Amazon has released some interesting numbers about the 2016 year. The key takeaway is the growth of Fulfillment by FBA (FBA) program, especially when considered where those sellers are coming from.
Amazon.com has been the most important ecommerce website worldwide for years, and many companies outside of the US have realized this. However for Europe and Asia based companies competing with domestic retailers was always a tough battle, since shipping times and costs were considerably higher.
All of this changed when Amazon expanded the FBA program to allow foreign companies to send products in. After that change, even companies as far away as China could ship their products to Amazon and thus achieve the same last-mile fulfillment speed as any comparable domestic seller.
Today this was confirmed by Amazon when they mentioned that sellers from 130 different countries used the FBA program. The list of countries successfully selling on Amazon would be much shorter if sellers couldn’t use FBA. Over the years Amazon has built a marketplace where retailer’s physical location in the world is irrelevant as long as they use Amazon for fulfillment.
Amazon has shared that sellers using the FBA program grew more than 70%. Part of this is the aforementioned international growth, part is domestic sellers realizing that customers want Prime. Seller Fulfilled Prime program allowing sellers to have Prime status without using the FBA program is growing, but most sellers choose to go all-in by using FBA.
And thus the FBA growth at 70% year-over-year. Some would argue that Amazon is creating a monopoly by forcing sellers into using FBA. However this change is dictated by the growth of the Prime program.
The more Amazon customers join Prime, the more pressure there is on sellers doing their own fulfillment. Even if they offer great pricing, Amazon will often choose a FBA seller for the buy box. The fact of the matter is customers paying for Prime want Prime shipping, even if a product costs a bit more. Reliability and quality of shipping is more valuable than trying to find the cheapest deal, often risking buying from a shady seller.
Jeff Bezos, CEO of Amazon, previously announced that there are over 70,000 sellers with sales of more than $100,000 selling on Amazon. Today it was shared that this number has grown by 30%. Does that mean there are 91,000 sellers with more than $100,000 in sales? Likely so. The previous 70,000 number had no date attached to it, so we can only guess if the 30% growth rate is based on it.
For marketplace sellers all of this means that FBA should be at least considered, if not then the Seller Fulfilled Prime. Over time customers buying from sellers not offering Prime is going to keep decreasing.