Here’s a crazy stat: Revenue from Amazon’s 3rd-party marketplace accounted for 60% of its retail revenue last year, up from only 3% in 2000.
The model is so successful that other online retailers — including mall-favorite brands like Express, J.Crew, and Urban Outfitters — want to roll out their version, per The Wall Street Journal.
Wait, WTF is the model?
Third-party ecommerce marketplaces are online retail listings hosted by a large ecommerce store, but sold and fulfilled by another seller — it’s like the internet’s version of a consignment store.
Retailers like Express are building marketplaces that align with their core product offerings. Think less “everything store” and more brands and products customers would associate with Express or Urban Outfitters.
The benefits for retailers are twofold:
- It allows a retailer like Express to offer a wider array of products — men’s grooming, activewear, etc.
- Express doesn’t have to buck up the cash to develop them in-house or fulfill the orders.
All this is good news for everyone BUT Amazon
Sellers on Amazon’s marketplace are finding it to be too competitive. In the article, WSJ interviewed Ken Zhang, the COO of a large Amazon retailer:
He’s seen his company’s return on Amazon advertising spend decline by 15%-20% in the past 3 years as the number of sellers has ballooned and competition for all retail categories stiffens.
Funny fact: Since the launch of Amazon marketplace, the company’s market cap has grown ~278x. Funny, if like us, you missed those gainz.
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