The great Amazon FBA lexicon

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Why should retailers sell on Amazon in 2024?

A success story: from vision to marketing model behind the world’s largest e-commerce platform Did you know that more people in the USA are Amazon Prime members than own a passport? Amazon was the first company in the world to exceed a valuation of USD 1 trillion, making Jeff Bezos the richest man in the world. The figures in Germany also speak for themselves: a full 94% of Germans shop on Amazon.de, and 74% start their product search on this platform. In 2023, Amazon’s sales in Germany amounted to around 37.6 billion US dollars, which corresponds to growth of almost twelve percent compared to the previous year. Global sales amounted to almost 575 billion US dollars. Source: Statista But how exactly has Amazon developed into the world’s largest e-commerce platform and what accounts for this success? And what are the advantages for German retailers of selling their products on Amazon in 2024? To answer these questions, it is important to develop a deeper understanding of the platform. To do this, we take a look at Amazon’s history, mission and marketing model. From online bookstore to the most customer-oriented company in the world In 1994, Jeff Bezos received a forecast about the enormous increase in the number of Internet users. He then made a bold decision: he quit his job at a New York hedge fund to set up his own Internet company. This was an online bookstore that could offer almost any book on the market. However, his goal was bigger from the start: he wanted Amazon to become the “most customer-oriented company in the world”, where customers can find and discover everything they want to buy online. The name “Amazon” is derived from the second longest river in the world, the Amazon, and is intended to symbolize the wide selection. Amazon’s basic philosophy can be described as follows: To offer customers a huge selection and a simple shopping experience. The corporate vision of “customer obsession” and “customer experience” still characterizes Amazon today. The fundamental question that Amazon always asks is: “What is good for the customer and how can we offer them even more added value?” The five most important metrics are the largest selection, the lowest prices, the fastest shipping, the cheapest shipping and reliability. Are you interested? If you want to delve deeper into the vision, philosophy and history behind Amazon and Jeff Bezos, I recommend reading the book “The Everything Store” as well as Bezos’ letters to his shareholders. Growth without major investment: Amazon’s marketing model Have you ever heard of the Amazon Flywheel? It is also known as the flywheel or virtuous circle and describes the system and marketing model behind Amazon. The basic idea is that Amazon’s growth is achieved through scaling, which enables an increase in sales without major investments. The Flywheel works through a cycle of four factors: User experience, traffic (number of visitors/demand), seller and selection. These components influence each other and drive Amazon’s growth. A positive user experience leads to more traffic, which in turn makes the platform more attractive for sellers who can offer a larger selection. This in turn improves the user experience and closes the loop. In addition, a smaller cycle accelerates the main cycle as the growth of the platform improves the cost structure, resulting in lower prices for customers and further improving the customer experience. The Flywheel’s momentum enables maximum results to be achieved with minimum resources, which makes an important contribution to Amazon’s success. Advantages of Amazon for retailers However, it is not only Jeff Bezos who is benefiting from Amazon’s growth, but also many other retailers. Amazon began opening up its marketplace to third-party retailers back in 1999. These enjoy a number of advantages: Wide reach and trust: As already mentioned at the beginning, around 94% of all Germans shop at Amazon.de. The obviously high level of trust in the platform is a decisive advantage for retailers. Prime shipping: In 2021, Bezos wrote in a letter to his shareholders that Amazon had 200 million customers worldwide with its subscription service. According to a survey by Pattern, 37% of customers cited their Prime membership and fast delivery as reasons for buying from Amazon. Amazon FBA and flexible working: With Fulfillment by Amazon (FBA), retailers can outsource storage, shipping and returns and concentrate on their core business. Registering as a seller on Amazon is very easy and you can often work flexibly from anywhere. International sales opportunities: With its international marketplaces, Amazon offers retailers the opportunity to tap into new markets. Optimized warehouse management and cost reduction: Thanks to Amazon FBA, retailers can improve their stock levels and reduce costs in the long term. Various marketing opportunities: Amazon offers retailers various advertising options to increase the visibility of their products on and off the platform. Some examples of this are sponsored products, display ads and coupons. Comprehensive database: Amazon provides retailers with detailed reports. These can often help to improve sales strategies and make important business decisions. Amazon compared to other German marketplaces A survey by Statista from 2021 illustrates Amazon’s strong presence compared to other German marketplaces. According to this, Amazon dominates not only the online segment, but the entire retail segment. In 2020, Amazon’s share of online retail was 53% and its share of total retail sales was 6.7%. Source: Statista Another infographic from Statista shows that more than a third of the top 500 online retailers in Germany sell their products on Amazon. The proportion of such retailers is therefore even higher than in the USA. Source: Statista In 2021, Amazon’s gross trade volume amounted to 46.2 billion euros. In second place was eBay with 10.5 billion euros, followed by Otto with 7.0 billion euros. Source: Statista eBay is known for its user-friendliness and large selection of products in various categories. Retailers can also easily serve customers all over the world. However, some traders criticize the sometimes high fees and certain guidelines that often strongly favor the buy side. On otto.de,