In this guide, we'll look at Amazon's 3P seller businesses and the business model and method of fulfilment by which they are run.
What is the most common business model third-party sellers use?
The most popular sales model that third-party sellers use is creating a private label. First, a business identifies a product with high demand but few sellers, then finding a way to get it made cheaply but with some marketable changes, finally branding the product under a private label and selling it on Amazon. Though this is the most used model finding a product like that can be difficult, and others try other strategies. Being a wholesalers/resellers is the second most popular method when selling on Amazon.
FBA (Fulfilled by Amazon) vs FBM (Fulfilled by Merchant)
If you ask almost anyone for Amazon's defining feature, it's their amazing fulfilment model. The FBA (Fulfilled by Amazon) is the envy of the industry and is available to any seller who uses the Amazon platform for a fee. This allows third-party sellers to have a functional eCommerce business on their feet relatively quickly, with storage and shipping included. However, some businesses choose the handle the storage and shipment themselves. This is known as FBM (Fulfilled by Merchant) and is being used by more businesses to avoid paying Amazon fees. In 2020, due to COVID-19 limiting Amazon's shipping strategy, more sellers, for the first time, used FBM (43% vs. 34% in 2019) than ever before.