Online forums reveal a growing divide: manufacturers (particularly from China) leveraging multi-store strategies and cost advantages thrive, while traditional resellers using retail arbitrage or wholesale models struggle. As one seller bluntly stated, "If you're not a Chinese factory, Amazon is becoming impossible."

Consumer Shifts: Changing Habits and Platform Diversion

Sellers widely attribute declining sales to shifting consumer behavior. High living costs have made shoppers more deliberate, prioritizing essentials and spreading limited budgets across discount platforms like Temu, TikTok Shop, and Shein. Some sellers even report customers abandoning pet ownership due to financial strain—a telling indicator of economic pressures.

Fee Structures: Systemic Issues

Amazon's fee system faces mounting criticism. The combination of storage fees, return processing charges, advertising costs, and commissions leaves little profit for low-priced items. Meanwhile, fraudulent activities and fake reviews persist, while legitimate sellers frequently encounter account suspensions and other operational risks, creating what many describe as a deteriorating marketplace experience.

The Road Ahead: Structural Changes in E-Commerce

The 2025 Amazon seller crisis reflects more than platform-specific changes—it reveals fundamental challenges facing global e-commerce amid economic uncertainty. With consumers tightening spending, international competition intensifying, and new platforms diverting traffic, small and mid-sized Amazon sellers must reassess their strategies. Many will need to diversify sales channels, enhance product differentiation, and optimize costs to survive.

For Amazon itself, the situation demands reflection. Algorithm transparency, cost reductions, and stronger fraud prevention could help restore balance to the marketplace. Without meaningful adjustments, the platform risks accelerating the concentration of resources among large sellers—potentially reshaping the entire e-commerce ecosystem in ways that could redefine online retail for years to come.