Building an e-commerce store and growing your brand's momentum online is the culmination of many months of blood, sweat, and tears. Store owners wrangle with budgets and fulfillment providers, pitting technology platforms and apps against each other in the ultimate quest for ROI.
So when considering other avenues of growth, online store owners understandably don't just want to capitalise on new revenue streams, but protect their existing revenue-generating asset.
Amazon has taken full hold of the ecommerce world, and some even herald it as the next online gold rush.
But brand owners with online stores are suitably concerned about the cannibalisation that may occur with having their brand sold on Amazon. That is, will consumers switch to purchasing their products on Amazon the minute they are uploaded?
First, let's address the reasons why cannibalisation may be a concern for store owners, and if those assumptions always hold true:
- The margin of selling on marketplaces like Amazon is worse than my own e-commerce store.
Not necessarily. Growing and maintaining an online store takes its fair share of margin, especially for smaller stores with smaller order volumes. Qualified traffic, order processing & fulfillment, and customer service are three major cost factors that Amazon takes care of for you through their Fulfilled By Amazon (FBA) program. Amazon generally takes a 15% cut of sales (plus fulfillment fees if using FBA), which may seem steep.
Sit down and factor in all the marketing and operational costs that you usually incur and which would be taken care of by Amazon. You may find that the difference is negligible or even better, especially when considering all the additional attention your products could get, and the fact that shoppers often have a lot more trust in buying from Amazon than a lesser-known site.
- Amazon shoppers are just after a bargain.
Categorically false. The perception that Amazon is a coupon-clipper's paradise or somewhere to buy cheap used books is out of date. 70% of upper-income US households have Amazon Prime memberships, and Prime members spend more than 2X as much as non-Prime members. Amazon may not be the best choice for exclusive luxury brands, it is an excellent venue for the vast majority of consumer products and even business-to-business products.
- We'll lose control over our brand and the customer experience.
The concern here is that Amazon will misrepresent your brand or create poor experiences for your hard-won customers. The cold hard fact is that Amazon is probably better at converting customers than you, and statistically is also probably better at customer service than you... Sorry!
Despite what some would call a rather ugly interface (especially compared with the gorgeous shopping experiences that we serve up!), Amazon has devoted countless hours and millions of dollars into creating the best environment for sales and conversions, perhaps in the history of the internet.
While most aspects of the product page are pre-set, there are still core elements that the brand can control. 7 product images, generous character limitations for title, bullet points and product description, usually provide plenty of room to convey your product's USP.
Now, there is one major drawback to selling on Amazon from a brand's perspective: customer ownership. Amazon's customers are Amazon's customers, and brands have no right or ability to re-market to them. This means no email addresses, no tracking pixels, and no way to engage customers off the Amazon platform. This is the deal that you make with Amazon in exchange for accessing "their" customers.
This is a downside, but it's not restricted only to Amazon - most marketplaces have the same restriction, and there is also no way to track and engage with end customers when selling in retail stores. Also, because some shoppers are just so loyal to Amazon, it could be argued that those are customers that you might never have reached anyway.
How brands can maximise the upside and minimise downsides of selling on Amazon
Test. There are companies such as Bobsled Marketing, who help brands to launch their products on Amazon. They also help to advise Shopify store owners that are concerned about a negative effect on sales through their online store.Â In these instances, the smartest thing to do is to properly validate this assumption through testing. One way to do this is through selling only specific products in your assortment on Amazon, and consistently measuring the effect of sales of products on Amazon versus your assortment that is not on Amazon.
Engage (within the rules). Amazon has strict rules about â€œdivertingâ€ their customers from the Amazon platform, so you should never link to other websites in your product listings or communications with Amazon. However, there is a place for engaging with customers and staying in line with Amazon's Terms of Service, such as allowing customers to register product warranties, or encouraging sharing on social media with hashtags and mentions.
Diversify. While Amazon offers significant opportunity to access new customers and quickly build revenue, being shackled to a single horse is not usually the best way to win. Leverage Amazon as a platform to scale fast, test ideas, and capture customers who might not have otherwise discovered a brand; but be sure to also maintain your own customer acquisition and marketing platforms to preserve control.
There are challenges involved with growing a physical product business through any channel, be that an e-commerce store, marketplaces like Amazon, or in brick & mortar retail stores. No one venue will be free of challenges or hard work.
One major concern that brand owners often have is that they don't have the time or expertise to properly execute an Amazon launch strategy. If you would like help with launching your brand and optimising your products on Amazon with brand support, there are companies that take ownership of generating revenue for your brand through the Amazon channel. Email an expert to email an expert and find out more.