Brief

Amazon: Half of all merchandise sold now comes from third-party sellers

Dive Brief:

  • Amazon has apparently crossed over to being more of a marketplace than a retailer in its own right: Half of all merchandise sold on its site comes “from sellers, small businesses and entrepreneurs,” according to a press release.

  • The e-commerce giant's Fulfillment by Amazon program allows marketplace sellers to store and ship goods from Amazon warehouses, while its fledgling Seller Fulfilled Prime program allows larger retailers and manufacturers to ship from their own centers. Amazon takes a cut from third-party sales using its website and fulfillment services.

  • The Seller Fulfilled Prime program has already made more than 6 million new items available to Prime shipping and services members across the U.S., U.K., France, Germany and Japan, Amazon said. Prime subscribers are privy to the retailer’s free two-day shipping and same-day delivery in some areas, and enjoy those same benefits whenever Seller Fulfilled participants can meet the shipping speed standards.

Dive Insight:

Amazon’s increased emphasis on its Fulfillment by Amazon and the newer Seller Fulfilled Prime could be a sign that it prefers to rake in its take on customer orders without holding merchandise on its own. The e-commerce giant has invested heavily in fulfillment, to the point where logistics costs nearly wiped out profits in its recent quarter. That increasingly vast fulfillment network could therefore be a boon to Amazon and its sellers alike.

Sellers have access not only to Amazon’s sticky Prime membership base and other customers, but also to its reputation for good customer service, its logistics infrastructure and the below-market rates it enjoys from United Parcel Service and the U.S. Postal Service.

But as third-party seller presence grows, Amazon risks losing control over the merchandise featured on its site. Amazon is increasingly contending with sales of counterfeit goods, which are showing up on its own warehouse shelves. That means that Amazon is storing and shipping fake goods, as in the case of the iPhones sold by New York vendor Mobile Star shipped through the Fulfillment by Amazon program. In fact, some 90% of the Apple products that “were directly sold by Amazon.com — not a third party seller” turned out to be counterfeit, according to court documents to a lawsuit filed on Monday by Apple against Mobile Star in a U.S. district court of Northern California.

Citing concerns over counterfeiting and unauthorized selling, Birkenstock USA in July informed Amazon that as of Jan. 1, it will no longer offer its footwear on the e-commerce site or its third-party Marketplace. Birkenstock USA CEO David Kahan said that the only way to avoid competing with fake or stolen merchandise promoted as genuine Birkenstock products is to sell directly to Amazon, but that “We believe this decision does not align with the long-term health of our brand or [Amazon's] business objectives.” 

Sales of counterfeit goods are rife on marketplaces including eBay and Alibaba (and, increasingly, Amazon), according to the watchdog group the Counterfeit Report. The group notes that the Recording Industry Association of America placed orders with Amazon and found that 44 of the 194 top CD’s delivered were counterfeit, according to an email to Retail Dive.

The Counterfeit Report says that counterfeiting is a $1.7 trillion global criminal enterprise that is difficult to track and that goes widely unpunished, and that it's especially a problem within e-commerce. The group has also slammed the e-commerce giant for failing to notify customers that they may have received fake goods, even after becoming aware of a problem. The Counterfeit Report notes that such activity robs manufacturers and consumers of money, potentially endangers consumers who receive sub-par products, and could damage the reputation of manufacturers as well as Amazon itself.

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Filed Under: E-commerce