Third Party Sellers on Amazon

May 9, 2019

An article from the Business Insider about Amazon’s third party sellers starts with a quote from Amazon founder and CEO, Jeff Bezos, saying that “To put it bluntly: Third-party sellers are kicking our first party butt. Badly.” This was from his annual letter to his shareholders last month and it showed data from the past 10 years that shows that independent sellers on Amazon are outpacing its main business. The data from these third-party sellers now make up for more than 58% of the physical gross merchandise sold on Amazon, accounting up to $160 billion in 2018.

 

I am actually not surprised with these numbers. As a long-time Amazon customer, I have noticed within the past couple of years that more and more product selections are being sold by third-party sellers. Like for example, if you do a search for a phone case, or any common accessory, the search results will yield several options sold by third-party sellers. Also, most of these third-party options have great product reviews which would result in more sales for those options. I am not familiar with Amazon’s product listing, but I would assume that if a product has good product reviews, Amazon probably has an algorithm to place it high in organic search results. I also think that Amazon prime has been a big factor as well with its 2-day shipping.

 

Sellers here in the US are earning on average, $90,000 a year from selling through Amazon. The company takes pride in its commitment to helping small business grow and has invested billions to help small business succeed.

 

It is actually fairly easy to set up your own business on Amazon. They call it Fulfillment by Amazon and you just simply start by setting up an FBA account (different from customer or prime account). From there, you just add your products to the Amazon catalog and integrating your inventory through Amazon’s API. A lot of sellers actually source their products from Alibaba which is primarily a B2B platform and ship it directly to amazon from there. This means that you don’t even have to physically hold any of your inventory at all. Once you have determined your products for sale, you can ship your products to Amazon and they will handle the rest such as product listing on Amazon.com, packaging and shipping. Also, since it’s fulfilled by Amazon, any customer that is a prime member will receive your product in 2 days. On top of all that, Amazon will also provide customer support on the product you sell, 24 hours a day and seven days a week.

 

Since there are so many third-party options in Amazon nowadays, it may be tough to find a product that is not currently offered because it the Amazon third-party market is now highly competitive with all the choices.

 

With this success, Amazon has actually been accused of using their third-party seller’s data in order to release their own Amazon brand products to launch. In response to this, Amazon mentions that their private label products (Amazon Basics) only account to 1% of their total sales.

Considering all of this, Amazon is dominating the e-commerce market and at the same time, providing a great option for entrepreneurs to use their Fulfillment by Amazon service. The growth of the company is threatening several industries such as electronic retailers and bookstores to name a few and it will be a tough road ahead for these industries to stay competitive with Amazon.

 

References:

 

Amazon Reveals How Third-party Sellers Are Kicking Its Butt on Sales As Part Of Small Business Charm Offensive by Mary Hanbury - https://www.businessinsider.com/amazon-reveals-how-third-party-sellers-kick-its-butt-in-sales-2019-5

 

How Fulfillment By Amazon (fba) Works - Amazon.com https://services.amazon.com/fulfillment-by-amazon/how-it-works.html

 

 

Amazon's Growth Could Threaten These 10 Industries by Mary Kate Taylor, Mary Hanbury and Dennis Green - https://www.businessinsider.com/amazon-is-killing-these-7-companies-2017-7

 

 

 

 

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