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Amazon Marketplace Grows, Taking Small Businesses Along

NEW YORK (TheStreet) -- Amazon (AMZN - Get Report) is in the business of selling virtually everything. If there is something it does not sell, odds are it will eventually. The online behemoth has been blasted as a killer of small businesses because its low margins are usually unmatchable by most mom & pop retailers.

Well, guess what: Amazon is helping small businesses, too.

The Amazon Marketplace is now in excess of two million sellers who shipped more than a billion units worldwide in 2013, a growth of 65% year-over-year. According to ChannelAdvisor, sales by outside merchants on Amazon were up 34.4% in June year-over-year.

By paying a fee to store and fulfill orders, small businesses on the Amazon Marketplace are able to offer fast shipping and gain huge exposure on the Amazon Web site, two things out of reach for most small sellers. For this added convenience Amazon takes a commission that has now grown to represent over 20% of its annual revenue. The huge popularity of Amazon Prime, and the benefits that come with it, actually help these businesses succeed.

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Before Amazon Marketplace, many of these businesses would sell their goods on their own Web sites, pay for online advertising if they could afford it or list their goods on eBay (EBAY) and hope for the best. Small businesses that have embraced Amazon Marketplace have found both success and growing sales.

One such beneficiary of Amazon Marketplace and Amazon Prime is Wagner Concepts and its drinking board game called Drink-A-Palooza. We spoke with Dave Wagner, CEO of Wagner Concepts recently to learn how Amazon has changed his business for the better.

"If it wasn't for Amazon I don't know where my business would be right now," he said. "Thanks to the Amazon program I can pass on my savings to my customers and offer them reduced or even free shipping now. I have only positive things to say about them."

Before using Amazon Marketplace Wagner was forced to charge his customers $15 per order for shipping, over 50% of what his actual product cost. This turned many potential customers away. Now prospective customers can buy his product for $27.99 and get free shipping under the Amazon Prime program.

Before listing on Amazon Marketplace, Wagner was selling a handful of games a month. In the last few months, since listing his product there, his sales have exploded to hundreds of units per month. After spending thousands of dollars on advertising on Google (GOOGL) to get ranked 20th, Wagner now finds himself ranked #4 on Amazon. This added exposure, for his unique leisure product, has helped to increase his sales dramatically.

Not everyone is so enthused with Amazon Marketplace. A local San Diego small business owner who sells her own beer-infused bakery goods stated she was hesitant to sell her products on Amazon. The reason the owner of PubCakes.com gave us was a fear that Amazon, or other companies, would copy her product and sell it for less.

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