First-Party, Third-Party and Fulfillment by AmazonAmazon offers businesses first-party (1P) and third-party (3P) selling models across its platform. Usually, a first party seller is a wholesale vendor that sells its inventory to Amazon, and Amazon itself acts as the owner of the sold product, managing pricing as well as shipping and returns processes. Amazon as an 'online retailer' operates on this basis. Third-party selling on the Amazon platforms is enabled by Fulfillment by Amazon (FBA). Third-party seller brands participating in FBA still act as the retailer, own the product, and control the pricing of their products. Shipping, storing, and returns of goods, on the other hand, are managed by Amazon. In return, Amazon charges commissions, shipping and related service fees. This is how Amazon becomes an 'online marketplace'. Through these services Amazon earned about 80.4 billion U.S. dollars in 2020. In the most recently reported quarter, the year-on-year growth in sales generated through third-party seller services was at its highest, at 60 percent.
Marketplace sellers are a lucrative business for Amazon, and not just for the catalogue of products they bring along to the platform. After sales generated through its online stores, which roughly totalled 200 billion U.S. dollars in 2020, third-party seller fees and commissions constitute the second highest revenue stream for Amazon. In comparison, Amazon Web Services (AWS) earned the company 45 billion U.S. dollars in revenue, while subscription services e.g. Prime generated 25 billion U.S. dollars in 2020.