2021 has been a year of disrupted supply chains, growing demand for imported products, and adjusting to the effects of the pandemic. How did e-commerce market participants cope with these challenges, and who became the top seller? PartnerTrade has collected the latest statistics and outlined the future of global e-commerce sites.
Top 3 Marketplaces
Currently, global e-commerce revolves around Amazon – in two years, the marketplace has doubled in size and topped the list of successful marketplaces worldwide.
eBay is second, and Walmart is third. Wish, Google Shopping, Target, and others have not reached their full potential and therefore have not shown progress in the overall ranking. Wish is still made up of Chinese sellers and hasn’t made any headway in the global market. Google Shopping initially positioned itself as a new marketplace but has become a price comparison platform. Target showed great promise but remained a closed, invitation-only venue.
Pandemic impact on the e-commerce industry
According to the US Department of Commerce, e-commerce accounted for 12.4% of retail spending ($204 billion) in the third quarter of 2021 as shoppers began spending more online. Experts predict an increase in e-commerce costs to 14-15% annually.
Disruption of the global supply chain
Imports of goods from Asia slowed down and became much more expensive. Ocean freight rates US-China increased fivefold in 2021. Since the imposition of quarantine restrictions, they have grown from $1,500 to more than $20,000. Factors such as port closures, natural disasters, shortage of workers, supply chain problems, and lack of containers have significantly affected the situation.
Goods were delivered to warehouses in the US almost twice as long – nearly 80 days compared to the usual 40. The reason for this was the accumulation of cargo ships waiting to dock outside major ports. Due to higher freight rates and slower imports, sellers have had to rethink freight routes, modes of transportation, and production locations.
Amazon Gross Sales Volume (GMV)
Despite weak points in logistics and a reduction in warehouse space, inventory levels at Amazon’s warehouses have remained high. 83% of the top sellers on Amazon.com kept most of their inventory in FBA warehouses.
The marketplace has built more warehouse space and hired additional staff to service it to meet the growing demand for order fulfillment.
Amazon marketplace sellers earned $390 bln by selling goods in 2021, generating nearly $90 bln in net annual growth. The market doubled from $200 bln in 2019 to $390 bln in 2021. The total turnover, including sales by third-party sellers and Amazon itself, is approaching $600 bln.
Sales by marketplace sellers accounted for 65% of Amazon’s total turnover. For comparison, ten years ago, in 2011, they were only 38%.
If merchant sales are equated to a country’s gross domestic product, then Amazon would be the 37th largest economy in the world, just behind Denmark.
General information on market participants and features of doing business on Amazon in 2021
Private umbrella companies or Amazon aggregators focused on raising investment in marketplace brands raised more than $12 billion in 2021. This amount includes both equity and debt financing.
The five largest aggregators – SellerX, Thrasio, and other companies – have raised more than $7 billion.
An increasing percentage of sales on Amazon come from sellers who have been working on it for years. More than half of them are those who joined Amazon in 2017 and earlier. New sellers add an insignificant percentage to the existing base.
The top sellers are companies that joined Amazon more than five years ago, with 56% selling since 2016 or earlier. Only 8% are sellers who have joined the site in the last two years.
40-45% of the top 10,000 sellers continue to be active during their three years on Amazon. 50-55% – within two years, and 60-65% – within a year.
Advertising on Amazon
By the end of 2021, the cost of advertising on Amazon reached $1.33 per click. It is up 43% from $0.93 at the beginning of the year and more than 37% compared to 2020.
The average ACoS ad selling cost (total ad spend divided by total ad sales) was 25% in early 2021 and has risen to over 30%. However, the average conversion rate – the percentage of clicks an ad converts into sales – has remained stable at 12-13%. So the average cost per sale was $6-7 in 2020 but rose to $9-10 in 2021 – it took eight clicks to create one deal at an average cost of $1.20 compared to $0.8 5.
Before ads became famous, customer acquisition costs on Amazon averaged 15% per transaction fee on each sale. However, due to advertising, the cost of customer acquisition has significantly exceeded 20%.
Product recommendations and personalization have been replaced by Amazon ads. The “Sponsored products related to this item”, “Four stars and above,” and “Brands related to this category on Amazon” replaced the “Customers who visited this item sections, also viewed” and “Customers who bought this item also bought.”
Featured on Netflix, sold on Amazon
Amazon is the #1 search engine for many shoppers. When they see something they like on a Netflix show, Instagram, or TikTok, they go to Amazon.
In October, “squid suit” was the top search on Amazon. In less than two weeks, costumes from Netflix’s thriller The Squid Game are selling like hotcakes on online platforms. Amazon was the fastest to respond to demand and placed similar products on the marketplace. Therefore, several hundred sellers increased their sales due to in-demand products.
The top-selling item on Amazon for most of January and February was high-waisted leggings, which went viral on the social app TikTok. The trend has not disappeared even after 12 months. Shoppers searched for them for “TikTok leggings.”
