Third-party sellers are thriving on Amazon (AMZN)

Amazon CEO Jeff Bezos revealed in the company's annual letter to shareholders last month that third-party sellers make up a bigger share of sales on Amazon's marketplace than Amazon itself, racking up $160 billion to Amazon's first-party retail business' $117 billion in 2018. Now, Amazon has released a report further detailing third-party merchants' success on its platform, which benefits Amazon too.

share of physical gross merchandise sales on amazon Business Insider Intelligence

Here's what it means: More third-party sellers are bringing in higher levels of sales on Amazon than ever before.

In 2018, more small- and medium-sized businesses (SMBs) surpassed $100,000 and $1 million in sales on Amazon than in 2017. The number of SMBs that brought in over $100,000 through Amazon reached nearly 200,000 after just 140,000 did so in 2017, and 25,000 SMBs broke $1 million in sales after approximately 20,000 reached the milestone in 2017. This suggests that more sellers are finding higher levels of success on Amazon, with the average sales revenue for US SMBs from Amazon coming in at $90,000.

The bigger picture: The rising performance of third-party sellers benefits Amazon in a number of ways, even if they are winning more sales than the e-tailer.

Enabling third-party sellers to bring in significant sales could inspire them to sell exclusively on Amazon.If sellers rack up hundreds of thousands of dollars in sales on Amazon, they may choose to focus all of their efforts on the marketplace and forgo selling on their own sites or other marketplaces to maximize their performance on Amazon. This would give Amazon pseudo-exclusive products, making it a more attractive shopping destination than its competitors.
Amazon can charge for services like Fulfillment by Amazon (FBA) that facilitate merchants' success on the marketplace.US SMBs using FBA saw their exports double in 2018, making the service more attractive to sellers. By charging for participation in programs like FBA that help merchants reach more consumers and offer better shipping speeds and prices, Amazon can profit off third-party sellers' sales.
Being able to point to the success of third-party sellers on its marketplace can help Amazon allay concerns about it having a monopoly.Government officials in several countries have shown interest in investigating Amazon's status as a monopoly, and being able to show that other sellers are performing well on its marketplace may help Amazon dodge any regulations, whether their successes truly have any bearing on it being a monopoly or not.

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Third-party sellers are thriving on Amazon (AMZN)

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