Is Amazon Really the Best E-Commerce Sales Platform?
A reporter was commissioned to write this in-depth article via NewsLauncher.
When it comes to selling goods online, the biggest challenge most Internet retailers (or e-tailers) face is getting found by their customers. The competition to rank high in the search engines for the most popular keywords and keyword phrases is fierce and growing more intense all the time.
The solution for many e-tailers is to sign up as an Amazon.com third-party seller. This can provide vast exposure for an online merchant’s products that’s far wider than what many can achieve via their own search engine optimization (SEO) efforts, leading to increased sales and revenue.
Amazon’s Third-Party Platform
More than two million third-party merchants in over a hundred different countries are currently selling on the Amazon platform, and this number has doubled in the past decade. More than 40 percent of all the merchandise sold on Amazon last year was sold by a third-party merchant, or a total of about two billion items—double the number of items sold on the platform in 2013.
Of course, there’s a cost involved in selling on Amazon’s third-party platform. Amazon collects a percentage of each item sold. This fee ranges from 6 percent to 50 percent, though most Amazon third-party merchants pay somewhere between 8 percent and 15 percent.
But this fee isn’t the only cost to being an Amazon third-party merchant. Due to the nature of the company’s unique business model, Amazon third-party merchants often discover that Amazon is not only their partner, but also their biggest competitor.
And what a competitor it is: The average e-tailer stands little chance of beating Amazon on the SEO front. In fact, it’s not unusual for an Amazon result to rank higher in the search engines for certain keywords and keyword phrases than a merchant’s own website. E-tailers too reliant on Amazon are also vulnerable to changes in Amazon’s merchant policies and retail algorithms that can wipe out a big chunk of their sales literally overnight.
The E-tailer’s Catch-22
All of this can present e-tailers with a Catch-22 situation, according to Bob Bilbrough, the COO of Fulfillment.com, which ships products for small Internet retailers with annual revenues under $100 million. Fulfillment.com is one of America’s fastest-growing private businesses, shipping products to more than 150 countries worldwide from distribution centers in North America and Europe.
“They need to partner with Amazon in order to get the online visibility needed to establish a market,” says Bilbrough. “But the fees eat into profits and make it harder for them to compete with other merchants. And the fact that Amazon might also be their main competitor further complicates the relationship.”
Given this dilemma, more and more e-tailers are looking for strategies that will enable them to diversify away from Amazon so they aren’t too dependent on the online retail giant. One strategy is to diversify across other online sales platforms like Overstock.com, eBay.com, and newegg.com.
Of course, e-tailers can try to sell directly from their own websites and avoid this dilemma altogether. Sites like Shopify.com help online merchants build their own e-commerce websites.
A Good Place to Start
“Amazon is good place for an Internet retailer to start a business,” says Bilbrough. “However, once an e-tailer has established a market for its products, it doesn’t have to continue paying up to a 50 percent commission to sell solely through Amazon.”
According to Bilbrough, many online merchants are realizing that they can sell on a platform like Amazon but maintain the back end of their business elsewhere. “This allows them to save money and have direct access to the end customer,” he says.
Bilbrough stresses that e-tailers should do their homework before automatically signing up with Amazon. “Even if they do sell via Amazon, it’s still a good idea not to put all of their eggs in one basket and sell via other channels as well,” he notes.
