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Amazon sellers diversify to other e-commerce platforms in wake of COVID-19

The third-party sellers that contribute to a majority of unit sales on Amazon.com Inc.'s site are diversifying their presence on other e-commerce platforms to reach more customers and capitalize off a coronavirus-induced online shopping boom, according to executives at those companies and analysts.

Many Amazon sellers were already expanding to other e-commerce platforms pre-pandemic. But experts say the crisis has prompted some sellers to accelerate those efforts and showcase goods on the growing third-party marketplaces of retailers including Walmart Inc., Target Corp. and eBay Inc. Others are looking to form new partnerships with shipping companies and e-commerce infrastructure providers like Shopify Inc.

Some of these third-party sellers, who tend to be small and medium-sized businesses, want to reduce their dependence on Amazon at a time when the e-commerce market leader is grappling with a surge in demand and strains on its shipping operations, experts say. Amazon temporarily halted shipping services for nonessential goods in March but resumed that service in April.

"Short term, a lot of merchants are cash-strapped, and they are looking for any avenue to new sales," said Andrew Lipsman, principal analyst with eMarketer, in an interview. "It makes sense for them long-term because [Walmart and Target] are growing channels, and they are only going to continue growing at a pretty strong clip over the next few years at least."

James Thomson, a former Amazon executive and partner with Buy Box Experts, also noted the appeal of diversification for these third-party sellers. "There are a lot of sellers on Amazon today that sourced everything out of China, they sell only on Amazon.com and they only used [Fulfillment by Amazon] for fulfillment," he said, referencing recent supply chain disruptions and trade tensions between the U.S. and China. "Guess what? All three of those areas got hammered in the last six months."

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

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Pictured here is the warehouse of New York-based Maxxima, which sells many of its lighting products on Amazon. The company plans to sell more goods on Walmart.com after sales grew significantly on that platform.
Source: Maxxima

Amazon declined to comment, but its third-party sellers are critical to the company. The percentage of gross merchandise units sold by independent third-party merchants on Amazon's site has grown from 3% in 1999 to 60% in 2019, according to Marketplace Pulse. As of September 2019, Amazon had approximately 898,000 individual and professional seller accounts in the U.S.

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Smaller rivals gaining market share

Even though some sellers are diversifying into other sales channels, experts said they expect Amazon will continue to dominate the U.S. e-commerce landscape for the foreseeable future. Amazon is expected to grab 38% of the U.S. e-commerce market in 2020, up from a 37% market share in 2019, according to eMarketer.

But some of its smaller rivals are gaining market share. Walmart is expected to end 2020 with a market share of 5.8%, up from 4.7% in 2019, which would make it a distant second-place finisher to Amazon. Home Depot Inc., Best Buy and Target are all expected to see their market shares increase in 2020, according to eMarketer.

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Walmart's e-commerce sales rose 74% in the first quarter while growth in its third-party marketplace "outpaced the overall business even as first-party sales were strong," Walmart President and CEO Doug McMillon told analysts on a call.

Walmart did not respond to inquiries, but the company nearly doubled the number of sellers on its marketplace to 43,573 as of May 2020, up from 23,368 in May 2019, according to Marketplace Pulse.

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Meanwhile, Target's comparable digital sales rose 141% in the first quarter. The company did not respond for comment, but its Target Plus invite-only marketplace has grown to 109 merchants as of February, up from 30 a year ago, according to Marketplace Pulse. EBay's first-quarter online sales also surged while its platforms experienced "improved acquisition of small business sellers." The online marketplace on June 4 raised its outlook for the second quarter of 2020 after seeing strong growth in global gross merchandise volume from April through May.

Steven Yates, CEO of management consultancy Prime Guidance, said there's "more business opportunity" on channels like Walmart than ever.

Lipsman said non-Amazon e-commerce platforms give sellers a chance to reach new customers. "We also are entering into a new reality where a lot of consumers who didn't necessarily look to online platforms are now maybe doing so for the first time or they are doing it with a level of regularity that they hadn't previously."

It is also a chance to capture potentially more profitable sales.

"The more crowded another platform gets, the harder it is to eke out a profit," he said. "If you are early in the game and Walmart is hitting an inflection point, you don't even necessarily need to generate the same volume of sales to generate a meaningful amount of profit."

New opportunities for sellers

Amazon sellers interviewed for this story said they see an opportunity to gain more sales traffic from retailers like Walmart.

Consider Maxxima, the lighting products company that sells many of its products on Amazon. Dov Sassoon, the company's senior vice president, said Maxxima has been selling on Walmart's marketplace for a couple of years, but that sales of his company's lighting products on Walmart.com were "five times" higher in April than they were in February. Meanwhile, Amazon sales were about 5% lower in April than they were in February, he said, declining to provide specific figures.

Sassoon said Amazon will continue to be the company's largest selling platform, along with Maxxima's own website, Home Depot, and eBay. But he said he is now looking at ways to further expand on Walmart.com, including testing some advertisements.

"These are investments that we were not making before but because we've seen success [on Walmart.com] in recent months, we want to learn how we can continue to sell our products on their platform," he said.

Jonathan Goldman, president of Quantum Networks, a supplier of audio and electronics equipment that sells mostly on Amazon, also is looking at ways to grow on Walmart after seeing sales on Walmart.com "nearly double" in recent weeks.

"We've sold on Walmart before but this has been a renewed focus," Goldman said in an interview. "There are many more customers shopping online. People are looking on Walmart now just as they are looking on Amazon or Target."

Shipping alternatives

As Amazon works to catch up with demand, Amazon sellers are also increasingly looking to partner with logistics firms like Deliverr, Shipwire Inc. and DHL, said Guru Hariharan, CEO of CommerceIQ, a provider of e-commerce channel optimization software and services.

Many sellers are looking to reduce their dependence on Fulfillment by Amazon as Amazon has increasingly placed an emphasis on shipping essential goods over third-party sellers of nonessential goods. "A lot of these third-party sellers were lower in the pecking order," Hariharan said.

Goldman, of Quantum Networks, recalls being in "complete shock" when Amazon halted shipping services for nonessential goods in March.

But he quickly pivoted by turning his company's warehouse into a backup Prime fulfillment center that helped his company fulfill orders as a stopgap measure. He plans to continue using his firm's warehouse to ship goods in addition to using Amazon for the foreseeable future.

"Now we have a multipronged approach — not just one method," he said.