Selling on online marketplaces has become a critical part of ecommerce. Twenty-seven percent of retailers use ecommerce marketplaces as part of their acquisition and retention strategy to drive growth, according to Shopify.
In fact, many sellers base their entire business on large marketplaces like Amazon. They can use one, or a combination of several business models on the platform. The differentiating factors are usually based on how inventory is acquired and how the orders are fulfilled.
According to data from Jungle Scout, the most common Amazon marketplace business models in 2023 are:
1. Private Label: 54%
In the private label business model, sellers typically identify a product (or product category) with high demand and minimal competitors. They discover and evaluate these opportunities using tools like Jungle Scout. They would then have their superior version manufactured, brand it, and sell it on Amazon. Top private label categories include Home, Kitchen, Sports/Outdoors, Health, Baby, Beauty and Personal Care.
2. Wholesale: 26%
Wholesale for marketplaces is the same as sourcing wholesale products for any retail business. Sellers purchase products in bulk (usually with a minimum order) from a manufacturer or distributor at a discounted price. They then mark up the individual product price to make a profit.
3. Retail Arbitrage: 25%
Retail arbitrage sellers usually spend a lot of time seeking exceptional deals in retail stores, and evaluating each product’s potential sales or problems (like categories that are tough to get into or brand restrictions). Top retail arbitrage categories include Home, Kitchen, Toys/Games, Books, Beauty/Personal Care, and Grocery.
4. Online Arbitrage: 24%
Online arbitrage is much the same as retail arbitrage except the search & sourcing is through online retail, be it websites or marketplaces.
5. Dropshipping: 17%
Drop shipping refers to a hands-off method of order fulfillment. Orders are processed and shipped directly from the supplier on the seller’s behalf, usually with no indication that the product came from somewhere other than the seller. Top dropshipping categories include, Home, Kitchen, Sports/Outdoors, Home Improvement and Outdoors/Garden. Learn all about drop shipping in our post, Wholesale Drop Shipping for Canadian Online Sellers.
6. Handmade: 8%
Sellers who create their own handmade products (such as jewelry or home décor) enjoy higher profit margins on Amazon.
Online marketplaces can make it much easier for Canadian sellers to reach international consumers. The United States is often the first expansion on Amazon’s marketplace, as it receives the most traffic and is in our North American comfort zone.
Canada was the first country Amazon expanded into and they continue expanding into other countries today. Belgium was added this year, with Colombia, South Africa and Nigeria expected to follow before the end of 2023.
Canada currently ranks second of the top Amazon international marketplaces for third-party sellers, following the United States.
Amazon Marketplace by the Numbers
- Amazon receives over 2.7 billion visitors every month and over 300 million customers around the world.
- 66% of consumers start their product searches on Amazon.
- 89% of small-medium businesses (SMB) on Amazon are profitable. Almost 2 million third-party sellers are SMBs.
- 58% of Amazon sales are third-party sales.
- Customers buy 7400 products per minute from US sellers.
Data Source: Jungle Scout 2023 State of the Amazon Seller
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Melody McKinnon's formal education is in business management, which she enhanced with more than 60 certifications revolving around business, marketing, health, general sciences and writing. In 25 years of working online, she has owned or managed both educational and ecommerce websites. Her book, 7 Recession Proof Online Businesses to Start From Home, is available on Amazon.
Melody has worked with many businesses & brands in a multitude of capacities. She can often be found on CanadiansInternet.com, CanadianFamily.net and AllNaturalPetCare.com, as well as other quality digital publications. Her content has earned reference links from highly-respected websites, magazines and university textbooks.