Third-party sellers have become the backbone of Amazon's success, accounting for over 60% of all sales on the platform. This statistic represents millions of entrepreneurs, small businesses, and established brands who have turned to Amazon to reach its massive customer base.
At first glance, the opportunity seems boundless—access to hundreds of millions of customers, sophisticated fulfillment infrastructure, and the credibility of selling on one of the world's most trusted platforms. However, beneath this promising surface lies a complex and often treacherous landscape that third-party sellers must navigate daily.
As Amazon has grown, so too have the challenges facing those who rely on the platform for their livelihoods. From sudden account suspensions that can halt business overnight to inventory management nightmares that drain profits, sellers find themselves increasingly vulnerable to forces largely outside their control. The relationship between Amazon and its third-party sellers has evolved into something of a double-edged sword—offering unprecedented opportunity while simultaneously creating significant obstacles to sustainable success.
These challenges have only intensified as Amazon continues to refine its policies, increase its fees, and expand its own product offerings that directly compete with third-party sellers. Many sellers report feeling like they're building businesses on shifting sands, never knowing when a policy change, algorithm update, or new Amazon-branded competitor might undermine years of hard work.
Let's zoom into pressing problems that Amazon third-party sellers face today. Whether you're a seasoned Amazon seller or considering entering the marketplace, understanding these challenges is crucial to developing strategies that can help your business not just survive, but thrive in Amazon's increasingly competitive ecosystem.
Account Suspension Issues
For Amazon third-party sellers, few phrases strike more fear than "Your selling privileges have been removed." Account suspensions represent an existential threat that can happen without warning, cutting off revenue streams overnight and potentially destroying businesses that took years to build. In 2025, these suspensions have become increasingly common as Amazon tightens its enforcement of policies—sometimes with algorithms making the initial suspension decisions before human review.
The reasons for suspensions are varied and often confusing to sellers. One of the most frustrating causes is the "related account" suspension, where Amazon's algorithms detect a connection between a seller's account and another account that has violated policies. These connections can be as tenuous as using the same IP address, having similar product listings, or even shipping from the same location. One seller described their experience: "After 15 years of selling with perfect metrics, my account was suspended because a former employee apparently started their own Amazon business. Amazon claimed our accounts were 'related' and suspended me without warning."
The appeals process compounds the frustration. Sellers report submitting multiple appeals only to receive generic responses or, worse, no response at all. The lack of direct communication channels means that sellers often feel like they're shouting into the void, with no clear path to resolution. For businesses that derive 80-90% of their revenue from Amazon, these suspensions can be catastrophic, leading to layoffs, inventory liquidation, and even bankruptcy. While Amazon maintains these measures are necessary to protect customers, the collateral damage to legitimate businesses has led many to question whether the platform's approach is too heavy-handed and lacks sufficient due process.
Inventory Management Challenges
Managing inventory effectively on Amazon has become increasingly complex and costly for third-party sellers. At the heart of this challenge is Amazon's fee structure for Fulfillment by Amazon (FBA) services, which includes storage fees that can quickly erode profit margins. These fees increase significantly during the holiday season (October through December), precisely when sellers need to stock up for peak sales periods.
The balancing act between avoiding stockouts and preventing excess inventory has become more precarious than ever. Stockouts can devastate a seller's ranking in Amazon's search results, potentially taking months to recover from. Conversely, overstocking leads to long-term storage fees that can turn profitable products into money-losing ventures. One seller shared, "I had to destroy $50,000 worth of perfectly good inventory because the long-term storage fees would have exceeded the product's value. It was either that or pay to have it shipped back, which wasn't economically viable either."
Inventory discrepancies represent another significant headache. Many sellers report that Amazon's inventory counts often don't match their own records, with products mysteriously "disappearing" within Amazon's fulfillment centers. While Amazon has processes to file claims for lost or damaged inventory, the burden of proof falls heavily on sellers, and reimbursement amounts frequently undervalue the lost items. For sellers using third-party inventory management software, these discrepancies create additional complications, as the software may show items as available when they've actually been lost or damaged in Amazon's warehouses.
FBA receiving delays further complicate inventory planning. During peak seasons, Amazon's receiving process can stretch from the standard 3-5 days to several weeks, leaving sellers with inventory in limbo—not available for sale but still incurring costs. These delays force sellers to send inventory earlier than ideal, increasing storage costs and capital tied up in inventory that isn't yet generating revenue.
