‘Third-party sellers are kicking our first party butt, badly,’ is how the Amazon CEO Jeff Bezos describes Amazon sellers’ sale growth which have eclipsed the marketplace’s own first party retail sales revenue.
In a 2018 letter to shareholders released today, Jeff Bezos considers the rise of third-party sales over the 20 years. He says that independent small and medium-sized businesses (SMBs) have grown from 3% since 1999 to 58% in 2018.
Jeff points to Amazon’s first-party business which has also grown significantly over two decades. Amazon saw $1.6bn (£1.2bn) in 1999 soar up to $117bn (£89bn) this past year. The compound annual growth rate for Amazon’s first-party business in that time period is 25%. However, in that same time, third-party sales have grown from $0.1bn (£0.076m) to $160bn (£122bn) – a compound annual growth rate of 52%. To provide an external benchmark, Amazon compare eBay’s gross merchandise sales in that period which they say have grown at a compound rate of 20%, from $2.8bn (£2.1bn) to $95bn (£72bn).
Amazon CEO on merchants selling more on Amazon than on eBay
Jeff put down Amazon merchants’ success which beats eBay’s to “the very best selling tools we could imagine and build.” He stars listing the tools which help sellers manage inventory, process payments, track shipments, create reports, and sell across borders. However, of great importance, says Jeff, are Fulfillment by Amazon and the Prime membership programs.
Jeff says that the success of FBA and Prime is established to such a degree which makes consumers accept the service as normality. He pointed to the radical change and financial risk the introduction of these services required – and the need to invest to keep them attractive. Jeff explains that it is with intuition, heart, and nourished optimism Amazon launched programs they didn’t know would succeed today.
Amazon CEO challenges competitors
Concluding the letter, Jeff challenged Amazon’s top competitors, saying “you know who you are!” to match their employee benefits and their $15 (£11) minimum wage. Better yet, says Jeff, go to $16 (£12) and throw the gauntlet back at us – it’s a kind of competition that will benefit everyone.