If anyone had any doubt that Amazon is sick of owning inventory and is more focused on selling services than Apple is, look no further than Jeff Bezos comments in today’s shareholder letter:
The percentages represent the share of physical gross merchandise sales sold on Amazon by independent third party sellers – mostly small- and medium-sized businesses – as opposed to Amazon retail’s own first party sales. Third-party sales have grown from 3% of the total to 58%. To put it bluntly: Third-party sellers are kicking our first party butt. Badly. And it’s a high bar too because our first-party business has grown dramatically over that period, from $1.6 billion in 1999 to $117 billion this past year. The compound annual growth rate for our first-party business in that time period is 25%. But in that same time, third-party sales have grown from $0.1 billion to $160 billion – a compound annual growth rate of 52%. To provide an external benchmark, eBay’s gross merchandise sales in that period have grown at a compound rate of 20%, from $2.8 billion to $95 billion. Why did independent sellers do so much better selling on Amazon than they did on eBay?
Although Jeff takes a swing at eBay, Amazon truly realizes the beauty of the inventory-less business models used by eBay and Alibaba. Lower cash requirements and better margins. When you chart out the growth, the growth is truly staggering: