Amazon independent traders’ sales soar through 2016

World's biggest e-commerce company says last year was a bumper one for independent merchants who use its service as the firm expands its storage and delivery capabilities.

An Amazon-branded Boeing 767 freighter, nicknamed Amazon One, flies over Lake Washington. Independent traders, many attracted by Amazon's Prime service, doubled the number of goods they sold last yearShow more

Amazon said the number of items sold for independent merchants that use its logistics service more than doubled to 2 billion last year, evidence the online retailer’s stepped-up investments in warehouses are paying off with expansion into new areas such as fashion and household goods.

The world’s biggest e-commerce company has differentiated itself by offering fast, free delivery of items from its vast network of shipping hubs where inventory is stored close to customers. “Fulfilment by Amazon”, its logistics service, lets merchants send goods to Amazon warehouses and pay a fee for packing and shipping online orders to customers.

The number of merchants using the service increased 70 per cent in 2016, Amazon said Wednesday. Getting access to Amazon Prime members, the company’s most loyal shoppers who pay US$99 a year for free delivery as well as video and music streaming, is a big reason vendors want to store and sell their goods using Amazon’s website and facilities.

The growth shows that the combination of abundant inventory with quick delivery that Amazon used to win market share in books and electronics is working in new categories such as clothing and kitchen items, said John Blackledge, an analyst at Cowen & Co.

“The infrastructure they’ve built and keep adding to is a big advantage over other companies,” Mr Blackledge said. “No one else can do what they are doing, offer so much and get it to you so quickly.”

The Amazon chief executive Jeff Bezos, in a letter to shareholders, highlighted Fulfilment by Amazon as a key growth driver that propelled his Seattle-based company in 2015 to more than $100 billion in sales for the first time. Amazon is projected to report that revenue increased 28 percent to $137bn in 2016, according to analysts’ estimates compiled by Bloomberg.

In addition to new categories, Amazon is increasing its growth rate by expanding overseas. Outside the United States, sales volume through Fulfilment by Amazon increased more than 80 per cent last year. Amazon added a logistics service in Europe that lets merchants send goods to one Amazon hub and the company distributes the items to warehouses close to customers in the Uited Kingdom, Germany, France, Spain, Italy, Poland and the Czech Republic.

The rapid growth has a big price tag. Warehouse capacity issues and the cost of new facilities helped to increase Amazon’s spending on order fulfilment 34 per cent in the third quarter, causing it to miss analysts’ profit projections.

* Bloomberg

Follow The National's Business section on Twitter