Amazon sellers - statistics & facts
There is not just one way to sell on Amazon. The e-commerce giant offers multiple business models such as drop shipping, wholesale, arbitrage, and private labels. However, a big distinction can be made between first- and third-party sellers. Today, 61 percent of the paid units of Amazon are attributed to its third-party selling – a scheme that has become pivotal in the e-commerce giant’s business and is forecast to grow tremendously in the upcoming years.
Since first-party vendors operate as suppliers, they have limited control over various aspects of sales and logistics. Their business relationship with Amazon is exposed to several critical challenges. In a recent survey, nearly one-fourth of them complained about pricing and competition, while many of them took specific actions to avoid shrinking margins. As they could not decide on prices, they prioritized selling high-margin merchandise, delisted unprofitable products and considered switching to third-party selling.
First-Party, Third-Party, and Fulfillment by Amazon
Amazon offers businesses first-party (1P) and third-party (3P) selling models across its platform. Usually, a first-party seller is a wholesale vendor that sells its inventory to Amazon, and Amazon itself acts as the owner of the sold product, managing pricing as well as shipping and returns processes. Amazon, as an online retailer, operates on this basis. Third-party selling on the Amazon platforms is enabled by Fulfillment by Amazon (FBA). Third-party seller brands participating in FBA are eligible for Prime, still act as the retailer, own the product, and control the pricing of their products. Shipping, storing, and returns of goods, on the other hand, are managed by Amazon. In return, Amazon charges commissions, shipping, and related service fees. This is how Amazon becomes an 'online marketplace'. Through these services, Amazon earned over 140 billion U.S. dollars in 2023. Marketplace sellers are a lucrative business for Amazon, and not just for the catalog of products they bring along to the platform. Third-party seller fees and commissions constitute the second-highest revenue stream for Amazon.Since first-party vendors operate as suppliers, they have limited control over various aspects of sales and logistics. Their business relationship with Amazon is exposed to several critical challenges. In a recent survey, nearly one-fourth of them complained about pricing and competition, while many of them took specific actions to avoid shrinking margins. As they could not decide on prices, they prioritized selling high-margin merchandise, delisted unprofitable products and considered switching to third-party selling.
