What is Amazon Marketplace? Exploring the Opportunities and Challenges for Sellers

Tempted by Amazon's massive reach but unsure of the seller journey? This guide explores both sides of the coin. Dive into the opportunities (millions of customers!) and challenges (competition, fees) of the Amazon Marketplace. Decide if it's right for you and learn how to thrive in this dynamic e-commerce environment.

What is Amazon Marketplace?

Amazon Marketplace is a digital platform where millions of third-party sellers can list and sell their products alongside Amazon's own offerings. It essentially transforms Amazon's website into a giant virtual mall, offering immense customer reach but also introducing complexities like competition and fees for sellers.

Is Amazon Marketplace too Saturated?

There is a lot of chatter recently on whether Amazon is a saturated market. I am going to break this down into several thoughts and analogies. It is important to note that for 2022 Amazon represented 37.8% of all ecommerce sales in the United States. The #2 position is occupied by Walmart.com, but guess how much their share of the market is?

The Dominance of Marketplace of Amazon

The 3rd position is a little bit of a surprise but its Apple.com at 3.9% and then eBay at 3.5%, but you get where I am going with this, the disparity between position #1 and #2 is larger than the divide between the Grand Canyon. Amazon is the clear market leader, and they have maintained this lead successfully over the last nearly decade. Walmart and eBay are also maintaining their positions, even though Walmart has recently made many improvements and additions to their marketplace platform which closely resembles Amazon Seller Central. They even went as far as to add an FBA equivalent.

It is true that the assortment on Amazon has deepened, and its also true that many isles have become commoditized. The commoditization of OTS (off the shelf) private label products is one factor playing in the perceived “saturation” of Amazon. The second is a slowing of the economy due to inflation and reduced consumer discretionary spending as a result of low consumer confidence. At present consumer credit card debt is at an all-time high. People are racking up immense debt just to buy essentials. Any anecdotes about amazon sales being reduced are lackluster are purely representation of these two points, nothing more.

The Impact of Economic Factors on Amazon Market Performance

Let’s firs talk about commoditization, why it’s a problem, and how it happened. I will be the first to say it, laziness. My theory is many sellers were roped into private labeling of products that every Tom, Dick, And Harry Make because software told them to. You can define software as any sort of data aggregator or also social media videos where amateurs are making videos for other amateurs. They sell a hoax of get rich quick, and work from home…. slap a brand name on some item with high margins are high and rake it in. No one thought to question that if you and the rest of American is being coached to put a rando brand name on an item 600 others are selling is somehow a good strategy. Do me a favor, go search bamboo paper plates on Amazon. Once upon a time, this was one of those spaces. Margins were good, easy to source, cheap, and low barriers to entry. Now look at it, a sea of the exact same item. How could you possibly make a compelling argument to buy your plates verses someone else’s plates? Because your name is cooler? Sorry, this does not work anymore. So are we seeing niches fail, yes, but they were destined to fail because it was too easy to recreate.

People, Stop this! If you already see a space with 12 other similar items, make something else. Your idea is not unique enough. I know you are really excited to start selling something, but what you sell early on will make or break you. If you do not have the success, you are expecting it does not mean amazon is broken, it means your business model is broken. Do not trust every video you watch on YouTube, IG, or TikTok. The real goal in making these videos is to monetize their social media, if they were making money hand over fist on amazon they wouldn’t have time nor be making videos all day long. They also lack experience, two years of experience selling on Amazon is not enough time to make you an expert. If you want expert Advise you should see the help of an agency, such as Dotcom Reps, who sells on Amazon professionally. We sell our service which is based on performance, not popularity.

Now the second reason why Amazon is feeling sluggish as of late is the general economic mood of the American consumer. Earlier in this article I provided some statistics on the American consumer. We all know wages have not kept up with inflation, and this was true well before the pandemic of 2020. Inflation is not a new problem, its been something growing in the shadows of our economy for several years now. We are unfortunately in a period where there is an obvious spike in the cost of goods, and it was only a matter of time until that inflation became crushing for the average American household income. The census bureau indicates the median household income is around $70,000 per USA household.

Strategies for Navigating Economic Challenges and Uncovering Opportunities

At a time when gas could cost a few hundred per month per household, when mortgage rates and costs of rent are at an all time high, eggs cost $8 per dozen, and the average new car payment is closing on $1000 how do you expect consumers are going to spend what is left over? If anything is left over..

Bank withdrawals are outpacing bank deposits for the American consumer. Just this week, three notable banks fell on their face. Money is an issue. Spending is limited. The problem you are facing as an experienced and seller is not a result of mass saturation on Amazon. It’s a combination of many problems and the truth is you just need to ride It out. This too will pass.

In times when order volumes are low and the cost of advertising is high, you need to get conservative creative with driving awareness to your brand. If people are needing value, how can you add that? Larger pack sizes? New combinations? Fresh content? Separate yourself from the pack, and think outside of the box. There is opportunity in every corner of Amazon. Leveraging an Amazon consulting agency can provide valuable insights and strategies to help navigate these challenges and optimize your brand's presence on the platform.