Amazon always wins :)

We generally hear a lot about 3P sellers at Amazon, and recently they raised concerns about Amazon being unfair to listing and pricing.

So in this post, I will try and put my arguments around that using numbers.

And if you want to understand Amazon's Business, you should go through this post (Companies Simplified - Amazon).

What are third-party sellers?

Anyone who wishes to sell products through Amazon.com

Something like below - like Spigen selling mobile accessories through Amazon.

Also, do check the list of the biggest 3P sellers on Amazon.

How big are they?

Oh, they are pretty big for Amazon. More than 60%+ sales are by 3P sellers.

Look at the share of 3P sales since 1999. (have taken just seven years for comparison)

• 1999: 3%
• 2004: 25%
• 2009: 31%
• 2014: 49%
• 2018: 58%
• 2019: 60%
• 2020: 62%

These are 3 Party Sales (GMV) Figures through Amazon

Total Sales Value by Amazon in 2020 ~500 Bn (out of which 3P Sales ~300 Bn)

Why is 3P Segment important to Amazon?

• It is one of the fastest-growing segments for Amazon. Amazon gives distribution to these sellers, and the buyers have more options to choose from.

• Through 3P sellers - Amazon generates $80 Bn in revenues, so that's ~21% of total revenues. Also, that's a 25%+ rack rate. (GMV of $300 Bn and revenue of $80 Bn - 80/300 -- 26%)

But that's not where the matter ends.

3P sellers want to reach the maximum customers. Amazon provides reach, but then they want to get noticed, so they spend on Ads.

Amazon provides them with the Ad Inventory too :)

You see the "Other" line item in the above snapshot - that's Ad revenue :)

• Ad revenue is ~22 Bn or 6% of Amazon Revenue. This year it will be close to ~$30 Bn.

So, what's happening here?

1. Amazon created to reach
2. Reach attracts sellers
3. Amazon charges them as they are providing distribution
4. More sellers come, and all sellers want to make more sales
5. Amazon provides them with an Ads option
6. Amazon now knows what product is in demand
7. To increase the profit percentage, they launch their product (like Amazon Basics)

And now you know why sellers are furious :)