Wired Magazine article on Amazon sellers (that’s us)

An interesting article was posted by Wired Magazine today on Amazon‘s third party sellers (that’s us). Specifically, it covers the growth of third party seller’s in Amazon‘s overall revenue, and how third party revenue may have surpassed purchases from Amazon‘s own products. Check out this quote:

Third parties sell at least as much dollar-wise on Amazon as Amazon does, if not more.

And this one:

During its most recent earnings call, Amazon CFO Tom Szkutak said that third-party sales accounted for more than one-third of the “product units” sold through Amazon during the previous quarter.

What this all means is: Amazon is taking over the world, and we should get partial credit.

Here’s the full text of the article:

“Other People Might Be Selling More on Amazon Than Amazon Does

By Marcus Wohlsen

While most of us still think of Amazon as a company that sells stuff, its transformation into a company that sells other people’s stuff might be more complete than we thought.

Amazon doesn’t report the total value of the merchandise sold through its sites and apps. Last year, the company sold more than $51 billion in stuff itself. But that figure does not include the value of barbecues, kayaks, USB cables and myriad other products sold through Amazon by third-party sellers, from which the company earns only a commission.

That has not stopped Amazon-watchers from trying to guess the total value of stuff sold via Amazon, whether by third parties or Amazon itself. And some of them have reached a striking conclusion: Third parties sell at least as much dollar-wise on Amazon as Amazon does, if not more.

During its most recent earnings call, Amazon CFO Tom Szkutak said that third-party sales accounted for more than one-third of the “product units” sold through Amazon during the previous quarter. Taken alone, that figure would seem to suggest that more of the money flowing to Amazon goes to purchase merchandise directly from Amazon.

But ChannelAdvisor CEO Scot Wingo argues that the average price per unit sold by Amazon comes in much lower, since so much of what Amazon sells directly is small-ticket media items such as books, movies, music and videogames. Amazon divides its sales into two big categories — media and “electronics and other general merchandise.” The bulk of third-party sales fall under the second category, Wingo says, where products have a higher average price.

Breaking down that mix, Wingo believes the value of everything sold by third parties on Amazon during the last three months of 2012 comes in at around $20.5 billion — more than $2 billion higher than Amazon’s own.

Amazon’s reported revenues continue to rise, but the rate at which they’re going up is slowing. That slowdown makes the growth of third-party sales all the more important as a measure of Amazon’s power as a platform for selling things to the world. Szkutak said in the earnings call that third-party sales grew by more than 40 percent year-over-year — a much faster clip than sales on Amazon overall. In that light, third-party sales make Amazon look like a much stronger money magnet, even if all that money isn’t going right to Amazon.

“If you don’t look at it through that lens, Amazon looks like a retailer whose growth is slowing,” Wingo says. “It looks like it’s shrinking, when it’s actually growing.”

Wingo speaks with particular confidence since his clients include many big third-party sellers on Amazon and other platforms, and his company crunches billions of dollars of their sales data. Better business for third-party sellers means better business for him.

But he’s not the only one bullish on third parties as the future of Amazon.

In a note to investors just before Amazon reported its year-end results last week, Stiefel Nicolaus analyst Jordan Rohan said he believes the value of merchandise sold by Amazon versus third parties on Amazon (known as gross merchandise value, or GMV) has just about hit a 50-50 split.

By 2015, Rohan says Amazon will hit $180 billion in GMV, and third-party sellers will be responsible for most of those dollars.

“Even while increasingly dominant in e-commerce,” Rohan writes, “Amazon’s business model is still evolving.”

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