Every year at least tens of billions of dollars worth of goods are sold directly from China to consumers in the US and elsewhere. Without the excitement, attention, and venture capital other parts of e-commerce have received, it is this quiet industry capturing the profits. It didn’t exist before 2010.
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After experiencing all-time high negative seller reviews in May, Amazon has recovered to levels seen before the pandemic started. Seller reviews are the best indicator of Amazon shopper sentiment since they capture as much as ten million opinions a month.
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Amazon is struggling to accept some inventory shipments in time, which is causing products to sell out, leading to a drop in search rankings and quantity restrictions. The previously predictable inventory cycle with known restrictions and fees has become unpredictable.
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For the first time, in the second quarter, Amazon’s fastest-growing business segment was the marketplace. Revenue from transaction and fulfillment fees was up by an all-time-high 53% in the quarter, indicating strong sales by the marketplace sellers.
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Walmart marketplace has surpassed 50,000 sellers, doubling in size from July 2019. The partnership with Shopify, announced on June 15th, has accelerated its growth, bringing over 5,000 new sellers during the six weeks since.
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Amazon has increased the number of placements promoting its brands. Out of twelve ad spots on its website and six on its mobile app, three feature its private label products, for some searches. Amazon is giving up advertising revenue it would have made otherwise by selling ads to brands to promote products which profit is unlikely to offset the loss.
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Amazon's sales growth is unrelated to its catalog increase. No matter how many products Amazon adds to the catalog, there are only 48 items on the first page of search results. The outdated retail concept of the catalog size disregards the nuances of e-commerce, where shelf space has no cost and is thus endless.
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Recent months have highlighted the vulnerability that stems from Amazon’s fulfillment operations: Amazon warehouses and ships practically everything sold on Amazon. The same FBA moat that allows the company to provide a consistent shopping experience despite millions of sellers behind the scenes is a single point of failure. As it tries to protect that single point of failure, it needs increasingly strict quantity restrictions, high fees, and complex rules for sellers using FBA.
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Amazon will begin displaying the business name and address of sellers in the U.S. marketplace starting September 1st, putting the U.S. marketplace in line with the European, Japan, and Mexico marketplaces, where this information was always available because of local laws.
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The majority of sales volume on the Amazon marketplace comes from sellers that have been on it for years. That signals the controlled churn and high longevity of those businesses. At the same time, new sellers bring incremental growth.
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