Amazon’s extraordinary sales figures and almost exponential growth haven’t gone unnoticed by anyone. In the second quarter of 2020, the tech giant’s revenue jumped 40% and its net profit doubled. But does that mean it’s also very profitable for its sellers? As a seller, distributor or manufacturer, should I forget about having my own eCommerce and focus on selling on a marketplace? Is it profitable to have your own eCommerce and also sell on Amazon?
Pros and cons of selling on Amazon
Advantages of selling on Amazon versus your own eCommerce:
- Growth opportunity: when you join Amazon, you get access to a very high volume of traffic. In the US, 44% of consumers search for products directly on Amazon.
- Internationalization: being able to use Amazon’s own logistics makes the whole export and internationalization process easier.
- Entry cost: if you’re self-employed, there’s the individual account, where you only pay when you sell (€0.99 per item sold), and the Pro seller plan (for more than 40 items sold per month). So you can try it at a very low cost.
Disadvantages of selling on Amazon versus your own eCommerce:
- Margin is a critical factor: on average, Amazon keeps around 15% of each sale, which can reach 45% depending on the product.
- Price wars: competition on Amazon is very high, so you end up in a tough price war with other sellers. If, on the other hand, you have exclusive products, pricing competition won’t be as fierce.
- The customer comes first, then Amazon, and the seller comes last. That means if you don’t like Amazon’s terms, and there are quite a few, your only option is to leave.
- Limited customization: if your value lies in design or brand awareness, you have few ways to show it on Amazon, since design options are minimal.
- Limited advertising: if you choose to be a Seller, advertising options are limited. Compared with other online advertising platforms, the targeting and user data you get are very basic.
- Customers who buy from you on Amazon aren’t your customers; they’re Amazon’s. You can’t contact them outside the platform or build your own database.
Pros and cons of having your own eCommerce
Advantages of having your own eCommerce versus Amazon:
- Branding and customization: having your own website lets you build a value proposition around your brand. Reflect your values, stay close to your customers and follow your brand’s visual style and colors.
- Data: a website generates a lot of data. With tools like Google Analytics you can get to know your consumers closely, create data-driven campaigns and identify problems or pain points users may have.
- 360 advertising: online advertising keeps expanding. Having your own eCommerce lets you “play” at reaching users at different stages of the conversion funnel: you can do SEO, Google Ads, Social Ads, email marketing, etc.
- Your own terms: on your own website, you set the rules and conditions. With its pros and cons (it’s also extra work), you choose your margins, logistics, and shipping and returns terms, among other things.
- Added value: since you control design and usability and have customer data and direct contact, you can heavily personalize the customer experience and improve engagement and loyalty.
Disadvantages of having your own eCommerce versus Amazon:
- Cost of eCommerce platforms: in terms of resources, building an eCommerce store is expensive compared with the initial cost of selling on a Marketplace. In the medium term, the cost of building and maintaining a platform is much lower than the margins Amazon charges.
- Logistics: logistics are handled by the company itself, as are the resources (human and financial) for internationalization.
- Visibility: to gain visibility for your eCommerce store, you need an online marketing plan that generates traffic and conversions. On your own eCommerce it is easier to build a certain level of visibility, especially with competitive pricing.
eCommerce and Amazon side by side
Our general recommendation is to make your own eCommerce store your main channel and work a few product lines on Amazon to build visibility and brand awareness. For a more efficient strategy, keep the following in mind:
- Avoid running Marketplace actions at the start of the peak sales season so you don’t saturate sales.
- Be present with alternate collections: for example, sell winter products in summer and vice versa.
- Avoid putting best sellers on Marketplaces. Products should be differentiated by type, previous collections, more basic models or products you want to test.
On the other hand, for internationalization Amazon can be a good tool to test whether a product can break into a market, with low structural and resource costs.
Depending on its features and value proposition, each product and brand will benefit from leaning more toward one strategy or the other, but adding channels is always positive.
