Amazon is the shopping behemoth that we all encounter now and then. From a needle to giant electronic devices, it has everything available. You name it, and you have it! But do you know that Amazon as an e-commerce platform differs from Amazon as an online marketplace? Yes, you read that right! When we make purchases from Amazon, we often have no idea whether we’re buying it through Amazon or third-party sellers since Amazon’s marketplace is so well integrated into the e-commerce platform.
Let us break down the difference between both the terms and explain in detail what they are.
What is Amazon’s E-commerce Platform?
Amazon.com, an e-commerce platform, is a product of Amazon.com, Inc., a multinational technology company headquartered in the U.S. This company, being one of the Big 5 American information technology companies, focuses on e-commerce, cloud computing, online advertising, digital streaming, and artificial intelligence.
The e-commerce platform sells multiple product lines, including media, baby products, apparel, electronics, beauty and wellness products, groceries, musical instruments, industrial and scientific supplies, health and personal care products, kitchen items, jewellery, toys and games, sporting equipment, and everything else under the sky!
One thing to note here is that Amazon websites are country specific. For example, amazon.com for the U.S., amazon.in for India, amazon.fr for France, etc. According to a study, this e-commerce platform is the 14th most visited website globally, with approximately 2.4 billion visitors in May 2022.
What is Amazon Marketplace?
Amazon marketplace is an e-commerce platform that is owned and operated by Amazon Inc. This online marketplace permits third-party sellers to sell their products at a fixed price alongside Amazon’s regular offerings. In an online marketplace, the marketplace operator is in charge of all consumer transactions while these are delivered and fulfilled by the participating retailers or wholesalers.
But how does this mechanism work? How do participants sell their products in this online marketplace? Read further to find out.
How Can You Sell Products on Amazon?
Sales through Amazon happen from two systems: Amazon Vendor Central and Amazon Seller central. Let’s understand how these mechanisms work.
1. Amazon Vendor Central
It is an invite-only program that typically has manufacturers and wholesalers as members, where sellers sell their products at wholesale rates directly to Amazon. Then Amazon sells them to customers through Amazon.com and keeps profits for themselves.
2. Amazon Seller Central
In this program, sellers directly sell their products to shoppers, and Amazon acts as a mediator. Amazon lets these sellers list their products on the website and, in return, get a part of the profits these sellers make through sales. It is interesting to note that most third-party sellers sell through Amazon Seller Central.
How these sales are managed is covered by these two established programs- Fulfilled by the merchant (FBM) and Fulfilled by Amazon (FBA), and Amazon Advantage.
3. Fulfilled by Merchant Program (FBM)
Under Fulfilled by merchant or FBM Program, goods to be sold are kept in the inventory of third-party sellers and all the related handling; the third-party merchants handle shipping and customer service. At the same time, Amazon charges its merchants a referral fee for each sale as a percentage of the sales price.
4. Fulfilled by Amazon Program (FBA)
With Fulfilled by Amazon or FBA program, goods are stored and handled in Amazon’s fulfilment centres. Amazon itself handles all the related handling, shipping and customer service, and merchants simply have to ship their goods to one of these designated centres.
You must be wondering about the better option between the above-mentioned two programs. While the FBM program leaves authority with the third-party sellers, the FBA program offers significant time-savings benefit to these merchants, among other multiple benefits.
5. Prime Eligibility
Amazon runs a scheme that provides customers with a prime membership, with multiple advantages over regular customers, like free shipping on all products, additional discounts, one-day delivery, early access to sales, etc. As per a study by Business Insider, prime customers usually spend more than twice as much as non-prime members. Goods listed under the FBA program are eligible for prime delivery, which becomes attractive for customers who wish to have their products at their doorstep faster.
6. Boost in Sales
Amazon’s algorithm is designed to give preference to FBA goods, providing more visibility in the search results. Sales through the FBA program can boost sales by 30% to 50%.
7. Amazon’s Customer Service
Amazon’s customer service is one of a kind and one of the first giants to take this aspect seriously. Under the FBA program, Amazon is entitled and responsible for handling, selling, and shipping products, ultimately creating cost and time savings for FBA sellers.
8. Amazon Advantage Program
There’s an additional program for third-party sellers- Amazon Advantage. It is a program designed for publishers, authors, musicians, filmmakers, studios, and other media content creators to list their products on Amazon and sell directly through it. Sellers registered with Amazon Advantage ship their inventory directly to Amazon, and then Amazon fulfils and ships the products to the customers. Under this program, sellers get to enjoy multiple features like:
- Marketing and Promotions: Sellers can benefit from features of lightning deals, advertising and enhanced detail pages.
- Pre-orders: Amazon offers the sellers to list their titles for pre-orders once the release date gets confirmed.
- Amazon Prime: Customers and sellers benefit from the prime program once the items are stocked in Amazon’s fulfilment centres.
- Trusted Offers: Products listed through this program are labelled as “Ships from Amazon.com” and “Sold by Amazon.com”, which ultimately builds customer confidence.
- Customer support and fulfilment services: Sellers get access to Amazon’s customer fulfilment services and after-sale support which is par excellence.
Amazon E-commerce vs Amazon Marketplace: What’s the Difference?
The major difference between Amazon as an e-commerce platform and Amazon as an online marketplace lies in the fact that Amazon’s e-commerce platform is primarily customer-oriented that allows customers to purchase products. In contrast, Amazon’s marketplace is a seller-oriented platform that enables sellers to sell directly (or through Amazon) to online customers.
Other differences between the two are as follows:
- Products: Products sold through Amazon.com are always fresh and new, while third-party sellers can sell new as well as used products on the Amazon marketplace.
- Profits Retaining Party: When sales are made through Amazon’s e-commerce platform, Amazon gets to keep the whole of the profit, while when someone purchases any product through the Amazon marketplace, Amazon has a share of a portion of the profits of third-party sellers.
- Branding: Products sold through Amazon are under the brand Amazon while Amazon marketplace allows sellers to use retail strategies to offer a wide range of brands from around the world.
Is it worth selling on Amazon?
It is true that the information around Amazon is in abundance and can become overwhelming when it comes to deciding if it is worth selling on the Amazon marketplace.
But the good news is that despite strong competition in every category, sellers still have multiple opportunities to succeed.
With proper strategies and understanding, sellers can take benefit of the features that Amazon provides both as an e-commerce platform and an online marketplace. These benefits include:
- Sellers do not need to worry about the promotion and advertising of their products.
- Amazon enjoys the trust of its customers, and sellers can take advantage of the reputation of the shopping giant.
- There are already established programs that help sellers quickly navigate the waters of marketing, selling and fulfilling orders.
- The customer base of Amazon is enormous, and they regularly shop from the online market.
In conclusion, as a customer, you can hardly tell the difference when you buy through the e-commerce platform. Whereas as sellers, there are multiple advantages that Amazon, one of the biggest online markets, provides that they can consider.
Amazon has a customer base that works nationally and internationally, making it essential for sellers to keep this online marketplace as a central part of their strategies.