Why does Amazon allow third-party businesses to sell on their marketplace and compete with them?
It is a mutually beneficial relationship.
Amazon does not want to compete with Third-Party businesses.
Tim Hellbusch speaks about these three reasons in ALGO Online Retail's YouTube video.
The first reason is money. Amazon saves a lot of money by having third-party sellers buy inventory rather than purchases inventory themselves.
This takes a lot of financial risks off of Amazon, but it is good for third-party FBA sellers because they do not have to compete with Amazon.
Second, is time. Think about all the time sellers spend on researching suppliers and products? Sellers take the time to do the research because it is crucial to the success of their business.
Amazon lets sellers do the research and purchase products rather than hiring an employee to do it.
Again, it is mutually beneficial. The sellers do the supplier and product research. Amazon does all the storage, shipping, and handling. Both parties benefit from each other.
The third reason Amazon wants sellers to use their marketplace is the seller's passion and motivation.
Third-party sellers' productivity is much higher than an employee's because the seller if working for their own business. The employee is just looking at the clock and waiting for their paycheck. The third-party seller has more of a desire to be successful and generate more profits because they are working for themselves.
More than 50% of Amazon sales come from third-party sellers.
The future is bright for Amazon's third-party marketplace.
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