3P stands for third party sellers. They used to be called "eBay sellers" but oh, how times have changed. 3P sellers are being credited for the resurgence in Amazon's (NASDAQ:AMZN) share price as well as the company's revenues and, more importantly, profit. More and more 3P sellers are looking for the exits in regards to eBay (NASDAQ:EBAY).
The marketplace dynamics are changing. eBay underestimated their hold on sellers and Amazon was there to woo them. Now a strange phenomenon is taking place. The type of product many 3P sellers are selling on eBay is trending toward end of life, liquidation, etc. Many 3P sellers are now using eBay for capital recovery while the lion share of their product is being purchased on Amazon at a higher margin. The IT has moved and continues to move to Amazon from eBay.
Why are 3P sellers shifting their mix of product to Amazon?
- Amazon wants them there, or at least acts like they do. Not all sellers are happy with Amazon but far more are upset with eBay. eBay management pushed sellers too hard and the result of that is showing itself in the migration. The problem is once the genie is out of the bottle its hard to get him back in. So eBay has to run promos to drive listings.
- Higher ASPs: 3P sellers know the percent they will pay Amazon on the backend and they can calculate the number in their pricing. Because of listing fees on eBay, if conversion decreases then marketing expenses can accelerate as a percentage of sales, therefore affecting profit margins.
- Customer Service: Buying on eBay is plain and simply too much work. Customer service emails are 100 times more on eBay than on Amazon. eBay buyers want the lowest price yet they want Nordstrom's (NYSE:JWN) service (last time I checked Nordstrom wasn't considered a discounter) while Amazon customers want a fair price with Amazon service and reputation.
- Constant turmoil and business plan changes on eBay and minimal changes or business disruptions on Amazon.
- Amazon is a retailer (wow, so are 3P sellers) and eBay is a marketplace promoter that has a history of soaking its clients.
These are just a few of the reasons 3P sellers are migrating over to Amazon; as they open up new categories, 3P sales will continue to be the main driver behind Amazon's growth and profits. Imagine an Amazon where 60% of their business is 3P and they benefit from the profit margins that business brings, allowing them to fine-tune their own retail operations.
EBAY/AMZN 1-yr comparison chart