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When it comes to selling physical goods through online channels, the Amazon model is dominant.
The company’s commerce business has four distinct components: A marketplace with a constantly expanding assortment of goods driven by third-party sellers, an advertising network that helps sellers stand out, a fulfillment network that delivers items quickly and conveniently, and a membership program that builds loyalty, while connecting shoppers to the other parts of Amazon’s consumer ecosystem.
Each of these elements are mutually-reinforcing. At this point, it would be difficult to grow one without another. A third-party seller on the marketplace likely buys advertising to stand out in a sea of brands, and uses Fulfillment by Amazon to store and ship inventory in part because it’s the most convenient way to access Prime customers.
Yet these parts also exist as their own lines of business that have helped Amazon unlock new avenues for growth beyond the rote sale of goods. Services provided to third-party sellers, Amazon Ads, FBA and Prime all generate their own revenue, and most of these are growing rapidly.
Just how important are they to Amazon?
The company offered some details on one of these areas in a new report this week: Third-party sellers. These independent sellers that list, manage and ship their own products are distinct from first-party sellers, which effectively sell items to Amazon and leave the ecommerce company responsible for the sale to the consumer. As Amazon points out, most third-party sellers are small and medium-sized businesses. First-party sellers tend to be the larger name brands.
As it turns out, third party sellers are very important to Amazon. Key stats from the report:
Independent sellers account for 60% of sales in Amazon’s store.
U.S. sellers sold more than 4.1 billion products—an average of 7,800 every minute. These sellers averaged more than $230,000 in sales in Amazon’s store.
Brand owners in the U.S. grew sales over 20% year over year in Amazon’s store.
Amazon sellers are based in all 50 states.
Over 260 million products were exported globally by U.S.-based sellers.
The results in part underscore how much energy Amazon has put toward growing the marketplace, and the uptake in sellers that has arrived as a result.
“Amazon invests billions of dollars annually to provide entrepreneurs with a constantly improving set of valuable tools and resources to help them gain access to capital, quickly launch in our store, build their brands, and rapidly scale and reach more customers,” said Dharmesh Mehta, vice president of Worldwide Selling Partner Services at Amazon, in a statement. “Amazon is committed to the success of small businesses, and we are excited to continue innovating on their behalf and help them grow into thriving success stories.”
Make no mistake: There is also a massive benefit to Amazon’s business. In the first quarter of 2023, third-party seller services generated $30 billion, and grew 20%. Compare that to AWS, which is typically seen as Amazon’s big profit driver, and you’ll find that the cloud division generated about $21 billion while realizing 16% growth.
While third-party seller services aren’t always running ahead of AWS, the fact that they are growing in areas close to each other is a sign of how much opportunity lies in the marketplace for Amazon. Factor in that Amazon’s $9.5 billion (Q1) advertising business is also tied in part to the marketplace, and it’s clear that the impact extends beyond a single budget line.
Amazon’s success with third-party sellers is a big part of the reason why the marketplace model is being widely applied across commerce. Walmart is doubling down on growing third-party sellers on its marketplace as it follows an ecommerce playbook that has similar components of Amazon, and Macy’s opened its ecommerce business to third-party sellers last year. Shein recently brought its own marketplace to the U.S., and the fast fashion platform is using it as a means to expand the number of categories.
While Amazon will likely to continue to couch its communications about third-party sellers in the language of support for small businesses, it is a major reason that the company has been able to grow to the giant it has become, and remain there. With the growth of ecommerce and the rise of retail media, plenty of others in commerce will continue to apply the model, as well.
For a bit more info on Amazon, the company also shared the below rankings in the report on third-party sellers:
The most-shopped categories from third-party sellers:
- Health & Personal Care
The five states with the most third-party sellers:
- New York
- New Jersey
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- 5 new shipping and analytics tools for Amazon third-party sellers ›
- Amazon approves 2,500 3rd-party apps to help sellers | EcommerceBytes ›
- Amazon increases incentives for new third-party sellers | Chain Store Age ›
Trending in Retail Channels
Labor disputes on the West Coast could cause further disruption heading into peak season.
When the first half of 2023 is complete, imports are expected to dip 22% below last year.
That’s according to new data from the Global Port Tracker, which is compiled monthly by the National Retail Federation and Hackett Associates.
The decline has been building over the entire year, as imports dipped in the winter. With the spring, volume started to rebound. In April, the major ports handled 1.78 million Twenty-Foot Equivalent Units. That was an increase of 9.6% from March. Still it was a decline of 21.3% year over year – reflecting the record cargo hauled in over the spike in consumer demand of 2021 and the inventory glut 2022.
In 2023, consumer spending is remaining resilient with in a strong job market, despite the collision of inflation and interest rates. The economy remains different from pre-pandemic days, but shipping volumes are beginning to once again resemble the time before COVID-19.
“Economists and shipping lines increasingly wonder why the decline in container import demand is so much at odds with continuous growth in consumer demand,” said Hackett Associates Founder Ben Hackett, in a statement. “Import container shipments have returned the pre-pandemic levels seen in 2019 and appear likely to stay there for a while.”
Retailers and logistics professionals alike are looking to the second half of the year for a potential upswing. Peak shipping season occurs in the summer, which is in preparation for peak shopping season over the holidays.
Yet disruption could occur on the West Coast if labor issues can’t be settled. This week, ports from Los Angeles to Seattle reported closures and slowdowns as ongoing union disputes boil over, CNBC reported. NRF called on the Biden administration to intervene.
“Cargo volume is lower than last year but retailers are entering the busiest shipping season of the year bringing in holiday merchandise. The last thing retailers and other shippers need is ongoing disruption at the ports,” aid NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “If labor and management can’t reach agreement and operate smoothly and efficiently, retailers will have no choice but to continue to take their cargo to East Coast and Gulf Coast gateways. We continue to urge the administration to step in and help the parties reach an agreement and end the disruptions so operations can return to normal. We’ve had enough unavoidable supply chain issues the past two years. This is not the time for one that can be avoided.”