SMM commerce in the US is in its infancy, but it is already indirectly contributing to sales growth. The hashtag #amazon has 20 billion views on TikTok, and other related categories have even more.
Brands on Amazon
In many categories, the bestseller list on Amazon changes every day. Other short-lived brands crowded out brands that recently did not exist at all. For example, in the headphone category, 1,800 unique products from 666 brands such as NUBBYO, LAFITEAR, NANMING, AIWONS, or HWCONA have made it into the top 100 bestsellers over the past 24 months. Only five brands – Apple, Samsung, Sony, Soundcore, and Tozo – remained on the headphone bestseller list for the full 24 months.
So many brands appear on Amazon that the number of registrations of their trademarks exceeded all records of the US Patent and Trademark Office (USPTO). In July 2021, the trademarks in the USPTO queue passed the 900,000 mark. Many companies on the approval list were random letters as they only wanted to enter Amazon’s brand registration service.
The number of popular product reviews on Amazon has increased significantly. For example, product comments in the headphone category have risen from 4,500 in 2019 to 40,000 in 2021. The average rating of goods increased from 4.1 to 4.4 out of 5.
Chinese sellers on Amazon
In April and May 2021, the marketplace suspended hundreds of top Chinese sellers for participating in fake review schemes. Three hundred accounts of Mpow, Aukey, VicTsing, Tacklife, Austor, Vtin, Seneo, Homasy, Homitt, LITOM, TopElek, and others were banned. The blocked sellers’ annual sales exceeded $1 bln and included dozens of top-selling items.
For example, the Fairywill electric toothbrush has been in Amazon’s top five bestsellers for at least three years. This item has 75,000 reviews and a 4.5 from 5 rates, but despite this was banned.
Due to account blocking, many Chinese sellers (including Mpow, Aukey, Tacklife, and Ravpower) moved to Walmart. The marketplace opened in March 2021 and added over 6,000 sellers from China. They can use Walmart Services of Fulfillment and the giant’s warehouses. Mpow headphones, previously available on Amazon, are now available to order at Walmart.
20 Amazon marketplaces
In September 2021, Amazon added two more markets to its sales geography – Egypt and Poland. The e-commerce giant now spans twenty global marketplaces.
More than 70 thousand sellers represent Poland – this is the most prominent Amazon launch in Europe. The marketplace in Egypt followed Saudi Arabia and the United Arab Emirates in a region where Amazon has been present for the past two years. Egypt became the smallest market for sales. It competes with companies such as Noom (UAE) and Jumia (Nigeria).
About 47% of the total number of visits is occupied by amazon.com. The United States is followed by Japan, Germany, and Great Britain – 10% each.
The top five markets (USA, Japan, Germany, UK, and India) account for almost 80% of web traffic. New trading platforms in Egypt and Poland did not significantly affect the overall growth of the marketplace turnover.
Future of Amazon
Amazon’s first innovation was the creation of an infinite catalog that eliminated the need to shop elsewhere. Whatever customers were looking for, Amazon had it.
The second step was fast and convenient shipping and return. Any products appear to the customer two days or earlier. It happened in 2005 when the company introduced the Prime service. Since then, the company has announced hundreds of new proposals and experiments, but the core commercial capacity has remained unchanged.
Instead, Amazon has taken to fix the blunders – identifying fake reviews, dealing with fakes, debugging order fulfillment bottlenecks, and more. The company created the most extensive catalog, fulfillment network, and employee base. Much of Amazon’s resources are dedicated to keeping this work going.
Experts say that Amazon will continue to move forward, adding $ 100 billion or more to its annual turnover if there are no failures in the system.
However, some exciting applications and platforms can push Amazon. For example, Shein a clothing shopping app straight from China. In 2021, it overtook Amazon to become the number one download. Shopify can also compete with Amazon as a successful business and shopping model. Successful e-commerce sites include popular social networks and niche Buy-Now-Pay-Later services that are becoming payment networks.
The world does not stand still, so the giant should consider what else it can offer, in addition to the existing functionality, to hold the first position.
The first place in global sales in the field of e-commerce belongs to the Amazon marketplace. eBay follows it, and after – Walmart.
Due to port closures, labor shortages, natural disasters, and other negative factors, supply chains have been disrupted, and sea freight rates have risen five times.
Amazon’s gross sales were $220 bln, and third-party seller sales were $390 bln, bringing total on-site sales for 2021 to $610 bln.
At the end of 2021, the cost of an Amazon ad was $1.33 per click.
High-waisted leggings became famous after a short video on TikTok, as well as tracksuits from the “The Squid Game.”
The marketplace began to fight against fraudulent rating schemes and fake reviews, which banned hundreds of leading Chinese sellers.
In Egypt and Poland.
That’s entirely possible. Last year clothing shopping app Shein overtook the e-commerce giant regarding downloads. A successful Shopify business model can also take the lead.