Third-party sellers on Amazon make up a bigger share of sales on the platform than Amazon itself. This is according to a letter by Amazon’s CEO Jeff Bezos sent to shareholders last month. According to figures in 2018, third-party sellers accounted for nearly $160 billion in sales compared to $117 billion recorded by Amazon itself. But this is not a bad thing. If third-party merchants are selling more goods on the e-commerce platform, it means Amazon is benefiting too.
This success has largely been driven by small and medium-sized businesses. In 2018 for example, SMBs that brought in over $100,000 in sales to Amazon reached approximately 200,000. This was significantly higher compared to the 140,000 recorded in 2017. In addition to this, a total of 25,000 SMBs broke over $1 million in revenue after approximately 20,000 reached the same milestone the previous year. What this essentially means is that third-party sellers are finding higher levels of success selling on Amazon than anywhere else on the Internet.
There are a number of benefits though that Amazon is reaping from these high-performing third-party merchants. First, if indeed it appears as if third-party sellers are achieving higher levels of success on the platform, they could be incentivized to sell their products exclusively on Amazon. This means that they will focus all their efforts on selling on the marketplace and forego any sales done directly through their sites. Amazon will then be able to record bigger sales as a result.
In addition to this, Amazon can also increase its own revenue through SMBs success programs like Fulfillment by Amazon. The program is designed to help small companies succeed on the marketplace but it comes at a fee. The program has also been a success. As a matter of fact, in 2018, companies that enrolled in the Fulfillment by Amazon program were able to double their exports in 2018. Demonstrating higher levels of success in such programs could help Amazon sign up more companies, leading to extra revenue.
It’s also possible for Amazon to use the success of its third-party merchants to push back against possible government regulation. This is because many politicians have often termed the e-commerce giant a monopoly. The company has been blamed for the ailing US retail sector and even President Trump called on more taxes against it. By pointing out the success of its third-party merchants, Amazon can argue that it is helping small and medium scale companies in the US succeed. The e-commerce giant will, therefore, be able to crawl out of its tag as a monopoly and build a reputation as the ultimate platform where small enterprises can grow.
It’s very likely that third-party merchants on the platform will continue to get better sales over the coming few years. Amazon has done well to introduce its own unique products but it’s still not yet close to matching what third-party merchants offer. Right now there are over 300,000 third-party merchants on Amazon selling different products.
