Jeff Bezos announced that more than 70,000 third-party merchants make more than $100,000 a year on Amazon. An even more staggering number is that 50% of all goods sold on the site are now from third-party merchants which is up from 35% just a few years ago. The total number of third-party merchants is roughly 2 million, but the majority are people reselling items.
The growth of merchants making a $100K is driven by merchants who launched their own branded product line, a strategy that yields higher profit margins than the traditional third-party merchant who resell existing products. We expect the private label trend to continue to accelerate as more people become educated on how to source products from factories and build a brand using the Amazon marketplace.
Amazon Third-Party Merchants Launch Their Own Brand Using One of Three Strategies
Amazon will continue to invest in expansion of the third-party merchant platform. As the picture below shows, there are three different strategies for third-party merchants (also referred to in some cases as ‘private label’ sellers).
A former Amazon executive who led the effort to create the third-party merchant functionality, John Rossman, predicted at the Amazon Prosper show in February 2016 that it would be more likely for Amazon to stop selling products directly than it would be for Amazon to shutdown the third-party marketplace.
Rossman is the author of The Amazon Way.