Just as Prime keeps shoppers loyal to Amazon, loans may be keeping merchants devoted to Amazon’s marketplace.
Reuters reported that the online powerhouse has increased its loans to the third-party vendors on its site in the last year. In the last 12 months, the company made $1 billion in loans to sellers. That’s two-thirds the total amount the retailer loaned from 2011 to 2015, said Peeyush Nahar, vice president of Amazon Marketplace, according to the news source.
The company reports that it has made more than 20,000 loans to businesses in the U.S., U.K. and Japan that range from $1,000 to $750,000. More than half of recipients have taken a second loan and they report interest rates vary from 6 percent to 14 percent.
Nahar says sellers have used the influx of cash to buy inventory and reduce prices on the site.
It’s one of the many ways Amazon facilitates transactions on its site, including handling subscription logistics through Subscribe with Amazon and dealing with picking, packing and shipping through Fulfillment by Amazon.
By providing sellers with this on and offline support, the marketplace is more vibrant and valuable to both Amazon and its merchants. And it makes Amazon’s marketplace a formidable opponent as other marketplaces spring up or grow.
“We do tell them it’s to help them grow on the Amazon Marketplace,” Nahar is quoted as saying.
A recent study by Feedvisor showed that nearly 50 percent of sellers on the site are brand loyal, with 80 percent to 100 percent of their sales generated through Amazon Marketplace. It also pointed out that eBay is the site’s biggest competitor with 65 percent of merchants on Amazon also selling on that marketplace. Other sites like Walmart and Jet.com barely rank at 10 percent cross over.
Read more about how Amazon’s marketplace stacks up: Study Reveals Inside Scoop on Amazon Marketplace and Why Its Sellers are Keeping Their Options Open
The site processes an average of $151,000 in sales a minute in North America, according to a separate Reuters story.
Amazon’s close ties to its loan recipients mitigates the company’s risk. After all, the e-tailer has all of the sales data on sellers before it invites them to participate in the program.
Nahar says the company plans to introduce the loan program to additional countries like Canada, France and China.