AMAZON’S 2019 SALES PROVE THE MARKETPLACE MODEL WORKS FOR RETAIL AND B2B

While it’s no secret that Amazon dominates the North American Ecommerce scene, its becoming clear that they are increasingly doing so on the strength of the third-party seller marketplace model of the Amazon Marketplace and now on the growing strength of Amazon Business.

In a recent earnings call to analysts, Amazon released their 2019 financial results. What we learned is that the Amazon Marketplace outpaced their first-party Ecommerce sales by $65 Billion. Over 989,000 third-party sellers saw a GMV of $220 Billion in 2019, accounting for 59.7% of Amazon’s total retail GMV of $335 Billion. The number of overall sellers, the volume of the revenue, and the fact that it represents nearly 60% of Amazon’s retail revenue, all demonstrate how the online marketplace model is fueling Amazon’s retail growth and further solidifying their market position.

Another, sometimes less evident, benefit of the marketplace model is the level of customer data it affords to the site operator. Amazon augments the customer data generated by browsing, cart behavior, and overall sales of their first-party items, but the addition of the data gleaned from the third-party offerings informs their decisions on which items to stock, themselves, and also which areas to expand their own branded lines of products. This data helped first party sales grow by $18 Billion, to $135 Billion in 2019, up from $117B in 2019, representing a 15.4% year-on-year increase.

Not to be outdone, the B2B-focused Amazon Business is anticipated to post a 60% year-on-year improvement of $16 Billion in revenue, up from $10 Billion in 2018 and on pace to break $53 Billion by 2023. While Amazon did not explicitly provide numbers for it’s B2B venture – the $10 Billion figure was disclosed by an Amazon blog post earlier in the year and the rest are projections – its clear that they enormous potential in business Ecommerce sales and are also relying heavily on the third-party marketplace model to grow that sector.

According to figures from Amazon themselves and projections from RBC, Amazon Business currently serves 55 of the Fortune 100, more than half of the top 100 hospitals, 40 of the top North American local governments by population, and more than 80% of America’s largest educational institutions. Those organizations certainly form a strong customer base, but – based on the lofty projections being floated by top analysts (like over $50 Billion by 2023) – it’s just the tip of the iceberg. With Forrester projecting US B2B Ecommerce to hit over $1.8 Trillion by 2023, Amazon sees the future, and it involves business-focused Ecommerce made almost infinitely scalable by the online marketplace model.

McFadyen Digital develops Ecommerce and Online Marketplace solutions for some of the top global brands. With world-class platform partners such as Mirakl, Adobe, Magento, SAP, Oracle, and Shopify, we architect, build, and scale award-winning enterprise digital commerce properties. Contact us at info@mcfadyen.com to see how we can help you.

SOURCES: Amazon.com, Inc., RBC Capital Markets December 2019 All Business About Amazon Business Report, Forrester Research