In his annual letter to shareholders, Amazon’s founder and CEO Jeff Bezos attributed 58% of physical gross merchandise sales on the Amazon marketplace to third-party sellers.
He said third-party sales have grown from $0.1 billion in 1999 to $160 billion in 2018, which is a compound annual growth rate of 52%. On the other hand, their first-party business saw a 25% compound rate, with sales growing from $1.6 billion to $117 billion in the same period.
Bezos also compared Amazon’s sales growth with that of eBay’s which grew at a compound rate of 20% in the same period, from $2.8 billion to $95 billion, and then he asked: “Why did independent sellers do so much better selling on Amazon than they did on eBay? And why were independent sellers able to grow so much faster than Amazon’s own highly organized first-party sales organization?”
To answer these questions, Bezos said Amazon’s investment in selling tools have helped small and medium-sized sellers compete with their first-party business. He placed emphasis on Fulfillment by Amazon and the Prime subscription program, saying both improved the customer’s experience with independent sellers. In addition to that, he said:
“We could not foresee with certainty what those programs would eventually look like, let alone whether they would succeed, but they were pushed forward with intuition and heart, and nourished with optimism.”
Amazon as a small player
Despite being viewed by the world as one of the key influencers in global eCommerce, Amazon remain a small player that represent a low single-digit percentage of the retail market, according to the retail giant boss.
He added that as they continue to grow, Amazon will occasionally commit mistakes that will cost them multibillion dollars. When it comes to investing in people, Bezos wants to focus on hiring and retaining employees who can ‘think like owners’.
Before ending his letter, he shared how more than 250,000 Amazon employees in the U.S. benefitted from the $15 minimum wage hike last year, and challenged his competitors to follow suit. Bezos wrote:
“Today I challenge our top retail competitors (you know who you are!) to match our employee benefits and our $15 minimum wage. Do it! Better yet, go to $16 and throw the gauntlet back at us. It’s a kind of competition that will benefit everyone.”
As a third-party seller on the Amazon marketplace, how would you rate the growth of your business? We hope to hear from you in the comments below.
As always, to your continued success,
Dave & Matt