How Amazon Will Drive Overseas Sales

More third-party merchant sales through Amazon's site can drive further share gains for the e-retailer.
Author:
Publish date:

By Trefis.com

Amazon's

(AMZN) - Get Report

share of the online retail merchandise market outside of the U.S. has increased for its two main businesses -- (1) Books, DVDs and Music (Media), and (2) Electronics & General Merchandise (EGM).

We estimate the Amazon's Books, DVD and Music business constitutes

36% of the $124 Trefis price estimate for Amazon's stock

. In comparison, the company's Electronics & General Merchandise business accounts for 46% of our Amazon price estimate.

The increase in Amazon's international share is attributable in part to more sales from third-party sellers on the Amazon platform, and we believe that more third-party merchant sales through Amazon's site can drive further share gains for the company.

Amazon's Third-Party Seller Business is Growing

Amazon, which competes with

eBay

(EBAY) - Get Report

in the online retail space, opened up its website a few years ago to allow third-party sellers to sell new and used merchandise to online customers. This initiative has helped Amazon dramatically increase its selection of available products.

The Amazon Marketplace also allows third-party sellers to compete with Amazon for any given sale. The company attracts sellers by offering services like fulfillment, where sellers can store their products in Amazon warehouses and Amazon handles shipping. Amazon takes a cut for each product sold through its marketplace.

As of 2009, third party sales constitute 30% of all items sold on Amazon. This percentage has been increasing in the past few years and has become a significant driver in Amazon's share in the international online retail market. We expect that third-party sales will drive additional sales for Amazon internationally and will help the company to gain share in the international retail market.

Amazon's International Share to Increase to 7% in EGM and 26% in Media

We estimate that

Amazon's market share in International EGM sales

was about 2.3% in 2009 and expect it to increase to 7% by the end of the Trefis forecast period.

We estimate

Amazon's market share in International sales of Books, DVDs and Music

is around 21% in 2009 and expect it to increase to 26% by the end of the Trefis forecast period.

You can modify our forecasts above to see how Amazon's stock would be impacted if its share of the international online retail market were to increase faster than we forecast.

You can see

our complete model for Amazon's stock here.

Trefis

is a financial community structured around trends, forecasts and insights related to some of the most popular stocks in the U.S.