THE BIG IDEA
Well, is it? The subject of whether the Amazon marketplace is too saturated has been debated for a long time now. The question boils down to, "is it too late to sell and succeed on Amazon? Is it worth trying?" Arguments often fall under one of these statements:
A. Existing sellers have all the advantages and market share on the platform, there's no way a new seller could make it
B. The spike in new sellers joining the marketplace has made it impossible to stand out and compete.
Well, good news, everyone, there's room for us all.
Competing in a saturated marketplace is a dog-eat-dog world where market share is taken from one another to succeed. Lucky for us, it turns out there's plenty of Amazon to go around. As an existing seller, it's reasonable to be wary of new sellers coming in and stealing your customers; however, the number of sales earned by sellers from 2017 and earlier is actually increasing and holds the majority percentage of sales on Amazon. Seasoned sellers continue to thrive while the number of new sellers grows.
"Because Amazon continues to grow and seller moats are relatively limited, new and existing sellers are competing for a growing pie of GMV. Additionally, 33% of the current volume is by sellers that joined more than five years ago. A year ago, it was 23% and the year before that 16%."
New sellers, on the other hand, despite the continued success of existing sellers, are still in an excellent position for growth. The evolving industry and expansion of the overall marketplace mean that everyone can get a piece without stepping on each other's toes. Those who are just beginning to sell on Amazon are continuously finding opportunities for marketplace growth, spotting niches, and ultimately, succeeding on Amazon without taking away sales from existing sellers.
There's hope, after all. The growth of e-commerce accommodates all sellers to be able to find success on Amazon. Your selling outcome relies more on how you play by Amazon rules, carry out strategies to remain competitively advantageous and your ability to the changing industry.
NEW ON AMAZON
If you were wondering when Amazon would expand and become an even bigger behemoth of a marketplace than it currently is, that time would be now.
Amazon recently announced that nearly 100 countries were added to their Approved Sellers List and can now register for selling on Amazon, bringing their total to 188. Most countries are in Africa, Central Asia, the Middle East, and South America. These additions will lead to the accessibility of goods from around the world, making it easier for consumers to shop globally.
Before this announcement, sellers from certain countries would collaborate with neighboring countries businesses' to get their products listed on Amazon.
"Since 2015, Fiza Muhammad, a linen exporter from Pakistan, has sold towels, bed sheets, and pillows to Amazon customers in the United States and the United Arab Emirates. But in order to run her business, she was forced to rely on a partner in Dubai," Louise Matsakis at Rest of World
Currently, China holds the largest share of sellers. Only nine countries have more than 10,000 on Amazon.com. Now places like Pakistan can become significant players in the marketplace, similar to how many Chinese manufacturers use Amazon as a DTC platform. Amazon, as we know it now, may be very different in the next couple of years with these updates as Amazon continues to expand and become a truly global marketplace.
TRENDS TO FOLLOW
The trend of acquiring Amazon businesses continues as an organization like Perch grows and dominates the space. In an interesting AMA on Reddit, Nate Jackson, the VP of Acquisitions at Perch, answers questions about what the process of acquiring an Amazon business looks like and what companies like Perch look for.
Below are some of the thread responses we found most interesting:
Q: What metrics do you analyze when looking to buy a company?
A: The first thing we're looking at the financials like revenue and Seller's Discretionary Earnings (SDE), and there's a lot of great resources out there that help you understand your SDE, like the blog post here. We want to see a business with 20-35% SDE margins as an indicator that we are buying a healthy business.
Q: How does Perch differentiate itself from some of the other major players in space like Thrasio, Boosted, etc.?
A: I think a first point of differentiation in the market at this point is one of longevity. It's wild to say that 18 months in operation makes us an "old-timer" but it's true. We've learned a lot over the course of acquiring 70 brands, and I can say with 100% certainty that if I were a seller I'd rather be on the other side of my 71st acquisition versus my 5th or 6th! Thrasio was our main competitor when we started and they're continuing to grow well today. But there's a huge amount of players who have raised money but are still living through the early days of building the engine. I'm rooting for a lot of people to be successful, but it's also very hard and so I would say that one simple point of differentiation is experience at this point.
Q: Are you actually acquiring the seller account? Like do you have 100+ seller central logins? Or are you just buying the inventory and brand adding to a Master account?
A: Yes, in all except for one instance so far we're acquiring the seller accounts. And so yes… we have lots of seller accounts :). We are migrating to centralized storefronts so that we can streamline some of the account management, but the past year has been THE WORST period to try to do things like move inventory in and out of warehouses :).
Q: How do you maintain so many supplier relationships. In the 6+ years with suppliers, we have little things we constantly need to remind them etc. If the person sells to you and exits how on earth do you guys manage all of those suppliers?
A: You've hit the nail on the head on one of the major complexities of our business: supply chain. Managing the supply chain is probably the hardest job of any brand owner. That may be true for Perch too. Some of our biggest "whiffs" early on have been in taking on new suppliers: there was a situation where we placed an order and we're crazy enough to expect that the supplier would start it after the deposit was made and actually complete it on time. We didn't know that the seller had previously had to incessantly nag them every 2 days about status in order to get outcomes. That led to a missed shipment date, a painful out-of-stock period, and an expansion of our Supply Chain team.
Ecommerce is continuously changing, and competition is fierce. Sellers are looking at alternative channels to reach their customers and diversifying via Shopify integration. Is it worth it? Despite record sales on Amazon this year, there are still those who want to decrease their platform risk and recognize the benefits of integrating with Shopify. In addition to having FBA benefits, through Shopify, you’ll also be able to do the following:
Now, this would be a definite asset for those who rely heavily on branding for their products and were limited by Amazon rules are regulations. Are you considering adding Shopify as part of your Amazon strategy?