Competition from Amazon's Own Products
Perhaps the most controversial challenge facing third-party sellers is competing directly with Amazon itself. The company has developed a vast portfolio of private-label products across numerous categories, from batteries and electronics to clothing and furniture. What makes this competition particularly troubling for sellers is Amazon's access to detailed sales data from third-party products—data that can inform Amazon's decisions about which products to develop under its own brands.
Multiple investigations, including those by The Wall Street Journal and Reuters, have revealed that Amazon has systematically used third-party seller data to identify successful products, create similar items, and then give preferential treatment to its own versions in search results. A 2021 Reuters investigation found documents showing that Amazon's India marketplace had developed strategies to copy competitors' products and manipulate search results to favor Amazon's versions—practices that Amazon has publicly denied engaging in.
The impact on third-party sellers can be devastating. One seller described watching helplessly as their best-selling product was cloned by an Amazon Basics version that immediately received prime placement in search results: "We spent years developing our product and building our brand. Then Amazon created a nearly identical item, priced it 20% lower than we could afford to, and suddenly our sales dropped by 60% overnight."
Amazon's dual role as both marketplace and competitor creates an inherent conflict of interest that many sellers find increasingly difficult to navigate. While Amazon maintains that its private-label products represent a small percentage of total sales, for individual sellers who find themselves competing directly with Amazon's versions, the impact can be business-ending.
Rising Costs and Fee Increases
The financial squeeze on Amazon third-party sellers has intensified in 2025, with multiple fee increases across various aspects of the selling process. FBA fees, which cover storage and fulfillment of products, have seen consistent annual increases that outpace inflation. These increases are particularly challenging because they often come with minimal notice, giving sellers little time to adjust pricing strategies or explore alternatives.
Referral fees—Amazon's commission on each sale—range from 8% to 45% depending on the category, with most falling between 15% and 20%. When combined with FBA fees, these commissions can consume 30-50% of a product's selling price before accounting for the cost of goods, advertising, returns, and other expenses. One seller noted, "Five years ago, my net margin was around 25%. Today, with the same products and similar sales volume, it's down to 12% due to Amazon's fee increases."
Advertising costs have become another significant expense as organic visibility on Amazon continues to decline. With more sellers competing for the same keywords, the cost-per-click for Amazon's sponsored product ads has increased dramatically. Many sellers report needing to spend 10-15% of their gross revenue on advertising just to maintain their previous sales levels. As one seller put it, "Amazon has effectively turned selling into a pay-to-play model. If you're not spending on ads, you're invisible."
Return processing fees add another layer of cost, particularly in categories with high return rates like clothing and electronics. While Amazon's liberal return policy helps drive customer confidence, sellers bear the financial burden of these returns, including return shipping costs, inspection, repackaging, and in many cases, the inability to resell returned items as new. Some sellers report return rates exceeding 20% in certain categories, with many returns showing signs of use or "wardrobing" (buying with the intent to use briefly and then return).
The cumulative effect of these rising costs has pushed many smaller sellers off the platform entirely, while forcing others to continuously reevaluate their product lines and eliminate items with margins too thin to remain viable under Amazon's fee structure.
Policy Changes and Compliance Issues
Navigating Amazon's constantly evolving policies has become a full-time job for many sellers. The platform regularly updates its terms of service, product requirements, and selling guidelines, often with minimal notice and vague explanations of the changes. These updates can render previously compliant products suddenly non-compliant, requiring immediate action to avoid penalties or listing removals.
Product restrictions and "gated" categories present another significant hurdle. Amazon has increasingly restricted who can sell in certain categories, requiring approval processes that can be opaque and inconsistent. Obtaining permission to sell in restricted categories often requires providing invoices from established wholesalers, proof of authenticity, and sometimes specific certifications or testing documentation. Even sellers who have successfully navigated these requirements report that the rules can change without notice, requiring additional documentation or reapproval.
Documentation requirements have become more stringent across all categories. For example, sellers of electronics now frequently need to provide safety certification documents, while those selling consumable products must provide detailed ingredient lists and expiration date information. While these requirements aim to protect consumers, the implementation often creates confusion and inconsistency, with some sellers receiving approval while others with identical documentation are rejected.
The challenge of keeping up with changing rules is particularly acute for small sellers without dedicated compliance teams. One seller described the situation: "I spend at least 10 hours every week just reading seller forums and Amazon policy updates to make sure I'm not unknowingly violating some new rule. It's exhausting and takes time away from actually growing my business."
Customer Service and Return Challenges
Amazon's customer-centric approach has set high expectations that third-party sellers must meet, often at significant cost to their businesses. The platform's emphasis on customer satisfaction means that disputes between sellers and buyers are frequently resolved in the customer's favor, even in cases where evidence suggests potential buyer abuse.
