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Covering auctions, collectibles and marketplace selling.

AuctionBytes Blog The AuctionBytes Blog has been giving a voice to online merchants since its launch in 2005. Named one of the world's top 30 blogs in 2008 by "Blogging Heroes." Weigh in with your thoughts on the joys and pitfalls of selling online.
Sun Apr 16 2017 17:43:04

Amazon CEO References 3P Sellers in Shareholder Letter

By: Ina Steiner
Sponsored Link
Amazon CEO Jeff Bezos referred to third-party sellers in his annual letter to shareholders. The letter wasn't a summary of Amazon's accomplishments in 2016, but rather a glimpse into his management approach. 

The yearly letters are famous for Bezos insistence that Amazon is still in Day 1, a reference he made in his very first letter to shareholders that he includes with each year's letter to Amazon investors. 

In this year's letter, Bezos tried to answer the question, "How do you keep the vitality of Day 1, even inside a large organization?"

One piece of advice he offered: recognize true misalignment issues early and escalate them immediately. Here's what he had to say about that challenge and how it impacted Amazon's approach to inviting third-party sellers onto its marketplace:

"Sometimes teams have different objectives and fundamentally different views. They are not aligned. No amount of discussion, no number of meetings will resolve that deep misalignment. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision.

"I've seen many examples of sincere misalignment at Amazon over the years. When we decided to invite third party sellers to compete directly against us on our own product detail pages - that was a big one. 

"Many smart, well-intentioned Amazonians were simply not at all aligned with the direction. The big decision set up hundreds of smaller decisions, many of which needed to be escalated to the senior team.

""You've worn me down" is an awful decision-making process. It's slow and de-energizing. Go for quick escalation instead - it's better."

It would be hard to imagine what Amazon would be like if it hadn't embraced the concept of allowing third-party sellers on its site, but at the time, it was not an easy decision.

Other retailers have since adopted the strategy (including Sears and Walmart), but have been much more selective. 

Amazon began cracking down on 3P sellers over the past 12 - 18 months, and just in the last 2 weeks has escalated the pace of its crackdown thanks to the latest wave of seller fraud brought to its attention by sellers and written about by EcommerceBytes, and then featured in a high-profile piece in the Wall Street Journal.

Some are wondering if the number of Amazon sellers will shrink or if they will be forced into Fulfillment By Amazon. 

Bezos's letter made for an interesting read. It would be great to hear details about how Amazon thinks about third-party sellers, which both help it achieve volume and selection and also bring security and customer satisfaction risks to the marketplace -- but that's unlikely for what is a generally a very close-lipped company. We will get to hear about the company's first-quarter performance next week, however, when it releases its quarterly financial statement.



Comments (11) | Permalink
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Amazon CEO References 3P Sellers in Shareholder Letter   Amazon CEO References 3P Sellers in Shareholder Letter
by: Snapped This user has validated their user name.
       
Sun Apr 16 21:41:08 2017
''...both help it achieve volume and selection and also bring security and customer satisfaction risks to the marketplace -- ''

This stood out to me because my marketplace experience reveals no more or less likelyhood of a deal 'defecting' from 3P sellers than from megabox sellers.  Including those who both 'host' and operate via a controlled venue.  In fact, one is much more likely to receive a higher quality of personal attention when dealing with a 'smaller' independent entity.  

Of course, the safe landing doesn't rate airtime.  But what does rate, is focusing on the 'threat' - always 'possible' - so to justify actions necessary to wrest control over a supply chain.  Particularly if that inventory is envisioned (desired) to be infinite in a finite capability reality.  

Mr Bezos speaks about alignment being critical, and need for nimbleness, and there's truth in all that.  But one needs to be very aware of (and why - suddenly?) who's drawing that line, and who's stick they're using to do it.  
Amazon CEO References 3P Sellers in Shareholder Letter   Amazon CEO References 3P Sellers in Shareholder Letter
This user has validated their user name. by: Rexford
       
Mon Apr 17 06:52:53 2017
"will be forced into Fulfillment By Amazon"

Should that happen, no doubt, a very large percentage of the 3P sellers will be gone. Many will choose to leave on their own.

When I hear Bezos use words like "misalignment" and hearing him using words like "Amazonians" it makes me think that those who are not goose stepping in perfect harmony will be "dealt with".
Amazon CEO References 3P Sellers in Shareholder Letter   Amazon CEO References 3P Sellers in Shareholder Letter
by: Barbbie This user has validated their user name.
       
