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Competition heats up for Amazon sellers

August 16, 2016 11:34 AM
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Retailers selling on Amazon.com Inc. are feeling the effect of increased competition on the online marketplace, according to new ChannelAdvisor Corp. data.

Same-store sales for ChannelAdvisor’s clients through Amazon.com increased 6.4% year over year in July, decelerating from June’s 11.6% growth rate. ChannelAdvisor, which helps retailers sell on online marketplaces, produces monthly reports that compare merchant clients’ sales through online marketplaces and marketing channels including Amazon (No. 1 in the Internet Retailer 2016 Top 500 Guide) and eBay Inc.

The 6.4% growth rate on Amazon for ChannelAdvisor’s clients is far below the 33.8% growth in general merchandise that Amazon reported in Q2 last month. The large discrepancy may be because there are more marketplace sellers on Amazon, says Scot Wingo, executive chairman of ChannelAdvisor.  ChannelAdvisor’s same-store sales reports only takes into account sales made by merchants that have sold on the marketplace for at least one year.

“What we are seeing in the last six months is a dramatic increase in the competitive cadence in the Amazon third-party space,” Wingo wrote in a blog post. “This seems to be most adversely impacting longer-tenured sellers with new entrants effectively taking share.”

After looking at a sample of sellers in July 2016, ChannelAdvisor reports there was a 227% increase year over year in competing offers at the individual product level.

“There has been a sharp increase in competition between Amazon sellers, making it incrementally harder for individual sellers to grow as rapidly as they did before, and we believe this increase is driven at least in part by a substantial increase in new sellers to the platform,” Wingo wrote.  

335 retailers in Internet Retailer’s 2016 Top 1000 Guide sell on Amazon, according to Top500Guide.com.

More competition may be coming from outside the U.S., Wingo adds. "It is hard to quantify, but generally there has definitely been a large influx of sellers and many are cross-border trade and/or brands, so those are definitely factors in the stepped-up competition we are seeing." 

Specifically, more sellers from China account for the increased competition. Chinese merchants’ sales on Amazon’s marketplaces around the world doubled in 2015 compared with 2014, Amazon executives reported in December 2015 at the company’s annual meeting with Chinese sellers in Guangzhou, China. Chinese companies’ sales increased for than tenfold on Amazon.com, they said. Amazon did not provide dollar figures for those sales. 

ChannelAdvisor also reports that 42.1% of orders shipped through Amazon in July were handled by Fulfillment by Amazon, in which retailers pay Amazon to store inventory and pick, pack and ship orders. When marketplace merchants use Fulfillment by Amazon, their products become eligible for Prime two-day free shipping. This compares with 35.5% of orders shipped through Fulfillment by Amazon in July 2015, according to ChannelAdvisor data.

Sales through eBay for ChannelAdvisor’s clients were up 3.5% in July compared with a year ago. Auction sales declined 17.2% year over year and sales of fixed-price goods increased 1.4% in July. EBay Motors, which includes purchases of auto parts and accessories, increased 14.2%.

Sales on marketplaces that aren’t Amazon or eBay, such as marketplaces operated by Wal-Mart Stores Inc. (No. 4 in the 2016 Top 500) and Sears Holdings Corp. (No. 14), increased 53.3% in July compared with the same month a year ago.

 

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