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Could Seller Flex Improve Amazon’s Merchant Relationship?

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Oct. 19 2017, Updated 9:05 a.m. ET

Marketplace revenue

Amazon (AMZN), eBay (EBAY), and Walmart (WMT) offer marketplace services in which they allow third-party merchants to sell on their platforms. Marketplace providers take a cut of sales on their platforms, which is an important source of revenue.

Amazon and Alibaba (BABA) also generate extra revenue from providing payment support for merchants on their marketplaces. PayPal (PYPL) processes payments for eBay and its marketplace merchants, and eBay has an investment stake in PayPal.

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Seller Flex and merchant relationships

Considering the revenue opportunity in the online marketplace service business, marketplace providers are in a fierce battle for the attention of third-party merchants. A service such as Seller Flex that Amazon is testing on the West Coast could help it build a stronger relationship with its merchant customers. By nurturing that relationship, Amazon could lower the risk of its merchants defecting to rival marketplaces.

Amazon could also generate more incremental revenue from providing merchant services such as digital payment support and advertising. The chart above shows Amazon’s revenue from providing third-party seller services.

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