The Origin of Amazon Marketplace - The Story Most People Don't Know
A story of failure and invention
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What People Don’t Know…
Most people don't know that when Amazon started...there was no marketplace.
There were no 3P sellers.
Amazon was a traditional retailer who bought and sold products themselves exclusively.
This is the fail and invent story of how Amazon started the marketplace business.
Amazon is stubborn on the vision and flexible on the details
The vision: Amazon is not constrained by four walls, why not have others come in and sell with us?
The execution: Required a few swings at plate...
First Idea…❌
Amazon looked around and at the time the big successful marketplace with sellers was an auction company (guess who?)...so Amazon built an auction system.
Big tech team.
Invited lots of sellers.
Big grand opening.
Crickets…🦗🦗🦗
Customers didn't come to Amazon for auctions.
Second Idea…❌
"The Amazon Department Store"
Offer the big Amazon store with a big door. Customers come in and shop. Right next to the big door is other smaller doors and each seller has their own little shop. Lots of little stores.
Invited lots of sellers.
Called it zShops.
Crickets…🦗🦗🦗
Customers only went through the big Amazon door.
Third Idea…bingo! 💡
Try something radical. Something nobody's done.
Invite sellers into the Amazon store directly, on the same shelves, competing with Amazon retail on the same product pages.
Very controversial internally at Amazon.
Many Amazonians disagreed and committed.
What happened?
The combo of retail + 3P sellers transformed a great store into an unbelievable store.
Amazon retail focused on the biggest brands and most popular products that customers can find in national retailers. Goal was to maintain consistent in-stock, fast free shipping, and competitive prices.
3P sellers bring an unbelievable and diverse assortment. Adding selection you'd never find anyplace else. More 3P sellers joined fulfillment by Amazon (FBA) and the Prime offered assortment skyrocketed. Prime Membership became even more valuable. Attracting more customers.
It's this virtuous cycle that's made Amazon so successful.
>50% of units are sold by 3P sellers.
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