Amazon’s Future is Not Selling Stuff

Wired’s Marcus Wohlsen suggests it will be helping third-party stores sell goods through Amazon’s platform:

While Fulfillment by Amazon gives even small mom-and-pop sellers access to Amazon’s global visibility and reach, the arrangement also works to Amazon’s advantage. Last year, Amazon opened up 20 new fulfillment centers and has plans for several more, including one near San Francisco and three planned for Texas, each more than 1 million square feet in size. By investing so much in shelf space, Amazon has every incentive to keep those shelves filled. And the more third-party stuff Amazon can move through its distribution hubs, the better, since that’s all inventory Amazon doesn’t have to pay for itself. As analysts at Baird Equity Research point out, third-party sales are 100 percent gross margin for Amazon. In other words, the only cost to Amazon of providing third-party fulfillment is money they would have spent anyway on the infrastructure, labor, transportation and whatever else they need to support their direct sales operation.

Considering these advantages, third-party sales loom as an important part of Amazon’s business future. Last year, sales of services — including commissions on third-party sales — accounted for about 15 percent of Amazon’s total sales. If current trends continue, that percentage will rise, giving all the more reason to stop thinking of Amazon as a seller of stuff and to start thinking of the world’s biggest online retailer as a platform for stuff — an API for the material world.

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