A few weeks ago, Jeff Bezos released his annual shareholder letter, which he has done each year since his famous 1997 “Day 1” letter released the year the company went public. The 2018 Amazon shareholder letter was unique in its focus - the amazing growth of the Amazon Marketplace.
There are two ways a brand can sell on Amazon: by selling directly to Amazon Retail or by selling on the Amazon Marketplace.
In the last twenty years, the Marketplace has transformed from an alternative way to sell to Amazon customers to the main way brands sell to Amazon customers. Here is a graph of the percent of sales on Amazon.com that come from Amazon retailing products or via the now-dominant Marketplace option:
As of 2018, almost 60% of everything sold on Amazon.com is sold via the Marketplace directly from a brand to an Amazon customer. In essence, in the last twenty years, Amazon has completely changed their business model from retailing products for brands to instead being the mall where brands can market and sell their own products to Amazon’s customers.
This shift has really intensified in the last three years. Amazon routinely makes it harder for a brand to sell products directly to Amazon. Instead, as this graph shows clearly, Amazon now wants brands to take their products onto the Marketplace, and cover all of the complexities of retailing their products directly to consumers.
Here’s the thing, though - it’s really hard to sell well on the Marketplace. As a brand you must manage marketing, photography, paid advertising, keywords, 24-hour customer service, claims and IP infringement, multiple sellers, individual state sales tax collection, and all aspects of supply chain management and logistics for each individual product sold to an Amazon consumer on the Marketplace. This leaves little time to develop the next generation of exciting products or tend to other (sometimes dominant) sales channels.
Bezos also discussed in the annual letter the investment to selling tools Amazon has made in the Marketplace platform, called Seller Central. While we at SupplyKick agree that Seller Central continues to show improvement in data tracking, most brands we talk to still find it hard to navigate the complexity of Seller Central’s ever-changing dashboards and reports. That’s why brands that excel on Amazon generally have a partner like SupplyKick to expertly manage logistics, marketing, paid advertising, and customer service to achieve sustained success on the ever-changing digital Amazon shelf.
If you are a brand looking to best maximize your sales and brand experience on Amazon, the clear option is to take advantage of the dominant Marketplace avenue. The big question for most brands is how to sell on the Marketplace. They can invest a lot of time and resources to try to figure it out themselves, and they may be successful, but this success often comes with big mistakes along the way.
Alternatively, many smart brands are choosing to partner with an Amazon Marketplace expert like SupplyKick for more immediate results. We replace a brand’s old wholesaling relationship with Amazon and work directly with the brand’s team to drive sales and deliver results. Our retailing knowledge is unmatched and we’re continually innovating technology solutions to make the brand manager’s life easier, whether it’s in merchandising and product purchase orders or ensuring every Amazon customer interaction is handled with spot-on brand awareness and voice.
The future direction of sales on the Amazon channel is clear, and smart brands are finding their Amazon solutions now.