The Latest on Amazon Marketplace: Updates You Should Know About
It’s no secret that Amazon continues to dominate the eCommerce business, driving over 45% of online shopping in the United States over the past few years. It has also empowered small and medium businesses to participate in the growing world of eCommerce: roughly half the sales that occur on the platform are from third-party vendors.
Amazon continues to evolve and grow, making it essential for anyone involved in the eCommerce world to keep on top of changes and updates. Today’s blog gathers together some of the biggest news from the past few months that’s most relevant to third-party vendors and eCommerce businesses.
The State of Things for Third-Party Vendors
In 2020, third-party vendors on Amazon generated sales totalling over $80 billion. There are now over 5 million third-party vendors registered on Amazon, which has recently expanded to allow vendors from over 180 countries (more on that later). Of those five million vendors, more than 225,000 are making over $100,000 in sales each year.
As you might expect, the holiday season is hugely profitable for Amazon at large and third-party vendors in particular. In 2020, customers ordered more than one billion products from marketplace vendors during the holiday season. 140 million items were ordered between Thanksgiving and Cyber Monday alone. Overall, the fourth quarter of 2020 saw the most sales on the platform by far, and Prime Day (which last year occurred in October) continues to be the single highest-conversion day of the year.
Though Amazon is a vital platform for many small and medium businesses, about 80% of Amazon vendors sell on more than one platform. Amazon is great for visibility, but it’s an extremely competitive platform due to the sheer volume of registered vendors. Even as Amazon grows, other marketplaces keep trying to secure a foothold in the industry by offering distinctive incentives to vendors and buyers, while individual companies push sales on their own platforms. Amazon promises the chance of excellent profits and visibility, but with constantly changing algorithms and policies, selling exclusively through Amazon might not guarantee a steady income.
Amazon Marketplace’s Global Expansion
Earlier this year, Amazon added 85 new countries to its Approved Sellers list, which now contains 188 countries. Coupled with its recent addition of new marketplaces such as Amazon Poland, these expansions indicate Amazon’s intentions to grow on a global scale.
It’s easy to see the motivation behind these expansions. Though the United States continues to be a powerhouse in global eCommerce, China has a much larger eCommerce market, and dozens of other countries recorded double or triple-digit growth in 2020. In 2021, over 2.14 billion people are expected to make purchases online, representing almost five trillion dollars in sales. Scaling your business to the global marketplace currently has huge potential and may be easier than ever.
Amazon has plenty of competition in other countries from eCommerce giants like MercadoLibre in South America, Rakuten in Japan, TaoBao in China, and Shopee in Southeast Asia. However, if you want to sell in these regions, Amazon has the distinct advantage of its ease of use.
With Fulfillment by Amazon or FBA, vendors can allow Amazon to handle shipping and returns across all of Amazon’s 19 global marketplaces. FBA can also provide customer support in local languages, which vendors are otherwise required to provide themselves. Meanwhile, Seller Center Language Switcher provides an English-language interface to manage operations in any global marketplace.
Tools such as Build International Listings (BIL) help vendors list their products on different global marketplaces in a few simple steps, automating tasks like creating offers in the target marketplace, creating and translating product pages, and adjusting prices to reflect currency conversion fluctuations.
Small and Medium-Sized Businesses Won Big on Prime Day 2021
Prime Day 2021 was the biggest two-day period ever for Amazon’s third-party sellers, who saw a more than 100% sales increase compared to Prime Day 2020. During this event, third-party sales grew even more than Amazon retail did. In the two-week lead-up to this year’s Prime Day, Amazon funded a Spend $10, Get $10 promotion, which encouraged customers to buy over $1.9 billion worth of products from small businesses during that time.
The timing of Prime Day 2021, which occurred on June 21-22, likely contributed to this year’s extraordinary success. Back-to-school purchases accounted for millions of sales including laptops, backpacks, notebooks, calculators, and art supplies.
Amazon’s Prime membership program recently reached 200 million users, up by 50 million from the beginning of 2020. Since Prime Day deals are available only to members, this massive growth contributed immensely to this year’s record sales.
For third-party vendors, the growth of Prime is nothing but good news. Prime users spend over $1,000 a year on average, whereas non-Prime Amazon shoppers spend between $100 and $500 a year. Since Prime members get free shipping on eligible purchases, they make these purchases more freely. If you’re a third-party vendor on Amazon, you have great incentives to make your products Prime-eligible.
New Features in Amazon Advertising
With such an oversaturated market, advertising is more important than ever for Amazon vendors. In August 2021, Amazon Advertising announced a new feature, the Budgets Page, which is currently in beta. It provides performance insights and suggestions using machine learning technology to estimate the missed sales, clicks, and impressions that occurred during the time a given advertising campaign was outside of its budget.
Easily accessible from the Campaign Manager, this feature allows sellers to adjust their advertising budgets to ensure they aren’t missing out on sales they could have generated. The Budgets Page suggests a recommended daily budget for each campaign to optimize ad spend.
It’s important to note that these metrics are estimates based on historical performance, not guarantees, and the feature is still in its beta phase. However, if you’ve been advertising on Amazon for a while, it can be worth considering these new insights.
Daily budgeting for Sponsored Ads has also seen some changes recently. This feature now allows vendors to balance their daily budgets throughout the month by exceeding their average budget by up to 25% on high-traffic days and saving money on low-traffic days.
The Brand Referral Bonus Program: A New Incentive for External Traffic
In July, Amazon announced a new program to compensate registered sellers for driving external traffic to Amazon product pages and generating sales. Registered sellers can earn an average bonus of 10% on qualifying sales.
This new program, the Brand Referral Bonus Program, can help vendors scale their business by compensating them for their external marketing campaign costs. As prices for Amazon Advertising rise, many eCommerce businesses are turning to other methods of driving traffic to their Amazon product pages, and this program can help fund those efforts. Meanwhile, Amazon Attribution helps keep track of which methods lead to the most sales, as well as ensuring that the external traffic you generate counts towards your Brand Referral Bonus.
The Brand Referral Bonus Program is only available for registered brand owners, so resellers and affiliate marketing associates aren’t eligible. However, if you aren’t enrolled in Brand Registry, the Affiliate Marketing program can allow you to earn commissions for external traffic you direct to Amazon.
The Future of Amazon Marketplace
Despite having more competition than ever, third-party vendors continue to use Amazon Marketplace to make billions of dollars in sales. As eCommerce continues to grow as an industry, gradually eclipsing in-person retail, Amazon remains one of the most visible platforms for small and medium businesses.
Amazon isn’t the only player, but it’s a vital one for many eCommerce businesses. We hope this post helped you get up to date with the new changes and developments in the Amazon Marketplace, and learn why owning a third party store in 2021 and beyond is still one of the most valuable assets available for financial growth in the world of eCommerce.