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Fortune Magazine Points Out Value of Amazon Marketplace

Fortune had published a feature article on Amazon.com in its May 26 edition called Mighty Amazon. In it, Fred Vogelstein discusses the Amazon Marketplace, part of Amazon where third parties can sell new and used goods, side-by-side with Amazon's own offering. Vogelstein suggests that in spite of fear that it would cannibalize Amazon.com's own sales and hurt future chances for profitablity, Amazon Marketplace has been wildly successful:

Selling partners' used and new goods next to Amazon's own has become a cornerstone of its offerings... Amazon earns about the same profit margins selling on commission as it does selling retail. In addition, the company doesn't have to advertise that its prices are lower, because consumers themselves can now compare prices from Amazon and other vendors....

The other benefit of Amazon's so-called marketplace strategy is that the revenue is almost pure profit. Amazon earns a commission instead of a markup for third-party transactions and incurs no inventory or warehousing costs. Almost 20% of Amazon's unit volume is now sold through others. Another dividend that Bezos counted on: Indirectly sold goods slow the need to add warehouse capacity.

The Amazon Marketplace is clearly a win-win for buyers, sellers, and Amazon. CTDATA participates in the Amazon Marketplace as a buyer and a seller. We have made thousands of dollars selling used books in the Amazon Marketplace.

We have also made purchases that ended up saving us 20 to 50 percent on books and DVDs that we would have purchased in the new market previously. As Jeff Bezos suggested to Fortune, the existence of the Amazon Marketplace has resulted in us buying more products from Amazon.com than we otherwise would.

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