#4: Amazon marketplace the engine inside the flywheel

Amazon's marketplace is one of the most well-known strategic moats in the retail industry.

It has become part of the retail lore during the last five years as Amazon has become one of the top five retailers in the world.

However, the Amazon marketplace is a rather old concept. Jeff Bezos initially introduced it inside the company in the late 1990s. After Amazon tried to buy eBay, the original marketplace, Bezos initiated a project to copy eBay.

Bezos stated in 2000 that the marketplace would represent 50% of revenue when Amazon reached $200 billion. That was almost 100 times the revenue Amazon had at the time.

It was a prescient forecast. However, the marketplace did reach half of the revenue already in 2015. At the time, Amazon surpassed $100 in revenue.

More of the history of the Amazon marketplace has been explained in the earlier post.

The growth of the Amazon marketplace is illustrated very well by the figure above. It shows the revenue share from Amazon’s first-party and marketplace sales. The marketplace picked up growth in the 2010s.

The growth of the marketplace also coincides with the meteoric rise of the increase in the share price of Amazon. The figure shows how the market capitalisation of Amazon and eBay changed over time.

In the early 2000s, eBay was regarded as the best online retailer and the company with the best business model. After multiple struggles, Amazon found a good solution for its marketplace and, in the late 2000s, really started to invest in it.

One of the marketplace's core pillars was logistics, which is the topic for the next post. 

----------------

Would you like to learn more about the retail trends and numbers?

We conduct trend reviews, from individual presentations to ongoing quarterly reviews. Read more about them in the Services section or email us at arhi@adainsights.fi, and we can discuss how we could help you understand the changing retail environment.