A few months back Web Retailer and Feedvisor surveyed over 1,500 Amazon sellers about their businesses.
We asked about their sales volume, profit margin, business model (including use of FBA and private labelling), their concerns about selling on Amazon, how they source and promote products, and the software they use.
It was a comprehensive study of businesses selling on the Amazon Marketplace. The scope was global, and the participants ranged from ordinary people selling part-time from their homes, to enterprise-level businesses generating tens of millions in Amazon sales each year.
Today we are publishing the results. Our analysis is below and you can get even more insights in Feedvisor’s report.
Our Segments: Million Dollar Sellers and Private Labellers
There’s a huge range of business selling on Amazon, and that was reflected in the survey data.
So to help analyse the results, we looked at two specific segments as well as data from all survey participants:
- $1M+: Sellers generating more than $1 million of annual sales from Amazon
- PL sellers: Businesses who only sell private label* items
You’ll see those abbreviations used throughout.
* Private labelling is the practice of selling generic products under the retailer’s own brand name, and has become a very popular business model for Amazon sellers in recent years.
The Amazon Mega-Sellers
In our 2014 survey we also asked participants for their annual sales. Back then 2.1% of sellers said they sold between $10M and $100M across all online marketplaces – not just Amazon.
This time, we asked just for their sales on Amazon. As we were excluding other online marketplaces, we doubted that anyone would crack the $100M mark.
But we were wrong.
Around 0.6% sell more than $50M each year – on Amazon alone. And half of those sell more than $100M. That level of sales is a huge achievement for any retailer, but for multiple businesses to generate over $100M just through Amazon is extraordinary.
Overall there was a very broad range of businesses and individuals selling on the Amazon Marketplace, as you can see below.
Private label sellers were slightly more concentrated in the lower sales ranges, with 73% of PL sellers making up to $250,000 against 65% of all respondents. 9% of PL sellers make $1M or more versus 15% overall.
Because the previous survey focused on all online marketplace sellers, not just Amazon sellers, I don’t recommend extensive comparisons against this year’s results.
50% of Sellers Do Some Private Labelling
Half of survey participants make some sales revenue from private label products (generic products with their own brand added). The other half sell no private label products at all.
Of the half who do private labelling, 23% make less than 10% of their sales from PL products. These businesses could be using private labelling to supplement their product range, perhaps with branded accessories, rather than using it as their main sourcing strategy.
But a third of the businesses who do some level of private labelling (17% of all sellers) follow the private label business model exclusively – all of their sales come from PL products.
Million dollar sellers are more likely to do just a little private labelling, with 27% of $1M+ sellers who do some private labelling generating less than 10% of their sales from private label products. They are also less likely to be exclusively private label sellers, with only 9% of $1M+ sellers selling only PL products.
77% Use Multiple Sales Channels
More than three-quarters of participants sell through multiple channels – online marketplaces, webstores and bricks-and-mortar stores.
The most popular second channel (after Amazon) is eBay, with 73% selling through this marketplace. The same percentage of $1M+ sellers use eBay, but only 35% of private label sellers.
A quarter of sellers have their own webstore. Shopify and Magento dominate as choices of platform, with 35% going for Shopify and 32% choosing Magento. The remaining 32% use a wide range of other ecommerce systems, including Bigcommerce, WooCommerce and Volusion.
Webstore use is higher among $1M+ sellers, at 31%, and slightly lower for private label sellers at 23%. Magento is more popular with $1M+ sellers, with 43% using it versus 35% for Shopify. For PL sellers Shopify is the top choice at 45%, while Magento is chosen by only 23% of this group.
New marketplace Jet.com is used by 4% of survey participants. That may seem small, but Jet’s public launch was in July 2015 – only one month before the survey was run. New marketplaces are typically met with scepticism by sellers, but perhaps Jet is bucking that trend.
Overall, 43% of sellers sell through only one other channel besides Amazon. A little over a quarter sell on two or three other channels, and 7% sell on more than three additional channels.
For $1M+ sellers, even more are multichannel sellers at 86%, and they tend to sell on a greater number of additional channels. Almost 30% of $1M+ sellers use just one other channel, 36% sell on two or three other channels, and 21% on more than three additional channels – three times the overall number.
Private labellers are much more likely to sell just on Amazon, at 38%. Another 39% of PL sellers sell on one other channel, 20% on two or three others, and 2% on more than three additional channels. Amazon is clearly the sales channel of choice for private label sellers, by a wide margin.
