Amazon No Longer Owns and Ships the Majority of Items It Sells

November 17, 2016, 11:00 AM UTC
Photograph by Michael Clinard for Fortune

Until Thursday, the majority of items sold on e-commerce giant Amazon were sold directly from the Seattle company, meaning that the company owned and shipped the items directly themselves. But on Thursday, Amazon said that half of all items sold on Amazon are officially from third-party sellers, small businesses, and entrepreneurs.

Sellers can sell via Amazon by shipping items themselves directly to customers or by using Amazon’s own fulfillment services. They send inventory to Amazon’s warehouses and the company takes care of the rest, including packaging the items, processing customer payments, and shipping. Depending on size and weight, sellers pay Amazon anywhere from $1.50 to $100 per order for the service, plus a standard fee.

The allure for many outside merchants to use and pay for Amazon to handle its shipping is to sell to Amazon’s estimated 50 million Prime members, who pay $99 per year to get anything from toilet paper to diapers to books delivered to them in two days or less. For a time, merchants were eligible to be part of Prime delivery only if they were enrolled in the fulfillment program, which in 2015, delivered more than 1 billion items to customers worldwide.

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But last year, Amazon started testing a new Seller Fulfilled Prime program, working with a set of larger merchants that already have warehouses across the U.S. and are able to deliver within the Prime two-day window. Because these merchants have their own fulfillment services, they don’t need to use Amazon’s fulfillment services.

But they do get access to Amazon’s negotiated shipping prices with companies like UPS, which are much lower than standard rates. It also allows another way for Amazon to offer more items to Prime customers without adding more capacity at Amazon’s hundred-plus fulfillment centers around the world.

On Thursday, Amazon said that the Seller Fulfilled Prime program had added more than 6 million new items for Prime members with free two-day or next-day shipping in the U.S., U.K., France, Germany and Japan.

Amazon is predicting record sales for third-party sellers this holiday season, but in typical company fashion, did not reveal what it forecasts those sales to be. Last year on Cyber Monday, the online shopping holiday that takes place the Monday after Thanksgiving, sellers on Amazon received orders for more than 23 million items, a more than 40% increase year-over-year.

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