Black Friday and Cyber Monday mark the beginning of the holiday dollar scramble in the US. Traditional retailers are taking a page out of Amazon’s books. They are building online marketplaces where third-party sellers can offer their products.
Walmart, Target, Staples, Macy’s and Express are among the hundreds of retailers that have opened their websites to outside suppliers in recent years. They aim to drive web traffic by increasing the range of products available on the company’s website without the risk of inventory. It can be a lucrative way to drive growth online.
Third-party sellers cover most of the costs by keeping items in their own warehouse and shipping the items to customers. Website hosting usually takes 5 to 15% commission on sales. Companies can also sell advertising, delivery services, or even merchant lines of credit.
All are looking to compete successfully with Amazon’s Third Party Marketplace. Launched in 2000, the business now accounts for about 60% on Amazon’s online sales volume. It creates Revenue $80.5 billion for Amazon last year. That’s more than one-fifth of the team’s total, and nearly twice what the AWS cloud business pulls in. However, the latter business is still more profitable, accounting for 60% of the group’s operating profit last year.
Amazon’s third-party business has grown so much that it’s enabled antitrust probe. In Europe, regulators have accused the world’s largest online retailer of unfairly exploiting data about third-party sellers. In the US, a top legal official is looking into whether Amazon encourages retailers to sell their products on other sites.
These are not the only risks of opening the door to outside vendors. Topping the list is quality control. Amazon has come under closer scrutiny for the sale of counterfeits, unsafe goods, and even fences.
Markets where there are few competitors attract suppliers most easily. Even so, retailers like Walmart still have a long way to go to catch up with Amazon, which has nearly 2 million sellers on its platform.
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