As we saw in the opening ‘Amazon and the Nordics’ article, debate has revolved around when Amazon will open its first eCommerce site in the region. And this has sent a wave of fear surging throughout the business community as commerce leaders consider the detrimental impacts it might have. But little, if any attention has been paid to what Amazon actually provides, and how this relates to your overall eCommerce offering.
In Part 2, we analyse exactly what Amazon brings in the way of opportunities but also its limitations. You’ll also learn how and where Amazon might fit into your current and future strategy.
Ecommerce ≠ Amazon
It can often feel like every eCommerce transaction in the world is being funnelled through the Amazon platform.
You’ve probably brought something from there in the past, or at least know someone who has. From books to bath bombs and from cosmetics to cat-carrier dresses (yes, you read that right—see here if you don’t believe us), Amazon has almost everything you can imagine.
But before we get carried away, there’s one crucial point to remember in all of this—Amazon represents only one sales channel.
In a report from eCommerceFuel, 70% of respondents actually listed their own storefront as their biggest sales channel, with Amazon making up only 6.2% of their overall revenue.
As we’ll come to see, this isn’t downplaying the power of Amazon. Rather, it’s showing another side to the argument of—Amazon will enter the Nordics, swallow up every business and force every merchant to operate on Amazon and Amazon only.
The situation is a little more complex...
The benefits of selling on Amazon
Selling through Amazon means that your business has instant access to a huge stream of purchase-ready customers. And on the whole, these customers are likely to bypass the awareness phase, so are already aware they want a particular product. This access to ready-made traffic is a huge plus, particularly for young businesses who have yet to develop a large audience.
And importantly, customers trust Amazon—they’re happy to make purchases because of Amazon’s stellar reputation. By selling through Amazon, your business will benefit as a result of this trust.
From a practical standpoint, it’s incredibly easy to start selling on Amazon—taking as little as 24 hours if you have the relevant information in place.
And then, the jewel in the crown—Fulfilment by Amazon (FBA). In a nutshell, this means storing your products in Amazon’s fulfilment centres and letting them pick, pack, ship, and provide customer service for these products. With Amazon taking care of the heavy lifting, you’re able to free up resources and add value to other areas of your business.
The limitations of Amazon
What makes Amazon so attractive as a platform, however, is ironically the same thing that holds it back.
Yes, there are millions and millions of loyal customers at your disposal. But these are loyal Amazon customers. It’s important to remember that this is Amazon’s territory—they own the marketplace and the customers—not you. This means it’s restrictive in how you can brand your store. You’ll be able to display your logo/name and a few images but that’s it. No linking to your external website or social media. Zero control.
And because they’re not your customers, you won’t have their data either. So say goodbye to email marketing campaigns, targeted promotions and personalised shopping experiences. Without knowing your customers on Amazon, you simply won’t be able to do it.
In terms of brand-building, it’s clear that Amazon is poor—especially when compared to your own eCommerce store.
Just imagine a customer who’s looking for a pair of headphones to buy as quickly as possible for an upcoming vacation. The average person shopping on Amazon will simply type ‘headphones’ into the search bar and will then scan the results that immediately show up. They might then filter by price or by average customer rating—they’ll also be influenced by ‘sponsored’ products at the top of the page (more about these in our next article). The point is, they’re not too bothered about which brand they’re buying from. They want a product that looks good, has good reviews and is at a price they’re willing to pay.
If you’re one of the thousands of headphone manufacturers selling only on Amazon, then you run the risk of being lost in and amongst all the other names. There’s a real danger that you’ll never establish your brand, and never build a loyal following of long-term customers. That being said, some customers will come to Amazon and search for their favourite brand. So if you’re a global company with high brand recognition that can sell on Amazon, then it could represent a very attractive sales channel. As an example, see how Nike has developed its brand store on Amazon. Just remember, though, that even with your own brand store, you’ll still be subject to other brands (and Amazon) trying to entice your brand searchers over to their products...
But it’s not just the control of your Amazon page that you’d be giving up. If you decide to opt-in for FBA then you’ll also be losing control of your inventory. What if Amazon needs to transport your inventory from one warehouse to another, thereby deeming your products unsellable, whilst in transit? By letting Amazon take control of your inventory management, you’ll also lose control of your logistics chain. And with concepts like Last Mile Logistics, it will be Amazon delivering to and interacting with your customer—not you.
It may sound counter-intuitive but one very real risk is having a successful product. Why? Well, Amazon could easily just go to a manufacturer and make the same thing at speed and scale before you’ve had a chance to adjust. And for good measure, they could list this replica product ahead of your own. Again, this demonstrates why putting all eggs in one Amazon basket can be a dangerous tactic.
And finally, there are the numbers. Once Amazon has taken its fee, how much will be left for you? This is something to measure before you go head-first into an FBA agreement.
A double-edged sword
If you’re wondering whether or not to sell on Amazon, then the evidence is conflicted. In the case of FBA, your company’s maturity and success will come into play. If you’re an established brand with its own distribution centre (Nike), then you’ll want to organise your own logistics rather than having to meet Amazon’s standards and requirements. But for a new brand looking to try out a market (like our aforementioned headphone seller), then FBA could be the perfect way to explore and test new options without having to make huge investments in new markets.
One thing is clear—selling on Amazon, despite its instantly accessible customer base, means surrendering control. An eCommerce store, on the other hand, provides you with complete freedom and flexibility. You have the ability to control your design, logistics, inventory, branding, content marketing and advertising. And importantly, in the age of the customer, you can engineer the exact experience you want to give. From education to storytelling and layouts to navigation, having your own store means you can choose how customers discover and interact with your brand.
Whether you should sell on Amazon demands a nuanced conversation—it’s not as black or white as it often appears. Depending on your company’s trajectory, size and goals Amazon may well prove a useful channel in which to operate. If you are an established brand looking to break into more markets (internationalisation), or simply looking to generate more revenue, Amazon is a channel to consider. But as noted, relying on another platform (that you have no direct control over) is not the formula for sustained business success.
There’s been a tendency to think that Amazon entering the Nordics will suddenly deem your eCommerce and physical stores obsolete. In fact, there will actually be opportunities to leverage the power of your own platform (marketing, data, branding) to your and your customers’ advantage.
One day, Amazon will be in a market near you—it’s time to embrace its arrival, not fear it.
Join us next week for Part 3 of Amazon and the Nordics, as we look at how you can setup an Amazon store that has the ingredients for success.
But if you want to find out straight away then you're in luck as we have the full guide available for exclusive download here!