Mon Apr 17 08:55:21 2017
Amazon FBA is so screwed up as far as I am concerned, unless the product is completely indestructible and not valuable, I would not sell anything with that service anymore.
Amazon CEO References 3P Sellers in Shareholder Letter   Amazon CEO References 3P Sellers in Shareholder Letter
by: OnlyPollyPocket This user has validated their user name.
       
Mon Apr 17 10:01:23 2017
I would be one of the leavers if FBA was required.  

I think I do a very good job but if Amazon doesn't, I'll be fine with dropping them from my selling venues.
Amazon CEO References 3P Sellers in Shareholder Letter   Amazon CEO References 3P Sellers in Shareholder Letter
by: mcposty This user has validated their user name.
       
Mon Apr 17 10:37:37 2017
Amazon would still be in the red without 3p sellers..50% of their profits..without which they couldn't have been so easy with returns and fast free shipping.

They still need 3p sellers today.

Power to the people
Amazon CEO References 3P Sellers in Shareholder Letter   Amazon CEO References 3P Sellers in Shareholder Letter
This user has validated their user name. by: toolguy
       
Mon Apr 17 11:59:48 2017
If I'm not mistaken Amazon makes most of their profit from cloud storage.

3rd party sellers are a pain in the rear for Amazon.

I see their days as limited. . .
Amazon CEO References 3P Sellers in Shareholder Letter   Amazon CEO References 3P Sellers in Shareholder Letter
This user has validated their user name. by: VV
       
Mon Apr 17 16:02:29 2017
"If I'm not mistaken Amazon makes most of their profit from cloud storage."

Toolguy is mistaken as usual.
Amazon CEO References 3P Sellers in Shareholder Letter   Amazon CEO References 3P Sellers in Shareholder Letter
by: EbayerAmazons Corner This user has validated their user name.
       
Mon Apr 17 16:08:59 2017
I have created new products and still looking for a suitable platform to sell on in the UK apart from Ebay.Selling on Amazon is so scary with rules that change sooner than you have completed reading yesterdays rules.Amazon will use your ideas and sources to compete directly with a 3p seller while collecting monthly subscription fees from its 3p seller is so unfair that anything it says is just a facade to steal from its 3p sellers and push them out once it has what it needs from the 3p sellers.Amazon is Greed unchecked and nobody with power does anything about it because they have shares with Amazon or cannot organise themselves to take more class actions in court.Totally disgusted
 
Amazon CEO References 3P Sellers in Shareholder Letter   Amazon CEO References 3P Sellers in Shareholder Letter
This user has validated their user name. by: RKTOYS
       
Mon Apr 17 16:13:10 2017
FBA is really a losing proposition if you think it through.  The 99c flat fee for FBM is replaced with equal or larger pick-n-pack fee in FBA.  Don't forget that you pay to ship to (and from) the warehouse too.  And then there's monthly rent that goes up certain times of the year and the very real risk of co-mingling with counterfeits.

Amazon _loves_ 3rd party sellers...loves to bleed them dry on FBA when it isn't yanking 20% of every FBM sale.

And when you have a thief for a customer, Amazon's right there helping to rob you.  They'll ignore delivery confirmation and a completely non-responsive customer.  Appeals are a sick joke and aren't even read by a real person.  At least FBM, they aren't holding the rest of your inventory hostage too.
Amazon CEO References 3P Sellers in Shareholder Letter   Amazon CEO References 3P Sellers in Shareholder Letter
This user has validated their user name. by: eXtinctBay
       
Tue Apr 18 02:52:22 2017
Before Amazon limited the sales of DVDs with a MSRP over $24.95, and began gating many categories, I made 3X more money selling there than on eBay.

And I was constantly asked to be an FBA seller. Now I sell more on eBay in an average day then I sell on the River in two weeks. If they force all sellers to fulfill through them, well, it has been a good ride.

If Amazon lost half or more of their third party sellers overnight, it probably would not matter much to them.

As much as Devin Wenig states eBay is a technology company, Amazon truly is, and could survive a mass exodus of sellers. If the same happened to the Bay, it would likely signal the end.
Amazon CEO References 3P Sellers in Shareholder Letter   Amazon CEO References 3P Sellers in Shareholder Letter
This user has validated their user name. by: toolguy
       
Tue Apr 18 11:43:37 2017
@vv

http://www.geekwire.com/2016/amazon-without-aws-online-reta
iler-posted-big-loss-not-booming-cloud-business/


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