Amazon: Third-Party Sellers on the Rise

The corona crisis brought along a record high for Amazon’s third-party business in Germany: Around two-thirds (65.1%) of the revenue generated via amazon.de in the peak months of the crisis between March and May 2020 were generated by third-party sellers, according to Amazon’s German blog on aboutamazon.de. This is a rise of almost 4 percentage points compared to the same period of the previous year (61.1%). Amazon’s marketplace business has grown in general – not only in the wake of the corona pandemic, and certainly not only in Germany. In the past, Amazon CEO Jeff Bezos used to be quite reserved when it came to disclosing company details. In a letter to shareholders published in late 2019, however, he first announced concrete figures on the role the third-party business plays on Amazon – revealing a success story that came as quite a surprise to many: “Third-party sellers are kicking our first party butt” is how Bezos called it. Independent sellers have been responsible for more than half of all physical merchandise sales on Amazon in the past years is a more formal way to put it. With a compound annual growth rate of 52% between 1999 and 2018, independent sellers sold physical merchandise worth US$160 billion on Amazon in 2018 – compared to “only” US$117 billion sold by Amazon’s first-party organization.

Amazon started as an online retailer and opened its business for third-party sellers around the turn of the millennium. In 1999 – the year of birth of Amazon as a marketplace – third-party sellers contributed only 3% to Amazon’s gross merchandise sales. Since then, the marketplace business has constantly grown and brought more and more money into Amazon’s pockets. In 2004, third-party sellers were already responsible for one fourth of Amazon’s gross merchandise sales. Ten years later, the 50% mark was surpassed – since 2015, third-party sellers have constantly made up more than half of all physical gross merchandise sales on Amazon. The latest reported figure from 2018 attributed a share of 58% in gross merchandise sales to the third-party business.