Over the past decade, Amazon has seen a considerable increase in the number and the sales value generated by its third-party (3P) sellers – 61% of the ecommerce giant’s sales in Q1, according to AltIndex – and now its second-largest revenue stream.

There are different ways to sell on Amazon. It offers various business models to vendors such as wholesale, drop shipping, private labels, and arbitrage. However, the most significant difference is between its first- and third-party sellers.

Most first-party sellers are wholesale vendors who sell their inventory to Amazon. The ecommerce giant acts as the owner of these products, manages pricing and shipping, but ensures priority selling and brand trust in return. However, since most first-party vendors operate as suppliers they have limited control over sales and logistics.

On the other hand, third-party sellers have much more flexibility when selling on Amazon’s platform. This type of sales is enabled by the Fulfilment by Amazon (FBA) agreement which means vendors still act as retailers, own the product, and control the pricing, while Amazon manages shipping and storing. In return, Amazon charges commissions, shipping, and related service fees which became its second-largest revenue stream.

The share of paid units sold by third-party sellers on Amazon increased significantly over the past five years. According to Statista and official company data, third-party sellers generated roughly 50% of Amazon’s total sales in 2018. By the end of 2020, this figure jumped to 55%. The increasing trend continued last year, with 3P sellers generating 59% of sales in the platform. Since then, their share increased by 2% and hit an all-time high of 61% in Q1 2024.

This figure will most likely continue growing by the end of the year as Amazon recently adjusted fulfillment rates and introduced a low-inventory fee that privileges successful sellers with high inventory levels to make 3P sales even more appealing to vendors.

Amazon’s 3P selling formula has brought the company huge profits and helped its sales skyrocket over the years. In 2018, Amazon’s net sales generated through third-party seller services amounted to $42,7-billion. Two years later, this figure practically doubled to over $80-billion.

However, the following years have seen just as impressive growth with total third-party net sales jumping to $107-billion in 2022. Statistics show the annual net sales value dropped to $96-billion in 2023, but the ecommerce giant still earned almost half a trillion dollars through its 3P services in the past five years.