- Amazon’s third-party business has grown at a faster rate than its first-party business, Amazon CEO Jeff Bezos wrote in his 2018 letter to shareholders.
- Sales from independent third-party sellers accounted for 58% of physical gross merchandise sold on Amazon in 2018.
- Bezos attributes this growth to programs like Amazon Prime, Amazon’s fulfillment centres, and the selling tools it provides to third-party sellers.
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Amazon’s booming retail business has made it one of the most valuable companies in the world. But according to CEO Jeff Bezos, sales of merchandise from small and medium-sized independent businesses have grown at a much faster rate than Amazon’s own first-party merchandise sales.
The compound annual growth rate for Amazon’s third-party sales between 1999 and 2018 was 52%, he wrote in his 2018 letter to shareholders. That’s more than double the 25% compound annual growth rate for the company’s first-party business over the same time period.
“Third-party sellers are kicking our first party butt,” he wrote. “Badly.”
Sales from independent third-party sellers accounted for 58% of the physical gross merchandise sold on Amazon in 2018, up from 3% in 1999.
Amazon attributes this success to various products and services, including the selling tools Amazon provides to its partners and the fulfillment centres and services it allows third-party sellers to use. Bezos also mentioned its $US119-per-year Prime membership program as a contributing factor.
“We could not foresee with certainty what those programs would eventually look like, let alone whether they would succeed, but they were pushed forward with intuition and heart, and nourished with optimism,” the Amazon CEO wrote.
See below for the share of physical gross merchandise sales that Amazon’s third-party sellers have accounted for over the years, as noted in the letter.
- 1999 – 3%
- 2000 – 3%
- 2001 – 6%
- 2002 – 17%
- 2003 – 22%
- 2004 – 25%
- 2005 – 28%
- 2006 – 28%
- 2007 – 29%
- 2008 – 30%
- 2009 – 31%
- 2010 – 34%
- 2011 – 38%
- 2012 – 42%
- 2013 – 46%
- 2014 – 49%
- 2015 – 51%
- 2016 – 54%
- 2017 – 56%
- 2018 – 58%
Bezos is highlighting the high growth rate of its third-party business amidst a call to break up large tech firms like Amazon. Sen. Elizabeth Warren, the Massachusetts Democrat running for president in 2020, announced a plan in March that would require firms like Amazon and Google to adhere to a new set of antitrust rules. The proposal would rollback certain mergers and would prohibit companies from competing on the platforms that they operate. She proposes, for example, that Amazon Marketplace and Amazon Basics be split apart.
The letter also comes as working conditions in Amazon’s warehouse fulfillment centres have come under increased scrutiny in recent months. In December, a New York labour union published a report in which it called employment practices in Amazon’s fulfillment centres “deadly and dehumanising,” which Amazon responded to with a statement that called the report “a rehash of inaccurate and exaggerated news stories.”
Bezos also noted in the letter that Amazon’s decision to raise its minimum wage to $US15 per hour has benefitted more than 250,000 Amazon employees and more than 100,000 seasonal employees, challenging Amazon’s top retail competitors to do the same.
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