Besides the major marketplaces shown above, multiple sellers said they sell on 11Main (founded by Alibaba in 2014 but sold off earlier this year), French marketplaces Cdiscount and Fnac, classifieds site Craigslist, liquidation site Overstock and daily deals site Wish.com.
48% of Million Dollar Sellers Want to Sell on Jet.com
Nearly half of all sellers with Amazon sales over $1 million want to start selling on Jet, compared to 27% of all survey participants. Despite being only six months old, this new marketplace has certainly captured the attention of larger sellers.
38% of all sellers want to start selling through their own webstore, but only 30% of $1M+ sellers. This is consistent with more million dollar sellers already having their own online store, or perhaps larger sellers are less optimistic about the sales potential of an independent webstore. Private label sellers are more positive about selling through webstores, with more than half looking to start their own.
Shopify is the most popular webstore choice, with 68% of all sellers who want to start their own store specifying Shopify. Even more private label sellers who want to start their own webstore said their choice was Shopify, at 76%.
Private label sellers have similar marketplace expansion plans to other sellers, except that 17% are looking to sell through bricks-and-mortar stores, versus 13% of $1M+ sellers and 12% of all sellers.
A small number of sellers mentioned other domestic and international sales channels that they are looking to sell through, including Amazon Business, home design site Houzz, Southeast Asian marketplace Lazada, and Walmart’s highly selective marketplace.
Million Dollar Sellers: More Electronics and Fewer Books
We asked sellers about their primary product category. For some categories, there was a striking difference between all participants, $1M+ sellers, and private label sellers.
Only 2% of million dollar sellers primarily sell books, compared to 9% of all sellers. We also found that 12% of $1M+ sellers mainly sell electronics, versus 7% of all sellers.
Private label sellers are more active in:
- Home & Kitchen, with 26% of private label sellers vs 18% of all sellers
- Health & Beauty, with 21% of private label sellers vs 16% of all sellers
- Sports & Outdoors, with 12% of private label sellers vs 6% of all sellers
They are also more likely to sell phone accessories, baby products, jewellery, and pet supplies. Although these categories are less popular than the “big three” above, private label sellers were more than twice as likely to specify them as their primary category than all sellers.
See Feedvisor’s report for a more extensive category breakdown.
A Third of Sellers Have a Profit Mark-Up of 25%-50%
We asked sellers about their average profit mark-up. Just under one-third of all sellers have an average mark-up between 25% and 50%, and 29% of sellers have a mark-up between 10% and 25%.
More $1M+ sellers are in the 10% to 25% range: 45%. In the 25%-50% range there are 23% of $1M+ sellers. This could indicate that higher profit margins are easier to attain for small businesses, and as sales grow margins tend to reduce.
Private label sellers have much higher mark-ups with half stating an average between 25% and 50%.
Note that there is a difference between mark-up and profit margin – mark-up is the amount added to the cost of a product to arrive at the selling price, whereas margin is the percentage of the selling price that is profit. They are related, but not the same. An item that costs $100 and is marked up by 50% would sell for $150, whereas the profit margin is 50/150 or 33%.
35% of Businesses Sell Some Used Items
Amazon is generally seen as marketplace for new products, so it may be surprising that over a third of sellers in our survey sell some used items.
But for half of those sellers, used items make up less than 10% of their sales revenue. Just 8% of all survey participants make over half of their sales from used items, and only 1% of sellers sell nothing but used items.
Fewer $1M+ sellers sell some level of used items, at 24%. As with all survey participants, sellers who exclusively sell used items make up 1% of million dollar sellers.
79% of Amazon Sellers Use Some or All FBA
Amazon’s FBA logistics service (Fulfilment by Amazon) is highly regarded for its speed and accuracy, and also gives sellers an advantage on the Amazon marketplace by boosting visibility in the Buy Box, and making them eligible for the popular Prime free shipping program.
Perhaps it shouldn’t be surprising then, that 79% of all sellers surveyed use FBA for some or all of their products sold on Amazon. 44% use FBA for 90% or more of their sales, and 27% use FBA for everything they sell.
$1M+ sellers are less reliant on FBA: a third use it on 90% or more of their sales, but only 10% use it for everything they sell.
The opposite is true of private label sellers, with 56% using it exclusively.
