Third-party Sellers Change Amazon’s Profit Equation

Third-party Sellers Change Amazon’s Profit Equation

Howdy !

Amazon stunned us all and impressed investors with their second-quarter profit of $2.5 billion.

The giant retailer said they attribute their strong growth to their cloud services, advertising business and, of course, third-party sales.

Amazon Web Services (AWS) remains consistent in delivering success to the company, posting a 49% revenue growth at $6.11 billion and exceeding analysts’ projection of $6 billion.  

Regarding the performance figures of AWS, Brian Olsavsky, chief financial officer at Amazon, said:

“The business has accelerated the last three quarters, and we’re seeing great signs in a number of areas.

“We’ve added 800 new services and features so far this year; that’s an accelerated pace from last year, which was a record year. We see customers have migrated more than 80,000 databases using the AWS Database Migration Service.”

A chunk of the company’s Q2 revenue also came from third-party sellers, who were responsible for more than half of the total units sold through the Amazon marketplace.

Although Amazon’s net sales of $52.89 billion was slightly lower than analysts’ projection, they’ve managed to up their revenue from third-party sellers to $9.70 billion from $7 billion during the same period in the previous year.

Olsavsky said third-party sales have changed the profit equation for Amazon and are, in fact, more lucrative for the company than their own products, as they obtain commission from the sales of independent retailers.

When expenses turn into profit

We all know that 2017 was a year of big spending for Amazon as they were gunning for expansion in different parts of the globe at the time.

Their profits dipped as they spent a lot of money on building fulfilment centres and invested in various business sectors.   

These days they’re controlling their expenses while profiting from their huge warehouses and data centres.

However, the company said there’s no pausing their expansion in the UK where they have invested £9.3 billion since 2010.  

If you’re a third-party seller on the Amazon marketplace, then you’re among those whom they dubbed the game changer. That being so, how do you feel about Amazon’s Q2 financial results?

Share your thoughts with us in the comments below.

To your continued success,

Dave & Matt

 

 

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