Historically Amazon and eBay sellers were born out of bootstrapping. Same happened in the supporting market. But increasingly so we started to notice venture-backed businesses make moves in the market. Both as sellers, and as solution providers to other sellers.
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We have a love-hate relationship with private labeling. On the one hand it has allowed many sellers launch their own brands, and thus move beyond reselling. But on the other hand private labeling done at scale is ruining Amazon's catalog.
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CB Insights wrote "When it comes to most industries, the question isn’t whether Amazon will enter or not; it’s how the internet giant will enter, and how big the impact will be." This is exciting for everyone benefitting from Amazon's success - sellers, vendors, and even customers. But for everyone else the challenge is how to grow given.. Amazon.
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Many are still haven't heard of SoftBank. Their investment arm has recently become the largest e-commerce investor worldwide - their most recent tech fund called "Vision Fund" has $100 billion under management. Jeff Bezos has famously said "Your margin is my opportunity", which is only true because of the capital available. SoftBank will challenge this.
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According to Amazon's second quarter earnings, company's "other" revenue - believed to be made up mostly of advertising - category grew faster than anything else. It might take years for the advertising business to grow big enough for Amazon to consider breaking it out as a category of its own. But most estimate that by 2018 it will reach north of $5 billion yearly run rate.
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A minor misconception about marketplaces is that sellers are contempt with its model. Instead sellers are spending increasing effort to avoid the "marketplace", all to avoid having competition. 27 percent of the top 1,000 sellers, 37 percent of the top 10,000 sellers, and 44 percent of the top 100,000 sellers are selling 3 brands or less.
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Given the current list of top sellers how many of them were also top sellers a few months ago, or as far as two years ago. From the current top 1,000 sellers on Amazon US roughly 50% were in the top 1,000 two years ago too.
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Marketplaces are not created equal, and one of the biggest differences is how they treat sellers on the platform. While technically all marketplaces consist of a list of sellers, different marketplaces approach them differently.
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In the Toys & Games category on Amazon.com 8 out of the Top 10 products are currently fidget spinners. Many have dismissed the fidget spinner as a fad, including the top toy makers. But they missed the point of what made this toy so successful. It was successful exactly because it was a fad. The fidget spinner as a product is showcasing what the modern retail is going to look like. It is important to not think about this as trends catching, but as a challenge to set up companies to be agile in product making.
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Despite the popularity of private labeling as a topic in the marketplaces market, few companies have been able to scale it to the $100 million a year level and beyond. For the last couple of years the leading marketplace sellers were using software to scale retail arbitrage. We think the most interesting sellers right now are the ones investing heavily into artificial intelligence.
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