Amazon the Best Hope for Small Stores Against Wal-Mart

NEW YORK (TheStreet) -- Small merchants have long called Amazon.com(AMZN) a bogeyman. That's so 20th century.

Today, Amazon could be their only hope for competing with big box retailers like WalMart(WMT) . Small merchants also represent Amazon's "secret sauce" in justifying a PE of nearly 300 to skeptical analysts like Forbes' Martin Sosnoff.

Third-party merchants are now the biggest Amazon profit center. They can take advantage of the full range of Amazon commerce, cloud and logistics services. They can get their sales taxes tacked on and paid, and since Amazon has turned this into a profit center it's no longer fighting the move to tax online commerce.

Amazon charges merchants roughly 15% of sales to sell through its marketplace, Quora estimates. Upload your inventory, ship it yourself or have Amazon do it. Amazon brings customers to your page with its search algorithms, they handle the transaction and send you money. Amazon even has an application program interface to help with pricing, as it explained to re-sellers in February.

Amazon now has over two million such re-sellers, representing 37% of its retail volume, and it's the fastest-growing, most profitable segment of the business, as Seeking Alpha's Scot Wingo found on analyzing their numbers from last Christmas.

Notice how many times the cash box rings here. A commission on sales, a commission on sales taxes, a profit on shipping, all through a system Amazon has already built. But notice how it does the same thing for small merchants. No more fighting to find customers, no more worrying about order fulfillment, bad credit card charges or even advertising. Amazon does it all.