By its own account Amazon’s soon-to-launch Australian marketplace — an ecommerce platform for third party merchants — has fewer registered sellers than local marketplaces Catch of the Day, MyDeal and eBay Australia.
Earlier this month the Seattle giant announced more than 500 Australian sellers have registered to sell on the Amazon marketplace once it goes live. But industry watchers believe Amazon is downplaying seller demand to join the platform and predict Amazon.com.au will “explode.”
“There’s plenty of people wanting to get on that platform,” Phil Leahy, a veteran marketplace seller and CEO of Retail Global, told Which-50. He argues the local marketplace launch will provide a new channel for Australian businesses already using Amazon.com to reach international markets.
For its part Amazon says there are already “thousands” of Australian businesses selling their products on existing Amazon Marketplaces.
Juozas Kaziukėnas, founder of Marketplace Pulse, which tracks the performance of ecommerce marketplaces around the world, says they’ll be watching Amazon’s Australian marketplace closely once it is up and running.
“Amazon has hinted to 500 sellers pre-launch. I expect this number to explode,” Kaziukėnas told Which-50.
“Amazon launched in Mexico in July 2015. Two years later, they already have 48,000 marketplace sellers there. Amazon launched in India in 2013 and that marketplace is the fastest growing in terms of sellers, now at 230,000. So the 500 figure in Australia is only going to last for a day.”
Amazon.com.au’s seller base will be inflated by Chinese and other international sellers, especially when Fulfillment by Amazon (FBA) launches, Kaziukėnas said.
While promising “hundreds of new jobs” the ecommerce giant has been characteristically tight lipped concerning the details of its impending Australian launch, revealing it leased a 24,000 sqm fulfillment centre outside Melbourne and it’s recruiting sellers to participate in its marketplace.
Those third party sellers play a significant role in Amazon’s ecommerce offering. Sales from marketplace sellers now represent over 50 per cent of all items sold on Amazon websites globally.
But some contribute much more to Amazon’s bottom line than others.
Reading Between The Lines On Seller Stats
Gross Merchandise Volume (GMV) — the amount of cash which passes through the platform — determines the size of a marketplace.
But the number of sellers on a platform is also a critical metric because they expand product selection and drive prices down far more efficiently than a single retailer ever could.
However, the headline figures disguise the fact many of those sellers aren’t selling or at least they aren’t selling enough to be considered a full time business venture.
Despite an advertised seller base in excess of 2 million, Marketplace Pulse estimates just 1,000 Amazon.com sellers generate 25 per cent of the GMV on its global marketplace and more than 50 per cent of GMV is generated by just over 6,000 sellers.
How the local players compare
Here’s how the marketplaces already operating in Australia measure up against Amazon in terms of size:
- Catch of the Day, on an innovation spree to shake off its daily deals legacy, launched its marketplace offering in June. Since then it has signed up more than 600 sellers, half are live on the site while the rest are still being vetted. It’s predicting its marketplace sales will be $50 million in FY18.
- Established in 2011, MyDeal Marketplace has over 1,000 retailers on its platform and 2 million visitors to the site per month. It has grown from $15 million in FY16 to $35 million in FY17.
- Alibaba* also rates a mention here, although we can’t make a straight comparison between the Chinese ecommerce giant and our domestic marketplaces because Alibaba only releases the number of brands on its platform, which isn’t quite the same as unique sellers. Since opening an office in Australia earlier this year, the company founded by Jack Ma has ramped up its efforts recruiting Australian businesses to sell their products in China. According to Alibaba there are more than 1,300 Australian brands on its Tmall and Tmall Global marketplaces.
- Then there’s eBay Australia, which just celebrated its 18th birthday, with 40,000 small Australian businesses selling on the platform. Retail Global’s Phil Leahy estimates only 200 of eBay Australia’s sellers are turning over more than $1 million annually, while 2,000 sellers are doing between $100,000 and $1 million. A sizeable chunk of eBay’s sellers are processing under $100,000 a year, making it a platform for hobbyists, Mums and Dads and side hustles.
The key benefit an Australian marketplace will bring to local Amazon sellers is Fulfillment by Amazon (FBA), a service which takes care of the warehousing, dispatch and delivery of products on behalf of small businesses.
Tristan Swanwick, one of the first local merchants to be granted access to Amazon’s Australian Marketplace, said he and other experienced Amazon sellers “couldn’t wait” to start utilising the FBA service locally.
Since launching on the platform in America in 2015 Tristan and his brother James Swanwick have sold more than 25,000 Swannies Blue Light Blocking Glasses, generating USD $1.5 million in revenue on Amazon and USD $2 million in total.
Swanwick Sleep sells through its own website, but the company’s business model was to manufacture a niche product and launch the business in the US to take advantage of the FBA program. It now sells on Amazon in USA, Canada, UK, and Europe, with Japan and Australia on the way.
“It’s always been really frustrating for us that we’ve been able to service customers in America and Europe really easily through Amazon, but it’s been a lot harder for us to be able to get our products to Australians,” Swanwick told Which-50.
Swanwick says that a huge global base of potential customers and the FBA program are what sets Amazon apart from other marketplaces.
An Infrastructure business
Providing the services around payment, fulfillment, lending and advertising is what makes a marketplace successful, argues Marketplace Pulse’s founder Kaziukėnas.
“Leading marketplaces today are much more infrastructure providers than they are retail websites,” he said.
“Amazon 10 years ago was a website others could sell to, so was eBay (and still mostly is). But now unless a marketplace provides tools and services to enable growth, it is in many ways irrelevant.
“For example many retailers in the US have tried to launch a ‘marketplace’ to save their struggling growth, for example Sears or Best Buy, but have found that doing so didn’t achieve that because all they did was change the website, not build infrastructure.”
Winners and losers
Paul Greenberg, executive chairman and founder of the National Online Retailers Association and founder of Deals Direct, is skeptical about Amazon’s Australian strategy, predicting it will “either fail in Australia or it will be a slow grind.”
“Amazon and Alibaba will continue to provide outstanding springboards to global customers. Alibaba to China, Amazon to the US and Europe. Valuable conduits outbound for our brand owners and retailers with a global focus, but domestically, another story. A fizzer,” Greenberg wrote recently.
However, Leahy believes there will be positive and negative impacts that come with Amazon’s Australian entry.
“What Amazon tend to do is grow the pie. I’m not saying there’s no casualties in that, but they do grow the pie,” he said.
“The big losers are the traditional retailers who haven’t adapted or charge too much, but they’ve still got time.”
Although Amazon’s entry brings with it added pressure, more people buying online is ultimately good news for the likes of eBay and Catch of the Day. But the big winners will be brands with a strong product, supply chain and a partnership with Amazon, Leahy argues.
“Pretty much everyone will be dealt out of the supply chain, having a brand is what it is all about online now,” Leahy said.
Thanks to the dynamics of marketplaces, retailers are being disintermediated and the manufacturer (ie the brand) is also the merchant. Kaziukėnas argues brands are the future of marketplaces.
Tristan Swanwick agrees the key to success for a seller on Amazon is a great product with a strong brand behind it.
“You can put in hours of work, do all the SEO, and spend lots of money on marketing but if you don’t have a great product you’re always going to be up against it,” Swanwick said.