Does Online Retail Make the Most Money for Amazon?

Online retail is a multimillion-dollar business, and there’s no denying that Amazon is one of the industry’s biggest players. The company currently houses more than 450 million active monthly customers and more than 1.7 million sellers on its platform.

Whether you’re an influencer, a blogger, or simply someone who enjoys shopping online, there’s always plenty to learn from the masters. Let’s examine the current stats around ecommerce and retail on Amazon to see how digital retailers are performing, and if online shopping is a viable business model despite the current climate.

The Evolution of Ecommerce On and Offline

It’s always interesting to examine the progression of a trend, especially one as fundamental to our 21st century way of life as ecommerce. Retail businesses are currently evolving from expensive one-off purchases to monthly subscription boxes, creating a greater need for flexible working hours.

Offering overnight delivery and an array of same-day fulfilment options, Amazon has changed the game for online retail. The convenience for customers coupled with the need for flexibility for businesses has seen employment levels rise across the industry. In fact, according to the International Council of Shopping Centers, job losses in traditional retail were more than offset by job gains in online retail last year.

The shift to online retail was initially met with scepticism from traditionalists. Many saw it as a passing fad. But the trend-setters didn’t listen, and neither should you.

What Is Ecommerce?

Ecommerce is an abbreviation for “electronic commerce” and, as a result, can also be referred to as digital commerce or digital shopping. Simply put, ecommerce is buying and selling directly between two parties (often over the internet) with the involvement of a third party (a shopping facilitator) minimised or eliminated.

In its most basic form, ecommerce simply means going online to buy something. However, this definition is extremely broad, and can include a variety of activities including researching products, comparing pricing, and performing virtual transactions. It also does not limit itself to just purchases online, but can extend to include mobile commerce and even brick and mortar stores if those are considered “online” transactions.

What Is Retail?

In general, retail is something that you go into a physical store to buy. However, the definition of retail can vary from simply purchasing a product to include affiliate marketing, online marketing, and even performance marketing (via digital channels, email, or phone). As a result, retail can be considered a subset of marketing.

In the context of this article, retail will refer to businesses related to the selling of goods and merchandise online via their own websites or marketplaces. These businesses operate in a similar way to traditional retailers, but instead of selling through a store or a physical space, they allow customers to directly purchase what they want from the convenience of their homes. In some cases, these retailers operate completely online, while in others, they are hybrid businesses that include both online and offline elements.

How Is Ecommerce Performing On Amazon?

There are several metrics you can use to measure the performance of ecommerce on Amazon, the biggest of which is sales. According to industry research group The NPD Group, total retail ecommerce sales were worth over US$16.9 billion in the UK alone in 2018 and are expected to rise to over US$26 billion by next year.

Sales on Amazon’s marketplaces and websites represent just one piece of the overall ecommerce picture. In fact, you can’t really talk about ecommerce on Amazon without mentioning their FBA (Fulfilled by Amazon) program. Initially launched in 2015, FBA allows entrepreneurs to take advantage of Amazon’s fulfilment network and skip the middleman by having products delivered and picked up from warehouses by Amazon employees.

What Is the Growth Prospects Of Ecommerce On Amazon?

The NPD Group forecasts that total retail ecommerce sales in the UK will hit £26.25 billion by next year, an increase of 16.8% from 2018 sales figures. One of the primary drivers of this growth is expected to be Amazon.

According to Statista, Amazon’s share of the UK ecommerce market will grow from 13.3% in 2018 to 22.1% by next year. That’s a massive share, and one that shows no signs of slowing down.

To try and answer the question of whether sales on Amazon make the most money, or if it’s better to be a wholesale buyer, you need to look at a few key stats.

How Does Sales On Amazon Compare To Traditional Retail?

Let’s take a quick look at some key statistics to compare sales on Amazon to traditional retail.

According to research compiled by the analysts at Comparism, Amazon UK had a total retail sales value (goods sold plus service charges) of £8.68 billion in the 12 months to November 2018. That represents a 26% increase compared to figures from 12 months earlier. In the coming months, the UK Amazon store will hit £11.6 billion in retail sales.

As noted above, the definition of retail can be considered as broad as buying and selling directly between two parties with the involvement of a third party minimised. In some cases, this type of transaction can include affiliate marketing, mobile commerce, and even purchases made in physical stores if those stores have an online presence.

In the case of Amazon, their retail sales value is significantly higher than the combined value of all of their marketplace and website sales. In fact, if we compare the combined sales value of Amazon’s retail operations (goods sold plus service charges) to their marketplace and website sales, we see that Amazon’s retail operation makes up 82% of their total value. So, in short, their retail operations make up a lot of money for Amazon.

How Is Ecommerce Performing On Other Social Media Channels?

Although social media channels like Twitter and Instagram are primarily used for creating and sharing content that is somewhat algorithm-led, people still tend to follow and engage with content that is useful or interesting to them. As a result, certain brands and businesses can get a significant following on these channels even if they don’t necessarily “play the game” and use the most popular hashtags and engaging content to attract potential customers.

With all the talk of online retail and social media, it’s important to remember that these channels are just like any other channel – they have their ups and downs. For instance, people can be much more difficult to reach via social media than via a customer care service channel like email or phone. However, with the right strategy, harnessing the power of social media can greatly amplify your brand’s message and drive sales.

Where Do I Buy From On Amazon?

Now that you have a good idea of how much Amazon makes off of online retail, let’s take a quick look at where you can buy various products from on the platform.

If you’re looking for fashion-related items, you can find plenty of options on the Amazon marketplace and websites. However, if you have a specific product in mind that you’ve seen pop up on social media, you can use specialized search engines like Shoppee to easily search for the item you want while also connecting with the brand or store offering the item directly.

The Rise Of E-commerce On Amazon

As more and more people join the workforce and become comfortable with doing their own shopping online, the industry is seeing a rise in e-commerce on Amazon. This trend is not just limited to the UK, but can be seen across the globe. For instance, according to Shopify, online retail sales were worth US$16.9 billion in the UK in 2018 and are expected to grow to over US$26 billion by next year.

With the right strategy, brands can take advantage of Amazon’s networked effect by leveraging the company’s sizable audience and gaining support from customers who are inclined to trust Amazon. These customers can then be converted into potential buyers of the brand or store’s products.

In the coming months, we will continue to see more and more people choosing to shop online instead of physically going to a store. With the convenience of online shopping, delivery services, and an ever-evolving marketplace, the world of ecommerce is about to be rewritten.