Bought something from Amazon recently, or know someone who has? Chances are you’re nodding your head right now. And you’d be in the majority. After all, the online marketplace has a whopping 119,928,851 live products as of April 2019 and has the most popular shopping app in the US with over 150 million users (followed by Walmart at only 82 million). It’s clear that Amazon has changed the face of online shopping. Through its principle of what it terms ‘customer obsession’ and its large suite of products and services (Amazon Echo, Alexa, Amazon Prime, Kindle, Fire TV, Amazon FBA, etc) it has quite simply become THE home of product discovery and research.
So, whether you're a brand, distributor, retailer or manufacturer, it’s a sales channel you can ill afford to ignore. But you might be wondering what an Amazon/eCommerce business model looks like and how Amazon fits into your business strategy. We often see businesses grappling with such questions as: Should I sell on Amazon? What are the advantages of Amazon? and What's the relationship between my eCommerce store and Amazon?
Your Amazon/eCommerce Strategy
But these are complex questions, littered with nuances depending on your company's circumstances and future aims. That’s why in this article, we’ll be looking at the pros and cons of selling on Amazon vs. your eCommerce website.
Here’s what we’ll be covering:
- Advantages of selling on Amazon
- Amazon’s limitations and the role of your eCommerce store
- Should I sell on Amazon?
Advantages of selling on Amazon
The number one benefit of selling through Amazon is the instant access you get to a huge number of purchase-ready customers. Generally, these customers are likely to have skipped the awareness phase and are already aware that they want a particular product. This access to ready-made traffic is a huge benefit of Amazon, particularly for young businesses who are looking to grow their audience and brand.
Importantly, customers also trust Amazon—they’re happy and willing to buy from Amazon because of its reputation for strong customer experience. By selling through Amazon, your business will benefit from Amazon’s credibility.
And 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 together.
Then finally, the pièce de résistance—Fulfilment by Amazon (FBA). When you sell with Amazon FBA, you store your products in Amazon’s fulfilment centres and let them pick, pack, ship, and provide customer service for these products. With Amazon taking care of the heavy lifting and logistics, you’re able to free up resources, save valuable time and focus on other areas of your business strategy.
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Amazon’s limitations and the Benefits of eCommerce
Remember we talked about all the purchase-ready customers that Amazon has? Whilst true, it’s important to note that these are Amazon customers—not your customers (yet). Amazon owns the marketplace and the customers, which means there are tight restrictions on how you can brand your online store. You’ll be able to display your logo/name and a few images but won’t have the opportunity to link to your website and social media. Compare this to your eCommerce store, where you have full control of your brand identity and messaging at all times—which also means it can be tailored and amended to match your strategic priorities.
Because Amazon visitors are not officially your customers, you won’t have a chance to study their data as you would through an eCommerce site. So, say farewell to email marketing campaigns, targeted discounts and any kind of personalised shopping experiences. Without having access to your customers’ behaviour on Amazon, you simply won’t have the means to personalise the experience.
In terms of brand-building, Amazon is undoubtedly not the best option—especially when compared to the functionality of an eCommerce store.
Let’s assume you sell mobile phone cases. A shopper arriving at the Amazon homepage will likely just type ‘mobile phone case’ (or similar) into the search bar. They might filter by price or by average customer rating—and they’ll also be motivated by ‘sponsored’ products at the top of the page. The key takeaway here is that this customer is not necessarily too concerned about which brand they’re buying from, but, rather, is influenced by a product’s reviews, price and popularity in the Amazon marketplace. This means that your business runs the risk of being swamped by thousands of other mobile phone case sellers—never allowing you to truly establish your brand and grow a customer base.
What about selling with Amazon FBA? Whilst FBA certainly has its advantages (as documented above), you do have to surrender control of your inventory. Why? Amazon might need to move your inventory between warehouses meaning that your products are unsellable while in transit. And by letting Amazon take control of your inventory management, you also lose control of your logistics chain. Amazon will be interacting with and delivering to your customer in the crucial 'last mile'—not your business.
Numbers also have to come into consideration here—once Amazon has taken its FBA fee, how much will be left for you and will it be a profitable venture?
There’s also the issue of having a successful product (sounds strange, but stay with us here). Imagine that you've got a product that's flying off the Amazon shelves and into Amazon baskets up and down the land. Great, right?! Well, yes and no. Just think, Amazon has the means to go to a manufacturer and make the same product at speed and scale before you’ve had a chance to say 'Amazon'. And to top it off, they could then list this replica product above yours!
The bottom line—should I sell on Amazon?
So, the million-dollar question… As we’ve seen, there are both advantages and disadvantages of selling on Amazon. But one thing is certain—despite access to its huge customer base, selling on Amazon means surrendering control of your brand. With an eCommerce site, however, you have full control of every step of the customer purchasing journey. You choose how customers discover, interact, purchase and receive deliveries from your business. And at a time when personalised customer experiences are everything, this is a major plus.
But depending on your company’s ambitions, market share and size, Amazon could well prove a useful sales channel to reach new audiences and grow your business.
Get in touch with our Strategy and Consulting team. Our team has developed its ‘Amazon Business Case’ framework to help your business make data-driven decisions about the viability of selling on Amazon. Our team employs an innovative 7-step process to give your business a comprehensive assessment of your potential for selling on the Amazon marketplace and where you need to focus for success.
Download our 7-step process now and start building your Amazon Business Case!