61% of Sellers Fear Being Banned
Over 60% of all sellers said their biggest concern was Amazon taking away their seller privileges, by suspending or permanently banning them from selling on the marketplace. Two-thirds of $1M+ sellers have the same concern.
44% of all sellers are concerned about Amazon starting to sell their products, but that jumps to 64% of $1M+ sellers – almost as big a concern as being banned from selling.
43% of sellers are concerned about negative feedback or reviews from customers, but that drops to 26% for $1M+ sellers. Perhaps sellers with a higher sales volume can more easily absorb occasional bad feedback.
PL sellers are less worried that Amazon will start selling their items, with only 26% saying it is a big concern. Private label sellers technically have their own unique products, which largely protects them from direct competition. They are however much more concerned about other sellers maliciously leaving negative feedback (51% compared to 31% of all sellers) and other sellers copying their items (41% compared to 26% of all sellers).
Many sellers used the free-text comments to voice other concerns about selling through Amazon, and common themes included:
- Falling sale prices
- Returns abuse by buyers
- Policy changes made with little notice
Other comments included:
- The metrics are ridiculous. There is no room for error or a simple mistake.
- There are very low margins, due to small companies not paying their taxes.
- Amazon aren’t transparent with sellers about details of suspensions.
- Sellers hijack our listings and sell the item for 30%-50% less.
- Chinese suppliers are competing directly with their own customers.
Sourcing Strategies Vary Between Segments
There are some clear differences in sourcing strategy between sellers in general, million dollar sellers, and private label sellers.
Compared to sellers in general, million dollar sellers are:
- More driven by what’s popular in the marketplace
- Less interested in buying cheap items
- More interested in what their competitors are selling
- Twice as likely to get suggestions from their suppliers
- Twice as likely to visit tradeshows
Private label sellers are:
- Also more interested in what’s popular
- Also less interested in buying cheap items
- Less likely to describe their sourcing as random
- Less likely to visit trade shows
Several sellers added free-text comments about their sourcing strategy, and mentioned specific trade shows that they visit. The trade shows mentioned span the globe, and range from huge trade fairs for general merchandise to very niche shows. Shows mentioned by multiple participants included:
- ASD Las Vegas
- Spring Fair and Autumn Fair in the UK
- AmericasMart Atlanta
- Fancy Food Show
Some other themes in the comments were manufacturing their own products, and creating their own purpose-built product research software.
Specific comments included:
- I look at what other products my supplier has then research them on Amazon and Google Trends.
- We focus on my core category and research customer buying interests.
- I find products that are already selling well and redesign them.
- We sell items with MAPs that are strictly enforced, so there is a level playing field.
67% Promote Their Products, Mostly with Amazon Ads
Two-thirds of all sellers said they promote their products in some way. Of those, 74% said they use Amazon Sponsored Products. Just over a quarter said they use Adwords and 18% use Google Shopping. 10% promote their products offline, and just under 10% use banner ads, marketing agencies and social media.
Million dollar sellers are heavier users of all paid forms of promotion, but are much less likely to use social media – just 1% mentioned it compared to 9% of all sellers.
Private label sellers are the most likely to use Amazon Sponsored Products, at 87%, and social media, at 12%.
Many sellers added free-text comments. Common themes were Facebook, Facebook Ads and Pinterest. Only a few mentioned email marketing, reflecting that for Amazon sellers there is little opportunity to build a direct relationship with buyers.
Other comments included:
- We sponsor events that use our products.
- It’s lots of hard work, doing little bits every day.
- I already pay Amazon to sell my products. Why should I pay more for promotion?
89% of Million Dollar Sellers Use Software
We asked sellers about software they use now, or plan to use in the next 12 months, in the following categories:
- Inventory management
- Order management
- Product research
- Reporting and analytics
Overall, we found that 68% of all sellers use software in one or more category and 89% of $1M+ sellers are software users. It is surprising, perhaps, that 11% of million dollar sellers manage their business without using software in any of the categories we asked about.
Despite high software usage overall, the usage for each individual category is quite low. The most used type of software for $1M+ sellers is repricing at 59%, and the most used for all sellers is inventory management at 32%. Private label sellers are most likely to use feedback software, at 39%.
Overall private label sellers are the least likely to use software, with only 58% using tools in one or more category.
40% Plan to Use New Software in the Next 12 Months
40% of sellers plan to start using a new category of software within the next year, but only a third of private label sellers.
