Should Your eCommerce Business Sell on Amazon?

Amazon is an absolute powerhouse.  In 2016, the eCommerce behemoth did $135.99 billion in revenue, up 27.08% from 2015.  When the firm seems to announce a major acquisition or new service every couple of months, it becomes hard to argue with the analysts who do not predict its growth will slow anytime soon.  Amazon’s influence is enormous.  They have dictated the standards for eCommerce service (think reliable, fast, and free shipping with Prime), and not only that, but other companies’ stock prices fall as soon as Amazon announces it will be entering their market.

For consumers, Amazon can be a very useful tool for finding products online at the lowest cost.  According to the Wall Street Journal, 55% of all product searches start on Amazon while 28% start on search engines.  Yet for retailers, Amazon is often painted as the enemy, undercutting margins and diminishing brands’ power.

However, does Amazon need to be portrayed as the enemy?  Maybe not.  Here are three pros and three cons of selling your products on Amazon:

Pros:

1. Exposure to products

Eyeballs are an online retailer’s best friend.  Perhaps the biggest upside to Amazon is the sheer exposure it can generate for a product.  While the company keeps many of its numbers to itself, analysts estimate the number of Prime subscribers alone is somewhere between 65 and 80 million.  Then add in the number of non-Prime shoppers, which analysts estimate is slightly less than the number of Prime subscribers, and you have got a TON of eyeballs potentially viewing your products – many more so than the number an independent eCommerce store could ever draw in.

2. B2B Features

Remember, Amazon wants products to sell as much as the retailers that put their products on the marketplace do.  The good news is that Amazon reportedly spends over $13 billion a year on research and development to optimize the user experience to maximize sales.  When a multibillion dollar corporation shares a similar goal as a small business, it will inevitably bode well for the small business.  Amazon also takes care of menial and time consuming tasks such as inventory tracking and tax collection so third-party sellers can focus their efforts elsewhere.

3. Fulfillment simplified

Consumers have increasingly elevated expectations for customer service.  Nearly 60% of consumers say they would try a new company for a better service experience.  Fulfillment by Amazon (FBA) can provide a small business’s customers the famously consistent and speedy support and delivery that Amazon prides itself on so they do not have to worry about losing business over a negative service experience.

Cons:

1. Giving up margins

Selling on Amazon can place a product in front of far more shoppers than a traditional eCommerce website could, but at a price for the seller.  Amazon has many options and plans for paying for their services depending on the status of the seller, type of product, and if a business wishes to use FBA.  These can all add up and noticeably decrease profit margins.

2. Deemphasis of the brand

Amazon is a marketplace.  It is not a place where shoppers go looking for a specific brand, but rather a place where consumers can find a specific type of product at the lowest cost with the best service.  That means that a company itself is unlikely to be the focus of a search.  Amazon is a place to generate sales, not brand awareness.  By selling on Amazon, your products could ultimately become seen as commodities, rather than the goods of a unique brand.

3. Decreased interactions with customers

Amazon prides itself on its customer service.  By selling on Amazon, a company is entrusting its support channels to one of highest quality customer service providers in the world.  However, by selling on Amazon, a small business is also giving up the opportunity to win repeat business by wowing customers with its own service and to establish a reputation for its high level of care.

There is no definitive formula for determining whether or not a small eCommerce retailer should offer its products on Amazon.  To determine if Amazon is right for an eCommerce business, it is important to consider the monetary costs as well as how much control over brand image and service a company is willing to give up.  Amazon is a great tool for driving sales, however it is definitely not the only one.  Like any business decision, a thorough cost-benefit analysis will help you make the right choice.

Feel free to share any thoughts on selling on Amazon below!

Sources:

https://www.wsj.com/articles/amazons-revenue-rises-25-on-retail-dominance-1501187486

https://markets.ft.com/data/equities/tearsheet/forecasts?s=AMZN:NSQ

http://www.practicalecommerce.com/pros-and-cons-of-selling-on-amazon-business

https://www.shopify.com/blog/6399562-the-pros-and-cons-of-selling-on-amazon-and-ebay

https://www.cnbc.com/2017/02/17/amazon-hints-at-its-big-secret-how-many-prime-members-it-has.html

https://www.helpscout.net/75-customer-service-facts-quotes-statistics/

https://services.amazon.com/selling/benefits.html