Amazon has millions of sellers, and yet only 2% are able to build a business?


#1

Interesting article thought I’d share. I didn’t write it, just sharing.


Headline - Twenty Thousand Amazon Millionaire Sellers (Revenue, not profit)
source: MarketplacePulse
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Amazon has announced that more than 20,000 Amazon marketplace sellers worldwide surpassed $1 million in sales in 2017. Known for rarely releasing details about the marketplace businesses Amazon has introduced the Small Business Impact Report this week.

In the most recent Amazon sellers breakdown by sales volume research we estimated that there are 15,000 sellers worldwide with sales surpassing $1 million, not far off from the official figure given the limitations of the methods used.

“Amazon first invited small businesses to sell on Amazon nearly two decades ago, and today small businesses and entrepreneurs are a vital part of Amazon’s continued growth and commitment to customers.”

– Jeff Wilke, CEO Worldwide Consumer, Amazon

Previously Amazon mentioned the number of sellers with more than $100,000 sales in a year, a figure which has grown from 70,000 in 2015, 100,000 in 2016, to 140,000 last year. However given the average retail margins not all of those sellers could treat it as a full-time job, let alone a business. The $1 million sellers though are at a size allowing to support at least a few employees.

Amazon has millions of sellers, and yet only 20,000 were able to build a business.

Amazon Sellers by State (Pie Chart)

Amazon has also highlighted that more than a million US based sellers sell on the marketplace, 300,000 of which joined last year. A metric which looks impressive on its own, but in terms of job creation and retail impact is meaningless. Meaningless because less than 1% of sellers generate more than $20 billion in sales.

The one million US based sellers are mostly located in California, New York, and Florida. Top 7 states also including Texas, Illinois, New Jersey, and Pennsylvania account for more than half of all sellers. The list order is similar to that of eBay.

The Amazon marketplace has been growing in impact somewhat invisibly to most consumers and even retailers. Only recently the headline “Half the items purchased on Amazon come from small and medium-sized businesses” has become commonly used by the company. Previously the communication rarely included any mentions of the marketplace. Because of the critique for destroying retail jobs, the company has chosen to be more vocal about their estimate of 900,000 jobs created by the marketplace sellers too.

The increased mentions of the marketplace are likely also part of a long-term plan to transition Amazon from being a retailer.

It’s no surprise that the Amazon marketplace is growing faster than the Amazon’s own retail sales (known as first-party or 1P for short), because it carries less inventory risk and scales better. It’s also more profitable for Amazon. Thus now that the marketplace has passed 50% of all units sold and estimated 60% of sales, the question is how will Amazon’s strategy change once it reaches 70% and then 80% in the next five years. At some point Amazon will be able to focus on creating their own products and building infrastructure/services businesses, leaving to the marketplace to source the products.

State Sellers Count
California 175,000
New York 81,000
Florida 75,000
Texas 62,000
Illinois 38,000
New Jersey 36,000
Pennsylvania 35,000
Virginia 28,000
Ohio 28,000
Michigan 28,000
Georgia 28,000
Washington 27,000
Massachusetts 25,000
North Carolina 24,500
Colorado 20,000
Arizona 19,000
Maryland 18,000
Minnesota 17,000
Missouri 15,000
Wisconsin 14,000
Utah 14,000
Tennessee 14,000
Oregon 14,000
Indiana 14,000
Connecticut 12,000
South Carolina 9,000
Nevada 9,000
Kentucky 8,000
Alabama 8,000
Kansas 7,000
Iowa 7,000
Oklahoma 6,500
Louisiana 6,500
Idaho 5,000
New Hampshire 4,500
Nebraska 4,500
Arkansas 4,500
New Mexico 4,000
Maine 3,500
Mississippi 3,500
Delaware 3,500
Rhode Island 3,000
West Virginia 2,800
Hawaii 2,700
Montana 2,500
Vermont 2,000
South Dakota 1,700
Wyoming 1,600
North Dakota 1,500
Alaska 1,400

Edited to remove off site web link. - Glenn S.


#2

If you’re looking for an answer for that question mark in the title, there it is right in paragraph 3.


#3

Oh, I’m well aware of the challenges of marketplace selling. This is our 14th year.


#4

The ONLY reason the story line changed is the fact that is was mentioned on the this forum how many are hobby and part sellers with sub $100k USD in sales.

Big deal, many of us surpassed a million a year on eBay 15+ years ago.


#6

A few years ago I had employees specifically servicing our Amazon sales. My company got a short haircut and had to let them go. Pretty sad, it was like a sucker punch to them. They worked so hard to build our sales and provide first class service and quality product, ultimately it is my fault for assuming Amazon was on our side.


#7

Most small retail businesses go bankrupt in 3 to 5 years, so you won’t see lots millionaire sellers out of the millions of Amazon sellers. Lots of businesses go bankrupt and fold but a lot of newbies also rise. Amazon wins every time either way.


#8

Years ago it was because they lacked the work ethic required by success and that is why the failed selling online, that is not the case in the present.

A few years back success was in scope of MANY MANY more folks than it is now.

Now days, you don’t have a chance on Amazon due to the hyper saturation of sellers, the promotion of retail / online arbitrage, private labeling generics and the list can continue on.


#9

Don’t think most Amazon sellers expect to surpass $1M. $100,000 annual sales can mean success depending on what your goal is. I’m happy with my little piece of the pie.


#10

You keep mentioning this. What exactly happened?


#11

Reminds me of the line from the movie Scarface:
You be happy, not me.
LOL.


#12

Not everyone needs a million dollars in sales to replace their full time job. Particularly those who have margins unlike what the know nothings at marketplacepulse assume.

Now that the seller profile for individual sellers does not include the products tab, where will marketplace pulse find the data to mislead the public about Amazon sellers.

I know, using their crystal ball to interpret the deliberately vague data Amazon provides.


#13

Interesting statistics, but your million dollar threshold for whether one has “built a business” (or not) is completely arbitrary and pointless. There’s your problem. There are lots of long term profitable businesses out there that churn less them a million in revenue a year.

If your threshold for whether you’ve built a successful business, or not, is a million/yr in sales fine, whatever. I have my own measure of success that’s just as valid as yours is.


closed #14

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