Sellers on Amazon reaping the benefits

Amazon
Amazon's growth is not all bad, as most sellers are also seeing the benefits. (iStock/AdrianHancu)

It seems third-party sellers are also reaping the benefits of Amazon, as profit margins continue to grow year over year for these sellers. Plus, Amazon is seeing continued growth of its private labels, according to The State of the Amazon Marketplace 2018 by Feedvisor.

In a survey of 1,200 Amazon merchants, Feedvisor found that advertising and increasing investment in the online marketplace is still priority. In fact, 12% of sellers spend more than $1 million annually, a 5% increase from 2017.

"We were surprised to see how quickly Amazon sellers have continued to mature into established, profitable enterprises," Dani Nadel, CMO and general manager at Feedvisor, told FierceRetail. "The ratio of sellers making more than $250,000 has increased to 40%, compared to 28% just last year. Notably, the number of lucrative Amazon sellers is on the rise, with 19% of sellers generating over $1 million in sales—a 9% increase since last year."

As a result, other marketplaces are feeling the blow. For example, the number of merchants also selling on eBay was down to 52% from 65% in 2017. But other online retailers are not being negatively affected, as the number of respondents focusing online at Walmart in 2018 is 36%, up from 29% last year. 

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So how can these other online marketplaces compete? Nadel says that Amazon is not able to influence the rankings on its site from competing brands, so other marketplaces can effectively compete by properly analyzing data flowing in and out of their stores in order to make better business decisions. 

"From planning inventory months in advance and making the most effective advertising choices to optimizing pricing decisions and product listings in real time, data helps merchants make the most critical business decisions in order to navigate the complexity of the Amazon Marketplace and grow their businesses," she said. 

Also found in the survey, sellers are expanding their businesses. In 2017, 84% of those selling on Amazon had between one and five employees. This year, that number is down to 74%, while the number of companies with 50 or more employees has increased by 5%. Plus, the number of sellers with more than $1 million in sales grew 9% from last year. 

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Finally, when it comes to competition, 40% of those surveyed said their top concern when it comes to Amazon is competing with the Buy Box and private label products. The next biggest concerns were Amazon fees, 33%, and negative customers, 32%. 

In the next few years, Nadel predicts that the retail industry will continue to see a growing interest in private label brands. She also expects more and more major brands to sell on Amazon directly. 

"Brands simply cannot ignore the 100 million Prime subscribers who are likely to choose Amazon as their first shopping destination. Brands must meet their customers where they are, and we expect to see more of them exploring a relationship with Amazon," she said. "As a result of this increased brand presence, we anticipate the rapid rise of new advertising and branding options that will help brands effectively convey their unique message and identity on Amazon."

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