“You’ll have to move into e-commerce” — this is the most often repeated recommendation among brands and businesses, whether distribution or retail. Creating an online store or exhibiting a product catalog via digital channels may be a compulsory move in the 21st century, but it’s not enough to guarantee you immediate results... or even your survival.
There is ever more online supply, while internet users may not always be able to find what they are looking for, or easily discover small shops that are less well-known or have just started to take their first steps in the world of e-commerce. As a result, demand is directed toward Google and Amazon, as the most popular channels for online search and purchase.
Is it possible in e-commerce, then, to create your own business without either falling into Amazon's net, or disappearing under its power? Previously powerful companies like Toys "R" Us or Abercrombie & Fitch have seen their sales wane or have had to shut down in the face of the competition that Amazon brought with it.
To survive, you’ll have to think differently, and learn from the giant rather than battle it.
Table of contents
- Should you fight the marketplace? Amazon is not Goliath
- Selling in e-commerce in the Amazon era
- Keys to surviving Amazon
- Learning from Amazon to sell on other channels
Should you fight the marketplace? Amazon is not Goliath
According to an Arm study, 67% of consumers make online searches before going shopping in a physical shop, and in this aspect Amazon is king, with 9 out of 10 shoppers checking prices on Amazon before making any purchase.
It’s understandable that Amazon's accelerated advance in e-commerce will create fear among all sellers. According to Stores magazine, the top 10 largest retailers in the USA have barely changed in recent years. Compare this to Amazon’s rapid ascent which has taken it from seventh place in 2017 to third place in 2018. Its value is already higher than the other 8 largest retailers together, including Target, Macy's or Sears. Forecasts indicate that by 2021 Amazon will have 50% of the entire market value of global ecommerce.
No surprise we’re trembling, is it?
In addition, experts say some industries are more threatened than others by Amazon's advance in digital market share, especially the electronics sector, books, food, health and pharmaceuticals, and low-value common goods such as stationery or kitchen accessories, typical of department stores.
As Greg Mercer, CEO of Jungle Scout, points out, in some categories like batteries Amazon works very well and it doesn't make sense to compete. However, in others such as women’s fashion it has more difficulties and these sectors can present a good opportunity.
David vs. Goliath: Join or stand against Amazon?
Before panicking, we should look at the broader picture.
Amazon is neither a retailer nor a manufacturer, even if it does sell its own products under the Amazon brand. While it is undeniably a competitor, it’s actually a much more complex ecosystem, an empire that goes beyond retail-focussed e-commerce. It’s a model that almost no one else can imitate (in other parts of the world there are equivalents in Alibaba, Aliexpress or Rakuten).
As happened to the famous clothing brand Abercrombie & Fitch, some businesses end up surrendering to Amazon and give up exclusivity in selling their products through this marketplace, in exchange for receiving more digital exposure.
However, most of the businesses that sell on Amazon also do so through their own channels, such as brand websites, and even other marketplaces.
Selling on Amazon seems more like an obligation than an option, especially when your products may end up being sold there through other distributors or resellers, even though you didn't want that to happen. Faced with that risk, you’d do better to take this step and take control of your brand and product presence in the marketplace, through listings and relationships with distributors.
"The last thing you, as a major brand, want to happen is for those shoppers to search for a product that's in your category on Amazon and you to be absent among your competitors. Because Amazon assists third party brands with services like PPC advertising, promotions, and FBA (Fulfillment by Amazon), the increase in labor is minimal at best.” | Greg Mercer, Jungle Scout CEO
There are two alternatives for manufacturers:
- Sign up for the Trademark Registry and directly control the displayed product information and authorized sellers. No third party may alter your product content.
- Join Amazon Vendor and provide your products to Amazon, so that the marketplace controls the entire ordering and shipping process.
Not all manufacturers or retailers can decide equally whether or not it’s in their interest to sell on Amazon. However, there are several drawbacks to joining Amazon Vendor and Amazon Seller that you should consider:
- Sellers do not control user/buyer data, nor can they contact customers after purchase and observe behaviour to obtain analytics. Google Express would be a good alternative, because in this marketplace sellers control both the products they sell and the shoppers’ data.
- Sellers do not control products, whether it’s their price, which is determined by the Amazon algorithm, or the stock they send to the marketplace, or their listings.
- Amazon retains a percentage of sales. This is the main reservation of manufacturers and retailers when considering adding Amazon to their multichannel strategy. In addition, there will be more expenses, such as fees by product type, and annual fees for being a marketplace member or for the Fulfillment service.
- The seller remains in the background. In the buyer's eyes, finding a Smeg toaster at a good price is not a credit to Smeg or the retailer that holds it in stock, but to Amazon. The marketplace doesn’t highlight sellers and has put the consumer in the foreground, making it easier for them to compare products and prices. This is positive for the user, but adds difficulties for sellers suffering logistical or internal competition problems, as Amazon tends to treat the customer as always right and blocks support to sellers.
Amazon is neither a Goliath that can be defeated by some yet to be discovered trick, nor a giant that can be imitated or beaten by any retailer. You have to keep lively and active while the giant is resting.
Let's see how to do this.
“Retailers need to consider if they can compete price wise and still be profitable, if they need to develop a house brand, and find niches that Amazon won’t compete directly with them in. Amazon definitely wants to own all major categories and verticals of physical goods so it’s going to increasingly be fringe, artisan or smaller categories where 3rd party seller can thrive.” | Jason Greenwood, Digital & eCommerce Consultant
Selling in e-commerce in the Amazon era
The best strategy to sell on both Amazon and other online channels is to develop good product content and support it with a strong sales structure. Amazon casts its net wide for all users, whereas a retailer or manufacturer can focus on a small audience and still achieve a stable, growing revenue.
