Amazon Marketplace shipments eclipse record 2B in 2016

Dive Brief:

Sellers on Amazon used the e-marketplace's fulfillment program to deliver more than 2 billion products to customers in 2016. Fulfillment by Amazon shipments globally rose more than 50% during the holiday season alone, and active sellers worldwide using the service grew more than 70% last year, according to a company press release.
The retailer’s Seller Fulfilled Prime, launched in May 2015 to select merchants, flags certain products as eligible for Amazon’s Prime two-day free shipping perk; sellers fulfill the orders from their own warehouses. Amazon said “thousands” have joined the program and as a result more than 6 million new items are now “Prime eligible” across the U.S., U.K., France, Germany and Japan.
The number of Amazon sellers that reached $100,000 sales grew by 30% in 2016, the company said, adding that its sellers worldwide have created more than 600,000 new jobs outside of Amazon.

Dive Insight:

It’s no secret the e-commerce giant has invested heavily in its own fulfillment operations. Increasingly, its Marketplace selling, even more than its own retail operations, appears to be the targeted beneficiary of those efforts. At the moment those investments are taking a toll: In its most recent quarter, logistics costs nearly wiped out profits.

But that is also expanding Amazon’s reach, particularly through its Marketplace, and last year’s numbers portend further expansion this year. In November, Amazon announced half of all merchandise sold on its site now comes “from sellers, small businesses and entrepreneurs.”

The e-commerce giant's Fulfillment by Amazon program allows marketplace sellers to store and ship goods from Amazon warehouses, while its fledgling Seller Fulfilled Prime program allows larger retailers and manufacturers to ship from their own centers. Amazon takes a cut from third-party sales using its website and fulfillment services. Prime subscribers are privy to the retailer’s free two-day shipping and same-day delivery in some areas, and enjoy those same benefits whenever Seller Fulfilled participants can meet the shipping speed standards.

But as third-party seller presence grows, Amazon risks losing control over the merchandise featured on its site. Amazon is increasingly contending with sales of counterfeit goods. Sales of counterfeit goods are rife on Amazon, eBay and Alibaba, according to the watchdog group Counterfeit Report. The group notes the Recording Industry Association of America placed orders with Amazon and found that 44 of the 194 top CD’s delivered were counterfeit, according to an email to Retail Dive.

Still, the dedication to its fulfillment operations was underscored Tuesday by the announcement that Air Transport Services Group Inc., which runs Amazon’s Prime Air cargo operation, has bought Pemco World Air Services Inc. Pemco is essentially the repair shop that maintains cargo planes for a number of carriers, with a specialty in the Boeing 767 jets employed by Amazon, according to a report from The Wall Street Journal.

It's not just fulfillment that is boosting Amazon and its sellers: “Sponsored Products” clicks worldwide grew by more than 150%, driven by expansion of advertising placements on desktop and mobile sites, and the number of sellers globally using Sponsored Products grew more than 100%. Amazon is making things easier for its sellers through its new “unified billing” procedure, which allows sellers to deduct their advertising spend from sales proceeds.