The Amazon marketplace is a jungle, and clever sellers can reach huge numbers of customers and sell tons of products, but like any real jungle, there are also reasons to be afraid.
Adding to seller anxiety are Amazon’s dominance in the U.S. market, advertising challenges, and Google’s automated search results.
King Amazon
In 2023, Amazon Logistics moved more packages than both UPS and FedEx, marking the first time this has happened.
I decided to cover the wonders of Amazon Logistics and how it can help small and medium sized e-commerce businesses.
It all started with Pitney Bowes’ annual event. report “2023 will be the first year in the index’s history that Amazon Logistics will surpass UPS in parcel volume,” it said.
E-commerce giant Amazon shipped 5.9 billion packages in the U.S. in 2023, compared with 4.6 billion for UPS and 3.9 billion for FedEx.
Only the U.S. Postal Service (6.6 billion boxes and envelopes) handled more packages than Amazon Logistics. Of the big four — USPS, UPS, FedEx, and Amazon Logistics — only Amazon saw an increase in package volume in 2023, up about 800 million from the previous year.
We asked a few Amazon Marketplace pros about the impact it’s having on small businesses.
The two services, Amazon Logistics and Fulfillment by Amazon, provide storage, packaging, deliverycustomer service, and Return valuewhich frees sellers from the complexities of order fulfillment. Consumers love the service, and many packages purchased on Amazon from small businesses and emerging D2C sellers are delivered the same day they are ordered.
This is a big opportunity, but it is not without risks. The same experts say that Amazon’s dominance could force small businesses to Sell and compete In the case of large retailers, they too become dependent.
“This shows how dependent merchants are on Amazon.” Black Label AdvisorA Texas-based Amazon consulting firm.
“Amazon accounts for nearly 50% of all e-commerce revenue in the U.S., making it a near monopoly,” Elder said, adding that this dominance has allowed Amazon to significantly increase its selling fees.
“Margins are getting squeezed,” Elder said.
Some industry observers estimate that new logistics fees, which go into effect in February 2024, will add roughly 15 cents to the cost of each product sold on its marketplace and managed through FBA. Amazon has reportedly said the increase is in line with or lower than other delivery companies’ increases.
Still, it’s clear that merchants who rely on Amazon for the majority of their revenue have no choice but to pay.
Effective advertising
Many marketplace sellers rely on more than just shipping and fulfillment: Amazon advertising is also important.
Amazon’s advertising platform offers several advantages over Meta Ads and Google Ads:
- A large and highly motivated audience. According to the survey, between 50% and 57% of the total Shopping Intent Search In the US, it will start on Amazon.
- Seamless shopping. Amazon advertising is integrated into the platform’s search results and product pages, helping to increase visibility and conversions.
- First-party data. Most Amazon shoppers are logged in when they see ads, so all the fuss about tracking cookies has little impact on performance.
Amazon advertising represents a large portion of revenue for many merchants. The opportunity is there. The concern is increased costs and some disruption.
AI Search
Some marketplace experts say that Google Overview of AI (formerly known as Search Generative Experience) could entice some e-commerce and D2C companies to join Amazon.
AI Overview may result in a decrease in organic search traffic to merchants’ own e-commerce sites.
Imagine a consumer looking for trail running shoes. She searches Google for “best running shoes for Appalachian trails.” An online shoe store has a comprehensive, search-optimized article on that very topic, matching up the best shoes for each type of Appalachian terrain.
Before the About section, this query would have led her to an article on branding and merchandising on the store’s website, where she was likely to click on the shoes and add them to her cart.
Google’s AI Overview can now provide answers from articles without an explicit link to the store.
In February 2024, research firm Gartner Predicted They predict that by 2026, overall organic search traffic will decline by around 25% due to AI.
Meanwhile, in May 2024, Raptive, a company that places ads on creators’ and publishers’ websites, expressed concern “Regarding the impact of AI Overview, our initial analysis suggests that content creators will experience a significant drop in search traffic to their websites, directly impacting their advertising revenues and ultimately their livelihoods.”
E-commerce stores that have seen a significant drop in organic search traffic may seek out new sales channels, such as Amazon’s marketplace, resulting in increased competition.
