Amazon vs Shopify: Where Margins Break First

Amazon and Shopify are often positioned as fundamentally different selling models.

Amazon promises immediate demand but charges for access.
Shopify promises ownership and control but requires sellers to generate demand themselves.

In practice, both models apply margin pressure but at different breaking points.

Cost structure
Amazon applies layered fees including referral fees, fulfilment costs, storage, and advertising.
These costs are often invisible upfront but compound as volume increases.

Shopify shifts costs into subscriptions, payment fees, apps, and traffic acquisition.
While platform fees appear lower, margin pressure emerges through advertising efficiency and conversion rates.

Traffic and demand
Amazon provides demand but monetises visibility through sponsored listings.
As competition increases, advertising becomes less optional and more structural.

Shopify requires sellers to create demand.
Traffic costs are external, variable, and highly sensitive to conversion performance.

Risk distribution
On Amazon, sellers face policy risk, account dependency, and sudden fee changes.
Margins are stable only until competition or ad pressure increases.

On Shopify, sellers face traffic volatility and rising acquisition costs.
Risk shifts from platform dependency to marketing efficiency.

Scalability
Amazon scales quickly but compresses margins as competition intensifies.
Shopify scales margins only when brand leverage, repeat purchases, or organic traffic exist.

Neither model guarantees sustainable profitability.

When each model makes sense
Amazon tends to work best for:
– high-volume products
– competitive pricing strategies
– sellers optimising logistics and ads

Shopify tends to work best for:
– differentiated products
– repeat purchase behaviour
– brand-driven demand

Conclusion
Amazon and Shopify do not eliminate margin pressure.
They move it.

Understanding where margins break first is more important than choosing a platform.

Scenario-based conclusions require concrete assumptions.

To avoid misleading generalisations, MarginIndex separates high-level insights from break-even scenario analysis.

Extended Amazon scenarios (Pro)

This analysis focuses on structural margin pressure.

MarginIndex Pro expands this by modelling scenarios such as:

• Break-even thresholds under rising ad costs
• Fulfilment and storage cost sensitivity
• Volume-driven margin compression
• Risk exposure across selling models

This section will be available as part of MarginIndex Pro.