Launchpad was announced on Tuesday as a way for startups to more easily market and sell their products to consumers on Amazon. The e-commerce giant will help the startups along the process with things such as brand development and fulfillment, while also offering them access to its huge audience.
To create Launchpad, Amazon partnered with more than 25 venture capital firms, startup accelerators, and crowdfunding platforms, including Andreessen Horowitz, Y Combinator, and Indiegogo. As it debuts, Launchpad is featuring more than 200 products from startups such as Soma, Kinsa, and Casper.
The program sounds like a pretty good deal for startups, whose biggest challenges tend to revolve around customer acquisition and building brand awareness, but not surprisingly, it has some perks for Amazon as well.
The company line focuses on how the platform helps its customers: "As the pace of innovation continues to increase within the startup community, we want to help customers discover these unique products and learn the inspiration behind them," Jim Adkins, vice president at Amazon, said in a statement. A company with happy customers is a happy company.
But beyond that basic principle, Amazon's Launchpad will also provide some more tangible benefits: greater product selection and profits. Amazon is always trying to get more products onto its site, and when it can do so from third-party sellers, it earns higher margins on the goods.
"It's part of the company's larger efforts to build a more robust Amazon marketplace for third-party sellers, which represent a higher-margin transaction and where unit sales have been increasing at a faster pace than Amazon's first-party offerings," said Morningstar analyst RJ Hottovy.
Third-party sellers, both large and small, have a number of different options for where to sell their products -- they can go to eBay (EBAY) - Get Report , Etsy (ETSY) - Get Report , Amazon, or even a crowdfunding platform such as Kickstarter. By offering additional services through Launchpad, Amazon can win over more sellers from these other platforms.
"It gives them a tangible way to be different than other e-commerce providers in the sense that it creates this new and lively atmosphere for product trial and product access," said Greg Portell, a partner in A.T. Kearney's consumer products & retail and media practices.
Amazon is stepping up its game, and if other e-commerce platforms don't pay attention, they could lose out.
"Amazon appears to be going after the same small/medium sized sellers that eBay is also targeting, though Amazon's reach, fulfillment, technology, and funding options makes Amazon a potentially more attractive partner for these sellers," Hottovy said. "eBay faces an uphill battle regaining some of these SMB customers, and will have to significantly expand its services -- fulfillment, funding, marketing/brand -- to compete."