Amazon is benefitting from third-party merchants, who are increasingly adopting its FBA fulfillment service, according to Colin Sebastian of Wall Street firm Robert W. Baird.
Baird’s Q1 survey of Amazon product selection suggests accelerating growth in selection on Amazon.com, as well as Prime-eligible items and FBA use. Sebastian said total unit selection on Amazon surpassed 300 million for the first time. “Selection and Prime are among the key levers for Retail segment growth,” he said.
The Baird survey suggest merchants in Cell Phones & Accessories, Video Games, and Grocery & Gourmet Foods categories are adopting FBA at the fastest rate.
Third-party inventory increased +35.9% Y/Y (+13.3% in Media categories; +42.3% in non-Media categories), marking the second consecutive quarter of accelerating growth. First-party inventory also increased noticeably in the Home & Kitchen, Software, Office Products, and Industrial Equipment categories.
The number of Prime-eligible items grew 47% year-over-year – and FBA adoption is a key lever for Prime growth. “Importantly, we see this trend generating a virtuous cycle of increasing Prime subscriptions, further category expansion, and greater unit velocity. Currently, only 13% of all physical items are eligible for Prime shipping – including 25% of media products and 8% of non-media products – suggesting a meaningful opportunity for further Prime expansion.
Sebastian estimates Amazon now accounts for roughly 20% of the product selection on its marketplace (about 10% excluding MP3s), but represents nearly 60% of unit sales.
While there still appears to be a meaningful skew (or bias) in actual sell-through to Amazon-owned inventory, he said reasons for the disconnect include the mix in revenues by category (larger categories are more Amazon-weighted), and digital product sales will naturally skew toward Amazon. In addition, the survey is limited to Amazon.com, which would have a larger proportion of third-party sellers than the global business, he explained.