Amazon Reveals the Importance of Marketplace Seller Services

Yesterday Amazon released their 2017 Q1 results. It was a yet another stellar quarter for the company. But the most interesting part was how Amazon reports revenue.

For the first time Amazon reported quarterly revenues for marketplace seller services, showcasing the importance of the services it provides for marketplace sellers. Last time it broke out a new category was Amazon Web Services (AWS). This revenue source is growing faster than revenue from selling products, which is not surprising considering that the marketplace is half of Amazon’s sales and FBA share is growing too.

Growth by segment:
Retail products - 16%
Third-party seller services - 36%
Subscription services - 52%
AWS - 43%
Other - 58%

Third-party seller services include commissions, related fulfillment and shipping fees, and other marketplace seller services. Last quarter it brought in $6.4 billion, which is more than one in six dollars of total revenues, up by 36 percent from last year.

We estimate that as a whole, marketplace sellers will pay Amazon more than $35 billion during 2017 for third-party seller services, up from $23 billion last year. Plus a few billion more for ads. This is why Amazon has broken out seller services revenue into its own segment.

Revenue from third-party seller services, subscription services (mostly Prime memberships), and the other category (believed to be mostly the ads business) are all growing faster than product sales. As Amazon shifts from being a retailer to an e-commerce infrastructure company their growth is in providing services. Prime, FBA and product ads being the core services right now, more to come.

Amazon’s net sales in North America jumped 23 percent to $20.99 billion. North America region remains to be profitable. International sales are growing too, but are years away from posting a profit. India is one of the key markets Amazon is trying to win in, and thus their investments there are large. Amazon.in is the fastest growing marketplace in India.

This quarter was the eight straight quarter Amazon has posted a profit. Net income rose to $724 million. Amazon is often referred to as a company unable to make profits, but this is a result of them reinvesting back to growth. We are not sure why Amazon has decided to have a streak of profitable quarters.

Amazon continues to appear unstoppable.

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Juozas "Joe" Kaziuk─Śnas

Founder of Marketplace Pulse, Joe wears multiple hats in the management of Marketplace Pulse, including writing most of the articles. Based in New York City. Advisor to other startups and entrepreneurs. Occasional speaker at conferences.

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