The Prime Effect on Amazon Marketplace

Amazon’s Prime program now includes more than 100 million members worldwide. That makes it one of the largest loyalty programs in the world, and as a result Prime members as a group are influencing retail as a whole. Not only are other retailers waking up to having to offer “free” two-day shipping, other marketplaces are finding their own ways to enable unifying shipping experience.

“Alongside life, liberty and the pursuit of happiness, you can now add another inalienable right: two-day shipping on practically everything.”

Christopher Mims, The Wall Street Journal

Two-day shipping in the US is the norm. Free two-day shipping is the only option. That’s the effect of Prime over a decade in existence.

And so Prime is the norm on Amazon. The marketplace, which when Prime launched in 2005 contributed less than 30% of overall units sold on Amazon, but has since grown to more than 50%, has to be Prime-enabled too. The consumer on Amazon is single-minded - for the marketplace to work it had to match those expectations.

Since we started tracking the Amazon marketplace more than three years ago we noticed a steady increase in the number of sellers offering products through Prime. 9 out of 10 top sellers now offer Prime for at least one product, up from 7 out of 10 three years ago in 2015. Furthermore, 7 out of 10 top sellers offer Prime for more than half of the catalog, up from 4 out of 10 three years ago.

Number of the top Marketplace sellers that offer Prime

The growing Prime products is enabled by FBA. Launched twelve years ago on September 19th, 2006 Fulfillment by Amazon (FBA) has become a cornerstone service enabling the Amazon flywheel. Fulfillment by Amazon, or FBA for short, is an Amazon program which allows sellers to offload most of their warehouse operations to Amazon for a fee. Customers buying from FBA sellers get the same two-day Prime shipping and thus sellers get preferential treatment in buy-box rotation.

Sellers choose to store inventory in FBA not because it is more convenient or cheaper than the alternatives. They do so because it unlocks access to more shoppers on Amazon. And thus over the years those who do got more successful than those who don’t. It’s all about that Prime checkmark.

The Prime members, marketplace marketshare, marketplace GMV, and FBA usage growth charts all align. They look the same. Because, unsurprisingly, these metrics are interconnected. And what powers that, the force behind the scenes, is the shopper. The millions of shoppers who choose to pay $119-a-year for the Prime program is what the marketplace follows.

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Juozas Kaziukėnas

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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