Overall, inventory management is the most popular category of software that sellers plan to start using, with 21% intending to adopt it within the next 12 months. It is also the most popular category of software that private label sellers plan to implement, at 19%. But for million dollar sellers, product research software is the most popular, also at 19%.
Software Use By Category
We asked survey participants which software they use in each category. To ensure that their software usage was captured accurately, we asked for a free-text answer rather than providing a shortlist. Their answers were then de-duplicated and analysed.
A few points about the software category breakdowns below:
- Ecommerce software can have a broad set of features and overlap multiple categories, so some tools appear in more than one category.
- As software usage by private label sellers is low overall, we have not included them separately in the charts.
- Two software categories are excluded: repricing and reporting. We have decided to omit those categories from this detailed analysis because this survey was run with Feedvisor, whose software specializes in those areas.
InventoryLab is the Most Popular Inventory Management Software
More than half of million dollar sellers use inventory management software, at 56%, compared to 32% of all sellers and 16% of private label sellers.
Among the 32% of sellers who use inventory tools, Amazon-focused software InventoryLab is the most popular, being used by 23%. After InventoryLab the market is highly fragmented, with no provider having more than 5%. The most popular are Linnworks, QuickBooks and ChannelAdvisor.
However, only 6% of million dollar sellers use InventoryLab. The most popular choice for them is building their own inventory software in-house, again at 23%. For $1M+ sellers the market for SaaS tools is even more fragmented, with Seller Cloud, Monsoon OMS and RestockPro making a showing alongside the software mentioned above.
Linnworks is the Most Popular Order Management Vendor
47% of million dollar sellers use order management software, compared to just 20% of all sellers and 10% of private label sellers. FBA is very popular among private label sellers, greatly simplifying the order management process.
15% of all sellers, and 19% of million dollar sellers prefer in-house order management systems – making it the most popular choice overall. The most popular vendor of order management software is Linnworks, with 8% of all sellers and 8% of $1M+ sellers saying they use it.
ShipStation, ShipWorks and Stamps.com are the Most Popular Shipping Tools
55% of million dollar sellers use shipping software, compared to only 26% of all sellers and 16% of private label sellers.
Far fewer million dollar sellers use Stamps.com directly, at just 4%. For this group, ShipWorks (at 15%) just edges out ShipStation at 14%. Another 14% said they use their own bespoke shipping software.
InventoryLab and ChannelAdvisor are the Most Popular Listing Software
35% of million dollar sellers use listing software, compared to 21% of all sellers and only 7% of private label sellers. As private label sellers create their own products, they often have relatively few SKUs and little need for listing automation.
Mirroring the results for inventory management tools, InventoryLab was named by 25% of all sellers as the listing software they use, but by only 2% of million dollar sellers.
Just over a quarter of million dollar sellers said they use in-house listing software, and 18% said they use ChannelAdvisor.
$1M+ Sellers Prefer Bespoke Product Research Tools
19% of million dollar sellers use product research tools, compared to 27% of all sellers. Product research is the only category where $1M+ sellers are less likely to use software. Only 13% of private label sellers use product research software.
No million dollar sellers use Amazon’s own app, and relatively few mentioned the other tools that are popular among smaller sellers. However, 34% of $1M+ sellers said they have their own bespoke product research systems, and 11% said ScanPower was their preferred vendor, ahead of all the other providers.
Feedback Genius and FeedbackFive are the Most Popular Feedback Tools
38% of million dollar sellers use feedback software, compared to 27% of all sellers. But feedback tools are the only type of software where private label sellers are the heaviest users, at 39%.
Feedback software is the least fragmented category, with just two tools gaining more than 2% of answers: Feedback Genius and FeedbackFive. 44% of all sellers who use a feedback tool use Feedback Genius, making it the most dominant tool in any of the software categories. A quarter use FeedbackFive.
For million dollar sellers, however, the positions are reversed with 34% using FeedbackFive and 27% using Feedback Genius.
I believe that this survey has provided some rare insights into the way Amazon sellers really operate.
But like all surveys, there will be some bias. Caution should be taken if applying these findings to the Amazon marketplace as a whole, or making business decisions based on what you have read here.
Let me know in the comments below if you have any questions about the results. I’ll do my best to help.
For further analysis of this survey you can also download Feedvisor’s report.