Monday, August 11, 2008

Amazon's Third Party Business is $6 Billion!

I came across a blog post this morning that estimates Amazon's Third Party GMV at $6 billion which is roughly 10% of eBay's $60 billion in GMV. I think that is quite impressive since Amazon has half the categories available for 3P sellers, doesn't sell using the auction format (50% of eBay's GMV) and they have 20 fewer countries to sell in -- they also don't sell cars like eBay (Motors) and sell tickets like StubHub.

I wonder how that $6 billion in GMV stacks up with eBay on an Apples to Apples comparison?

---

Now the blogpost went on to assert that the reason Amazon's 3P business isn't bigger, is because their fees are too high:

Amazon’s higher fees and commission rates are the most significant factor holding back retailers from selling more products on the platform. Amazon charges higher initial fixed fees than eBay and has a 13% average commission rate that does not step down as the value of the sold product increases, compared to eBay’s 8.1% average take rate. Based on our discussions with third party sellers, we believe that if Amazon reduced its fees and commissions for selling products, it could meaningfully accelerate the pace of third party sales growth.

I can't really wrap my head around that concept. Amazon's fees are certainly high, but I talk to a wide variety of 3P sellers every day and honestly Amazon fees never come up. Sure, if asked, sellers would say they would list more if fees were lower but that is not the most significant factor affecting Third-Party sales on Amazon.

I contend that Amazon's growth in 3P will accelerate as it expands categories. Many of Amazon's categories are closed or gated, meaning that 3P sellers must be approved to sell in those categories, and there is a waiting list a mile long to get in. Also, Amazon doesn't have anywhere close to as many categories as eBay does, so as they roll out new categories that portion of their business will grow.

It really has nothing to do with fees, sure fees could be lower, but they aren't the reason Amazon's 3P business is a 10th the size of eBay's.


Just my 12%

10 comments:

Anonymous said...

We did the math prior to selling on Amazon and, even with the monthly fee and 15% commission fees, our net is considerably higher on Amazon. Yes, their fees are higher, but not so much when you factor in the listing fees on ebay. In addition, buyers on Amazon will pay full retail or retail less a reasonable discount; they don't have that flea market mindset. It makes a huge difference in our bottom line. Would we rather pay lower fees? Of course. But consider all one gets for those fees and Amazon wins hands down.
Just my 15%.

Rich said...

"It really has nothing to do with fees"

If they opened up collectibles categories I would be there [and have been for years with media]. Seems like vintage is a can-o-worms they are in no hurry to get involved in.

Meanwhile, I have items I can no longer stomach listing on eBay---with no real alternatives. This is a real niche problem no one is addressing in a meaningful way.

All's we discuss is MEDIA since it can be easily long-tailed and or digitally stored. What about all us tangibles types who sell old stuff---how do we loosen ourselves from the "tyranny of the shelf?" and take advantage of unlimited free online bandwidth?

eBay doesn't seem to want us.

Randy Smythe said...

Rich, eBay wants you because you have nowhere else to go and you pay retail fees.

Amazon, is just slow to open up categories and there are some real issues to opening up to Vintage etc.

Anonymous,

I agree and that is what I'm hearing from all corners. Fees only become a problem when the value you receive is less than what you are paying for (eBay).

Henrietta said...

If you are selling vintage you can sell on Etsy, which is a pleasant place to do business, upscale and growing.

As a seller I judge the cost of fees by value received, value is not just $$. Amazon clearly states the rules, enforces them, has living CS and is trusted by both sellers and buyers.

Amazon keeps its side of the bargain with transparency, has a stable platform and looks before it leaps onto the latest fad. There is no comparison in Buyer Protection and sellers do not need protection from buyers on Amazon.

I am interested to know where you get the 8.1% figure for eBay, we were happy to achieve 12%.

Randy Smythe said...

Henrietta,

That 8.1% number is a number tha analyst used in the the quote above. It is supposed to be the take rate on eBay.

In my category (media) it was closer to 17%

tula said...

Don't forget that Amazon's 15% includes credit card processing, whereas you have to add in the Paypal costs to what eBay charges. Throw in listing fees (which add up when your stuff doesn't sell -- very common scenario on eBay these days) and Amazon looks better and better.

Techmom said...

Maybe I'm missing something but I am about to close my Amazon account because their commissions are WAYYYY too high. 15% is, in my mind, ridiculous. I pay only 2.9% plus .30 each sale with PayPal by selling through my own website www.babysproutnaturals.com. Sure I do not have the traffic that Amazon has but then again, even if I do come up on Amazon, buyers are looking for the lowest price. If I set the lowest price then I barely make a profit after Amazon takes their cut. To me it just isn't worth it. I would rather sell the product on sale myself and give that savings back to the customer.

Randy Smythe said...

Techmom,

Many product categories work very well on Amazon just as others do on eBay.

Sellers generally go where the traffic is and Amazon's traffic is worth the cost to many, but not all.

Sellers should go where they feel comfortable and can get the most value. Amazon and eBay might not be the places to go for everybody.

If you are happy with the business you can generate from your website, there may be no need to sell elsewhere.

It really depends on your goals.

Anonymous said...

Amazon.com is hardly retail when it comes to the products the merchants are selling. The very high commission rates require the merchants to raise their prices grossly to even make any sort of profit. If for instance my company sold a Serrano Ham on Amazon.com we'd earn $8 on a $250 sale while Amazon.com earned $50. Amazon.com charges a 20% fixed commission on both the product price ($230) AND the shipping cost ($20) which effectively destroys the ability for any vendor to distribute on Amazon.com without raising their prices (unless they are the manufacturer or are a bona-fide wholeseller (which come to think of it is actually illegal to do in the US if the customer doesn't have a sales tax license; in fact...I believe I'll write the feds on this one).

Anonymous said...

Forgot to add that on our website we sell the identical products that we sell on Amazon.com but for 25-100% LESS. (if we sold a $4 item on Amazon which has $8 in shipping we'd end up losing money because of our profit margin and thus are required to raise our prices considerably. It's sad how many people are still willing to pay that premium even though our websites search results appear before Amazon.com' do and the price differences are clearly defined on Google product search. People are stuck in their habit of purchasing from the wal-mart of the internet and it's sad to see that they have lasted as long as they have while pillaging from their own customers.