Some think they need to mimic Amazon's tactics, such as giving more for less through incredible discounts (which on Amazon violate MAP deals and offer prices below the official minimum) and free express shipping.
This is unrealistic, as even Amazon suffers losses from shipping costs but offsets them with its huge sales profits. A small business would indeed have to assimilate those losses until it went bankrupt.
However if you became the benchmark in your niche, you’d be able to offer reasonable shipping rates and times that buyers are willing to accept.
On the other hand, it’s true that Amazon offers certain competitive advantages:
- The importance of logistics: As the perfect strategy to offer an (almost) impeccable shopping experience, Amazon offers agility of search, the possibility of comparing products, managing and sending orders quickly, and a very attentive and helpful customer service.
- The value of product information: Not all sellers meet the minimum requirements equally well, but Amazon values product content that is both good quality and complete, for the benefit of customers.
- The convenience of online shopping multiplied 100-fold: You can buy at any time of the day, and receive orders on a Sunday, the brand comparison range is huge, suggestions for similar products appear without your making any effort, and you can bulk buy through Amazon Pantry.
- Incorporation of technology: Amazon is at the forefront of testing and adapting new technologies at the buyer's service, such as voice-enabled searches (Amazon Echo), automated purchases using Dash buttons, and drone deliveries to locations with difficulty of access.
- Loyalty Program: Amazon Prime gives access to free and faster shipping, an audiovisual content platform, and books before their launch date.
Keys to surviving Amazon
What’s the best counter-attack strategy for selling on Amazon?
- Connect good product information that makes your products stand out in the listings. Product Information Management (PIM) software that includes a predefined connector for Amazon can automate the task of sending information to the marketplace and keeping it up-to-date, complete and error-free.
- Optimize: Revision of listings must be continual to meet Amazon standards and reach more customers.
- Create related ads, both on and off Amazon.
- Offer discounts during the most intense sales periods, and that are of interest to your niche.
- Analyse at all times whether your presence in the marketplace is actually bringing benefits and how to adapt your strategy accordingly. In search of quick benefits, some retailers apply the tactic of finding a cheap supplier on Aliexpress or Alibaba and selling the products on Amazon.
“We don't see many retailers today succeeding in selling large volumes unless a) they are selling brands that no one else carries on Amazon (that's rare), b) the retailers are particularly well versed on how to thrive on Amazon (also a rare trait for most brick and mortar retailers), or c) the retailers are selling on Amazon under a disguised name, usually so they can attempt to avoid detection of violating brands' minimum advertised prices by selling at lower prices on Amazon.” | James Thomson, partner of Buy Box Experts, and former business head of Amazon Services
And if you want to be noticed as a business outside Amazon? There are certain areas that the marketplace doesn’t yet control:
- Good quality products: This will always be the best sales pitch to win both customers and brand reputation.
- SEO positioning: Remember that Google is the other main search avenue for online purchases.
- Brand Image: Building a brand and community culture is a distinction that Amazon branded products lack.
- Exclusivity: Either be a brand that only sells through your own channels and that transmits a sense of prestige to the customer, or be an exclusive reseller of brands not found on Amazon.
- Niche specialization: Some highly specialized products are difficult to locate and compare on Amazon, and thus don’t inspire the same confidence.
- Niches that favour shopping in person: Although Amazon Pantry makes it easy to buy food, consumers still prefer to go to shops in person for some types of products such as fresh or frozen food, which otherwise involve more logistical difficulties for home shipments.
- Showrooms: Shoppers want to see for themselves how kitchen countertops or a garden barbecue look. The same applies to custom-made products or services with extra options, such as builders or carriers.
- Warehouses full of offers: On Amazon there are great bargains at $1, but the buyer wants the satisfaction of finding and grabbing a big discount right there and then, and not waiting for a month to receive the product, whether it’s an essential or an unnecessary item.
Learning from Amazon to sell on other channels
As Picasso once said, inspiration can come from stealing an idea. Amazon may be a great menace in some ways, but it can also be an example to learn from – and to compete with by offering the same but better.
- Better product quality and product content: Many customers complain that product descriptions on Amazon are poor or confusing. Opting for quality creates more satisfaction and fewer returns.
- Customer Service: The top-rated factor on Amazon, primarily because it speedily resolves issues with shipments and returns. It’s worth opting for generating satisfaction from the information, search and purchase phases, not only by the resolution of incidents.
- Brand Loyalty: Amazon customers often aren’t loyal to Amazon; whereas you can foster that brand loyalty, with exclusive and customised content like newsletters.
- Simple and personalized purchasing process: Dash buttons prove it – the fewer steps, the better. For example, removing the need to register or create an account, as required by Amazon.
- Physical shops: These are not Prehistory, but the future. Amazon is trialling in this field, so don't give up your store network if you have it already or if it could benefit your business.
“When brands are sold on Amazon by unauthorized or unknown sellers, the quality of the branding in the product listings often suffers, and is rarely correct, consistent and complete like the brand seeks to have itself displayed in all other channels. To be success long-term, brands should look for ways to remove pricing incentives for customers to shop on Amazon, and hold retail pricing consistent across channels.” | James Thomson, partner of Buy Box Experts, and former business head of Amazon Services
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