Marketplace Pulse’s “Marketplaces Year in Review 2019” Emphasizes Amazon’s Growth
Marketplace Pulse recently released its “Marketplaces Year in Review 2019” report, which examined the state of online marketplaces and predicted what may come next. The report focused primarily on Amazon, finding that “[d]espite Amazon’s dominance in the market, it continues to get bigger.”
The report also dubbed 2019 a “tremulous year on Amazon” for brands. In addition to navigating the impact of rumors that Amazon would dramatically reduce its amount of first-party sales, brands faced customer outreach problems, threats to their reputations, and chaos caused by counterfeiters. For instance, in late 2019, Nike decided to stop selling its products directly on Amazon after a failed two-year pilot program. According to the report, “Nike’s decision reinforces that Amazon is a revenue driver for brands sometimes, but a headache always.”
Part of the challenge for brands is keeping up with the scale and rapid growth of the Amazon marketplaces. There were roughly 3 million active sellers on the Amazon marketplaces in 2019, according to the report. Even sellers who left the marketplaces were rapidly replaced by new ones. In fact, 3.6 million new third-party sellers have joined the Amazon marketplaces since January 1, 2017.
More than 85% of the highest-grossing sellers in the United States offered Amazon Prime shipping for more than half of their products. Those products were stored in and shipped from Amazon’s warehouses as part of the Fulfillment by Amazon (FBA) program. The report explained that Prime sellers “choose to store inventory in FBA because it unlocks access to more shoppers on Amazon, not necessarily because it is more convenient or cheaper than the alternatives.”
The report also stated that the amount of sales by third-party sellers on Amazon totaled $200 billion in 2019; the number of sellers with more than $100,000 in sales per year also grew to 280,000. Amazon also has a high seller retention rate. Approximately 70% of the top 10,000 sellers in 2015 were still active sellers by the beginning of 2019. Unsurprisingly, Amazon also benefitted from these sellers’ successes. For instance, third-party sellers paid Amazon $39.7 billion in fees in 2018, according to the research. These fees included commissions, fulfillment and shipping fees, and fees for other third-party seller services.
Despite its findings on Amazon’s continued growth, the report’s authors concluded: “Amazon is facing challenges that come from the scale of the marketplace—fake reviews, counterfeit products, fraudulent sellers, and more. It is also facing legal questions surrounding its liability for marketplace sellers and, more importantly, whether its actions are anticompetitive.” Nonetheless, the report predicted that Amazon will spend 2020 growing its international marketplaces, and that the eCommerce industry will continue to flourish.
Read the full report here.