The Disappearing Amazon Resellers

Amazon conceived the marketplace to bring brands it couldn’t convince to sell onto the site. Thus, for years most of the sellers were large resellers with tens of thousands of products. However, increased competition and brands going direct has eroded this opportunity.

Only 10% of the top third-party sellers on Amazon have more than 1,000 products for sale. Five years ago, in 2016, that number was nearly 40%. According to Marketplace Pulse analysis of the top Amazon sellers, the share has steadily decreased since then. The number of products was chosen as an arbitrary point to differentiate large resellers from other types of sellers. Half of the top sellers currently have 70 or fewer products.

Some of the resellers stopped being active, others didn’t grow despite the overall GMV expanding, and others overhauled their business model. Most, however, were replaced by different types of sellers.

Percent of Top Amazon Sellers With 1,000 or More Products

Selling on Amazon has become synonymous with building private label brands because the reseller business model stopped working. Sourcing products from established brands was a repeatable and successful business model. However, dozens of sellers were soon competing for the sale. The way to avoid competition was finding a unique source (buying from diverters, for example), establishing exclusive rights to sell on Amazon, or selling goods other sellers couldn’t source. The latter is now known as private label brands.

Large catalogs also meant that few resellers were willing to invest in brand management and advertising. Instead, most resellers focused on sourcing as many products as possible and hoping to find a supply/demand opportunity. There was little interest (and space in the profit margin) in helping brands grow on Amazon because that would benefit future sellers. Only sellers with exclusive rights would do this. Everyone else approached Amazon with a disconnect from the goods they were selling.

Successful resellers are now often positioned much more like agencies than retailers. They present a third option to brands for selling on Amazon. Rather than selling wholesale to Amazon or selling directly as a seller on Amazon, the agency-reseller acts as the intermediary. Most brands are unwilling or unprepared to be sellers, and plenty is trying to move away from the wholesale relationship with Amazon.

There are still successful resellers left, and some new entrants manage to build a business around it. The few that remain are very strong. The market has moved on, however. This shift had second-order effects too. For example, demand for advertising tools replaced the need for repricing software. Selling on Amazon became more deliberate and calculated. Private label brands exploding the overall catalog size on Amazon is a third-order effect, a change Amazon is yet to grasp. Amazon went from having a few choices for each search with dozens of sellers competing to provide the best price, to virtually unlimited options no longer competing on price, but rather on the position in search results.

Most LEGO building sets have more than a hundred offers from different sellers. And from Amazon - the biggest competitor of resellers - too. There was an opportunity in the early 2010s before LEGO cared about Amazon and competition could figure out how to source it. Today that means being one of the hundreds selling a product pinned to the MSRP price.

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Juozas Kaziuk─Śnas

Founder of Marketplace Pulse, Juozas 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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