Amazon sellers have to work harder to grow

September 20, 2016 09:00 AM

Amazon sellers have to work harder to grow as they face more competition on the online marketplace, data from ChannelAdvisor Corp. shows.

Same-store sales for ChannelAdvisor’s clients through Inc. increased 10.5% in August. 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. While August’s figures show an increase from the 6.4% ChannelAdvisor reported in July, it’s still far below the 33.8% growth in general merchandise that Amazon reported in the second quarter in July.

One reason for the discrepancy between ChannelAdvisor’s data and Amazon’s reported figures is that ChannelAdvisor’s same-store sales reports only take into account sales made by merchants that have sold on the marketplace for at least one year. Therefore, it doesn’t include sales from marketplace sellers that joined within the past 11 months. Scot Wingo, executive chairman of ChannelAdvisor, in a blog post points to the “dramatic increase” in competition on Amazon’s marketplace in the past six months, stating that the new entrants are taking share from longer-tenured sellers.

More sellers from China account for some of 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 more than tenfold on, Amazon executives  said, but they  did not provide dollar figures.

“There’s a lot of interest in China to sell to U.S. consumers,” and one of the channels Chinese merchants are selling on is Amazon, says Eric Heller, CEO and co-founder of Marketplace Ignition, a consulting firm that helps brands sell on marketplaces. But Chinese sellers aren’t the only new entrants to Amazon, he says. More branded manufacturers are selling as third-party marketplace sellers in the past year, a change from when many branded manufacturers only sold their products wholesale to Amazon directly, which Amazon calls first-party sellers.

“For branded manufacturers, selling on Amazon as a third-party marketplace seller is now an acceptable platform,” Heller says. Some brands use marketplaces, like Amazon’s, to test flavor mixes or new products. For instance, Coca-Cola revived its 1990s soda called Surge with a yearlong pilot on Amazon from 2014 and 2015. For a year, consumers could purchase Surge soda only on Amazon. Because of that online success, Surge now sells  in select stores.

Some brands test products on Amazon and other marketplaces because it can be more cost-efficient than testing products in stores, Heller says. A brand may have to manufacture a certain number of products, for example, to put it on store shelves.

With more sellers on the platform, in addition to Amazon selling more of its own products, it’s more challenging for individual sellers to see big growth, Heller says. “Amazon as a platform is growing in pervasiveness and in visibility, but any one seller has to work really hard to gain share.”

ChannelAdvisor also reports that 41.1% of orders shipped through Amazon in August for ChannelAdvisor clients were handled by Fulfillment by Amazon, in which retailers pay Amazon to store inventory and pick, pack and ship orders. This compares with 33.8% in August 2015. When marketplace merchants use Fulfillment by Amazon, their products become eligible for Prime two-day free shipping.  

Sales through eBay’s marketplaces were up 5.9% in August compared with a year ago. Auction sales declined 15.9% year over year and sales of fixed-price goods increased 3.1% over the same period. EBay Motors, which includes purchases of auto parts and accessories, increased 13.9% in August.

Sales on marketplaces other than Amazon and eBay, such as those operated by Wal-Mart Stores Inc. (No. 4 in the Top 500) and Sears Holdings Corp. (No. 14), were up 37.7% year over year.

Sales by ChannelAdvisor clients through Google Shopping and Product Listing Ads increased 43.1% in August compared with the same month a year ago. “Google continues to turn all of the dials on Google Shopping,” Wingo wrote. The Google Shopping section of search results is showing more products, it has a higher placement in search results and it is shown in more search results pages, Wingo says.




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