Return abuse has become a growing concern for many sellers. Amazon's easy return process, while beneficial for legitimate returns, has created opportunities for some customers to take advantage of the system. Sellers report receiving returns where expensive components have been removed, items have been clearly used extensively, or entirely different products have been returned than what was shipped. Despite these issues, Amazon often issues full refunds to customers before sellers can inspect the returned items.
Negative reviews present another challenge, as they can significantly impact a product's visibility and conversion rate. While legitimate negative feedback is valuable for improvement, sellers report increasing instances of review manipulation by competitors and "review bombing" by customers using reviews to extract concessions rather than reflect their actual experience with the product. Amazon's review removal process heavily favors keeping reviews in place, making it difficult for sellers to contest even clearly fraudulent or misleading reviews.
The A-to-Z Guarantee, which protects customers by ensuring they can receive a refund if a product doesn't arrive or doesn't match the description, creates additional risk for sellers. Claims under this guarantee can be filed up to 90 days after purchase, and Amazon often sides with the customer without requiring substantial evidence of the claim's validity. For sellers, these claims not only result in financial losses but also negatively impact their account health metrics.
Limited direct communication with customers compounds these service challenges. Amazon's messaging system restricts certain types of communication and prohibits sellers from directing customers to external websites or contact methods. This limitation makes it difficult to resolve issues that might require more detailed explanation or troubleshooting than Amazon's messaging system easily allows.
The Future of Amazon Third-Party Selling
Despite the formidable challenges outlined in this article, Amazon's marketplace continues to attract thousands of new sellers each month. This paradox speaks to the platform's undeniable strengths: unparalleled customer reach, sophisticated logistics infrastructure, and the potential for significant revenue growth. However, the relationship between Amazon and its third-party sellers has reached a critical juncture in 2025, with many sellers questioning whether the benefits still outweigh the mounting obstacles.
The challenges facing Amazon sellers aren't isolated problems but interconnected issues that compound one another. Account suspensions disrupt inventory planning and cash flow. Rising fees force price increases that may reduce competitiveness. Policy changes require constant vigilance and adaptation. And through it all, sellers must contend with the possibility that their success might attract Amazon's attention as a competitor rather than a partner. This complex web of challenges has transformed Amazon selling from what was once seen as a relatively straightforward e-commerce opportunity into a sophisticated business operation requiring expertise across multiple disciplines.
Looking ahead, the future of third-party selling on Amazon will likely be shaped by several countervailing forces. On one hand, regulatory scrutiny of Amazon's dual role as platform and competitor is intensifying globally, potentially leading to restrictions on how Amazon uses seller data or promotes its own products. On the other hand, Amazon's drive for efficiency and profitability suggests that fees will continue to rise and policies will become increasingly algorithmic rather than human-driven. For sellers, success in this environment will require greater diversification across multiple sales channels, sophisticated data analysis to identify profitable niches, and perhaps most importantly, the agility to pivot quickly as conditions change.
The most successful Amazon sellers in 2025 and beyond will be those who approach the platform strategically—leveraging its strengths while actively mitigating its risks. This means viewing Amazon as one component of a broader e-commerce strategy rather than the entirety of one's business. It means building direct customer relationships whenever possible, even within Amazon's restricted communication environment. And it means staying informed and connected with other sellers through communities and forums where collective knowledge can help navigate Amazon's increasingly complex ecosystem.
For all its challenges, Amazon remains an unparalleled opportunity for businesses to reach millions of customers they couldn't access otherwise. The question for sellers isn't whether to sell on Amazon, but how to do so in a way that builds sustainable, resilient businesses capable of weathering the platform's inevitable changes. Those who can master this balancing act will continue to find success, even as the hurdles to that success grow increasingly complex.
Take Action
If you're currently selling on Amazon or considering entering the marketplace, here are some steps you can take to address the challenges discussed in this article:
Join seller communities like the Amazon Seller Forums, Reddit's r/FulfillmentByAmazon, or Facebook groups dedicated to Amazon sellers to stay informed about policy changes and share experiences.
Explore multi-channel selling on platforms like Walmart, eBay, or your own website to reduce dependence on Amazon.
Consider working with an experienced Amazon consultant or agency that specializes in account management, compliance, and strategy.
Invest in robust inventory management software that integrates with Amazon to help prevent stockouts and overstock situations.
Document everything—keep detailed records of all communications with Amazon, inventory shipments, customer interactions, and policy changes affecting your products.
The path to success on Amazon may be more challenging than ever, but with the right approach, third-party sellers can still build thriving businesses on the world's largest e-commerce platform.
