Amazon plans to invest $100 million to help small businesses attract sales on Prime Day

  • Amazon is investing $100 million to help small businesses attract sales on Prime Day and during the holidays,
  • This is a key moment for Amazon to recruit SMBs because of the coronavirus pandemic and a rise in competition.
  • Insider Intelligence publishes hundreds of insights, charts, and forecasts on the Payments & Commerce industry with the Payments & Commerce Briefing. You can learn more about subscribing here.

The etailer is investing $100 million to help small businesses boost their sales and customer acquisition efforts for Prime Day, which may occur in October, and through the holiday season.

It's also on pace to invest $18 billion to help independent businesses make sales through spending on logistics, services, and other areas. It intends to work with 500,000 US small- and medium-sized businesses (SMBs) that sell on its marketplace over the next 12 months to offer them its ecommerce expertise and other forms of support, as Amazon appears to be making a push to appeal to SMB merchants.

SMBs are a growing part of Amazon's massive third-party marketplace, so supporting them directly should bolster Amazon's performance. Amazon's third-party sellers have accounted for more of Amazon's physical gross merchandise sales than the etailer's first-party business for years, making the segment key to Amazon's success.

And US SMB sellers specifically sold over 3.4 billion products on Amazon in the 12 months ending May 2020, up from 2.7 billion in the comparable period a year earlier, suggesting SMBs are a major part of Amazon's third-party business. And with more financial support, guidance, and tools from Amazon—it claims it launched 135 free tools to help sellers strengthen their businesses this year—SMBs on Amazon's platform could thrive, boosting its sales in the process.

This is a key moment for Amazon to recruit SMBs because of the coronavirus pandemic and a rise in competition.

  • The pandemic is forcing SMBs to shift their businesses online, offering Amazon the chance to build out its merchant roster. Amazon intends to onboard 100,000 new US sellers—and it should have a number of interested businesses to target since ecommerce has surged during the pandemic, while retail has floundered overall. This should push merchants to digitize their businesses, and because Amazon is both deepening its support for SMBs and is the leading US etailer, SMBs may jump at the opportunity to start selling on Amazon. This should boost its product selection during the pandemic and potentially long term if it can convince merchants to continue to sell with it after the crisis subsides.
  • Shopify and Walmart are growing threats to Amazon's marketplace business, but attracting more SMBs now should help it hold them off. Shopify's solutions business and Walmart's third-party marketplace have thrived during the pandemic because merchants are moving online, and they've even partnered to bring more sellers to Walmart's platform. While SMBs selling with Shopify and Walmart aren't precluded from selling on Amazon, it enables other platforms to better match Amazon's product selection. By recruiting SMBs now, Amazon can strengthen its own roster and potentially limit SMBs' interest in selling on other platforms.

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