It’s good to be an Amazon Marketplace seller

Discussion
Jan 08, 2015
George Anderson

Despite concerns raised about Amazon possibly using data from third-party sellers on its Marketplace to benefit itself at the expense of those smaller companies, new numbers from the e-tailing giant show many of the merchants on its site are doing quite well.

According to Amazon, third-party sellers set a record selling more than two billion items worldwide last year. Today, there are two million sellers on Amazon that account for over 40 percent of the total units sold on the site.

"We’re seeing strong growth from sellers listing their items across our global marketplaces. In fact, there are now more than a billion offers for customers to browse from sellers who are listing items for sale outside their home country," said Peter Faricy, VP for Amazon Marketplace. "The growth of mobile and the introduction of the Amazon Seller App have also been a big win for sellers this year."

[Image: Fulfillment by Amazon]

A growing number of third parties are turning to Amazon for fulfillment, as well. According to the company, its Fulfillment by Amazon (FBA) service grew more than 65 percent year-over-year worldwide. Sellers using FBA, allow Amazon to store and ship items. The service allows them to participate in Amazon’s Prime program, offer free shipping and to take advantage of its customer service.

For many consumers, Amazon has become the first site to search when looking to make a purchase, a decisive factor for many third-party sellers looking to do business on the site.

According to ChannelAdvisor (via Internet Retailer), Amazon Marketplace comp sales increased 26.9 percent for its clients during the recent holiday season. A total of 44 percent of the product volume sold by its clients in December went through FBA.

Do you think the advantages of selling on the Amazon Marketplace outweigh the disadvantages? Will the growth of third-party sellers alter Amazon’s business model in the future?

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11 Comments on "It’s good to be an Amazon Marketplace seller"


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Max Goldberg
Guest
4 years 7 months ago

The advantages for small businesses significantly outweigh the disadvantages. The size of the marketplace, the sheer number of visitors, the fact that many consumers start their online searches for products on Amazon, and the opportunity to have Amazon handle fulfillment all outweigh Amazon collecting user data and paying Amazon a fee for services.

Ed Dunn
Guest
4 years 7 months ago

Amazon Prime is the determining factor for me. If the third-party seller is fulfilling through Amazon and Amazon offer Prime as a shipping option, I’m going to prefer purchases leveraging my Prime subscription.

Richard J. George, Ph.D.
Guest
4 years 7 months ago

As an Amazon third-party seller I can personally attest to the benefits. I have sold scores of each of my books on Amazon. Potential buyers can access them from Amazon directly or be linked to Amazon on my books tab on my website. It is an easy customer seller process. Before Amazon, authors had to “sell” brick-and-mortar retailers on stocking their books. Amazon changed all of this, at least for books.

At the end of the day, Amazon is a convenient distribution center with world-class logistics and fulfillment. I would expect this to continue and even expand opportunities for third-party sellers.

Herb Sorensen
Guest
4 years 7 months ago

Amazon Marketplace can play a major role in Amazon’s coming dominance in BRICK-AND-MORTAR retailing. However, this will possibly require a more partner-like role on Amazon’s part if they really want to leverage this business. There have been a lot of complaints about their competing with their “partners,” cherry-picking what their partners’ customers buy most, to using specials in Amazon’s own store to convert the shopper from being the partner’s customer to being Amazon’s customer.

I think of the brick-and-mortar stores as my friends, and Amazon as my friend. So I am a little like that politician who said, “I have friends who strongly support ‘X,’ and I have friends who are strongly opposed to ‘X,’ so I’m standing with my friends!”

Danny Silverman
Guest
4 years 7 months ago
Having studied the 3P marketplace for several years from the CPG manufacturer industry point of view it’s important to note that the CPG product these sellers sell has not always been obtained through traditional channels. Manufacturer liquidation is a big part of it but also expired, damaged, returned, etc., makes its way back out into the marketplaces. Amazon pricing is very much like stock markets: Supply vs. demand influences price. The difficult reality manufacturers will need to face is pumping out product that exceeds demand will ultimately drive prices down online. 10k leftover pieces from a 1MM piece promotion, liquidated for pennies on the dollar, will float around for months to come leaving brands competing with themselves. Result: Low prices that undermine any semblance of a pricing strategy that up until now was upheld in the brick-and-mortar landscape. There are two ways to consider combating this. Re: Liquidation, it’s more easily said than done. Bring supply and demand into balance. Better yet if demand slightly exceeds supply as it will keep inventory moving quickly and… Read more »
Mark Price
Guest
Mark Price
4 years 7 months ago

The benefits of selling on the Amazon Marketplace really depend on the retailer and the category. For smaller retailers and lesser-known categories, the Marketplace provides a scale that would be difficult to achieve elsewhere. As the business and the category grow, the risk grows that Amazon will seek to disintermediate.

For the right business, the Marketplace can be a godsend.

Shep Hyken
Guest
4 years 7 months ago

Amazon gives a retailer a world-wide storefront and an amazing distribution and fulfillment system. The advantages are obvious. Yes, they are collecting data. They use it to their advantage—as well as to the advantage of the retailer. The retailer has a choice. If they don’t like that Amazon collects data (and how they use it), they can choose to find another solution to market, sell and distribute their product.

Gordon Arnold
Guest
4 years 7 months ago

Living in the land of milk and honey is a good thing for small business survival needs. Being the cherry on top just doesn’t get any better. That is where Amazon sees itself and is doing a good job of informing small businesses that they too can join in on the most successful business venture for the future.

The problems with this are invisible at first but are many times becoming overwhelming obstacles to those trying to get out and on their own.

While it is easy for most to see these remarks as a foreboding warning, it is in fact a call to Amazon to observe an opportunity for limitless growth. A referral to classroom make-or-buy decision making processes and a look at how ADP grew with its base will suffice for those wishing to get started where Amazon is leaving off.

Martin Mehalchin
Guest
4 years 7 months ago

With Amazon known as the “Google of product search” it can make a lot of sense even for big brands to be a Marketplace seller. There is an inherent logic to merchandising your product where customers are looking for it. If you are not there, you will lose potential sales to substitute products that are.

Of course, Amazon does have a conflict of interest so sellers who proceed should proceed with caution. I’ve heard horror stories in particular about Fulfillment by Amazon (FBA) due to the co-mingling of inventory that occurs. If you sell a widely available product, particularly media or logoware where rights holders are involved, there are risks to losing item-level trace-ability on your inventory.

Arie Shpanya
Guest
4 years 7 months ago

There are a lot of pros and cons for third party sellers. On one hand, they get great exposure, but they also have to pay significant fees and fork over all of their selling data to Amazon.

I think that the growth for third party sellers has already altered Amazon’s business model. Retailers like Walmart and Target beat Amazon on low prices for a number of items this holiday season. Amazon’s loss leader strategy is unsustainable, especially because its dismal profits have frustrated share holders for a while now.

Amazon already uses sellers’ data to learn what products do well in order to get in on the profits. If anything, I think the recent success of third party sellers will end up favoring Amazon and it already does in terms of standard fees and FBA.

Kenneth Leung
Guest
4 years 7 months ago

Niche product providers are much better off on Amazon Marketplace and eBay than trying to get placement in traditional retail stores. The Amazon Prime eligibility is especially a draw if the product matches the needs for those who shop replenishment products on amazon.com. If you are a small business, Amazon’s data mining activities wouldn’t be affecting you anyway.

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