If you run a retail business—whether online or a brick-and-mortar location—you’ve probably spent nights worried about your customers buying from Amazon. But, have you thought about selling your products on there?
You may have heard mixed perspectives as to whether this is a good idea. On the one hand, Amazon makes it possible for potential buyers around the world to find your product. On the other hand, Amazon sellers must pay a commission for every product sold.
Amazon has the potential to help grow your small business by putting your products in front of new audiences. Imagine how much value this capability brings to both e-commerce businesses and physical retail storefronts.
Despite the benefits, however, the decision to sell on Amazon shouldn’t be made lightly. Paying commission on every sale can have a serious impact your business’s profit margins, and the more you depend on Amazon for sales, the harder it becomes for your company to build an independent brand.
When deciding whether to sell on Amazon, it’s important to weigh the pros and cons, as they reflect upon the long-term goals of your business. Ask yourself the following questions to help navigate this critical business decision:
How much control do you want over your sales data?
Amazon is both a strategic partner and competitor to your small business. Let’s start with the competitive side:
“In many ways, your small business is an experiment for Amazon,” explains digital marketing strategist Marcus Miller, who is a strategist with Bowler Hat Consulting in the United Kingdom. “They have your sales data, and there’s nothing stopping the platform from selling your exact same product at a lower price. We once worked with a small business customer and Amazon seller who sold big on the platform. But, Amazon decided to replicate that same line of business and undercut our customer. That killed their sales overnight.”
At the same time, Amazon gives your business a platform to reach audiences without needing to invest in traditional marketing tactics, such as paid channel advertising and social media. Small business owners can attract eyeballs to the platform—with Amazon taking care of the marketing.
But, you won’t have the same visibility into your customer base to the same extent that Amazon does. As a business owner, you’ll want to think carefully about your long-term goals. For instance, you may decide to use Amazon to jumpstart your sales or run small experiments on products.
“Consider driving subsequent sales through an online platform that you own,” explains Miller.
With every order that your company fulfills through Amazon, send along a postcard that shares details about your business. Offer a discount or coupon code for your customer’s next purchase. Consider using Amazon as a platform for forging direct relationships with your customers.
Are you selling books?
It’s hard to imagine that Amazon started out as an online seller of books. Over the years, the company expanded into different products and services, including a line of business devoted to cloud-based web hosting called Amazon Web Services (AWS).
Let’s say that you are an author and that your Amazon product is a book rather than any other retail item. Amazon may help you reach an audience that may not otherwise find your product—in a physical bookstore, for instance.
“Authors and publishers of specialized books in a tightly defined niche who would never be stocked in a small business storefront get the same shelf space as a best-seller and can be found and bought. And, that space can include descriptions, reviews, reader feedback and more,” explains business profitability consultant Shel Horowitz. “Amazon also offers on-demand printing, which means that publishes are never out of stock and can save the trouble and expense of handling books and processing inefficient single orders. Amazon can print and ship individual copies as they are ordered.”
But, Amazon isn’t the right fit for every publisher and author. For one, the company has decreased competition in the book market by driving at least two major chains and thousands of independent bookstores out of business.
“For small publishers, Amazon prices like a wholesaler on physical copies,” explains Horowitz. “That’s causing book prices to increase, while profits decrease. Amazon also undercuts its own sales by listing new and used copies on the same page—which means that publishers often see zero revenue.”
On the flip side, Amazon’s low barrier to entry empowers any person to become an author and sell his or her work. Rather than spending years seeking out a commercial publisher, you can start your own small business selling books. If you are smart about your financial and distribution strategy—for instance, selling electronic copies of books using the Kindle platform or app—you can avoid the potential pitfall of losing money. You can also use your book sales to drive visibility around another service or line of business.
Do you need logistical support?
One of the benefits of Amazon is that you can get your product in front of more eyeballs. The company also offers fulfillment services, making it possible to deliver an Amazon product to any buyer in the United States within two days.
When running your own business, this combination of scale and precision in delivery often proves to be impossible. Not to mention, because of Amazon Prime, customers have come to expect the same level of service.
For this reason, Amazon has the potential to help both online retailers and brick-and-mortar storefronts meet the needs of their customers. While Amazon is often blamed for driving many small businesses out of business, it has helped others grow and expand.
“We were able to turn my family’s 80-year-old manufacturing small business and convert it into a business-to-consumer reseller that now does almost 300% what the original company did in revenue in a year. With Amazon taking on a substantial portion of the work, we did this with minimal hiring,” says Will Tjernlund, co-founder of Goat Consulting—a business that maintains the accounts of dozens of companies on the platform.”
One tip that Tjernlund has for all small businesses with Amazon storefronts is to evaluate how much fulfillment fees are going to cost per item.
“Once you know that, you will know how much margin is left over to spend on Amazon advertising,” he explains. “If there is a 10-20% profit margin left for advertising, your product may be great for your small business to sell on Amazon.”
Do you need help selling your product online?
Selling online isn’t always easy, especially if you aren’t experienced with running an e-commerce operation. That’s why Amazon invests resources in supporting third-party sellers.
“I appreciate the fact that I’ve been able to work with an account representative to answer my questions,” says Calloway Cook, founder of a dietary supplement company called Illuminate Labs.
“I’m passionate about finding the most effective ways to reach consumers, and Amazon is many consumers’ first option when it comes to purchasing products.”
In other words, consumers operate in a digital ecosystem in which Amazon sets the standard for what makes an ideal shopping experience. Third-party sellers can set up storefronts and build stores that can make millions of dollars.
“Amazon allows you to reach a huge market of people,” says Cook. “Many of these individuals start their online shopping journey in the Amazon ecosystem and don’t leave. If you leverage the platform greatly, you can increase revenue greatly.”
Setting up an online retail platform and delivery service isn’t an easy process. But, Amazon can make the process easier.
The company lowers barriers to entry in the small business economy.
Does Amazon match your values
When Amazon was a tiny internet bookstore, nobody could have expected that the entity would become what it is today. When discussing the pros and cons of selling on Amazon, as a third party, it is important to bring the company’s reputation to the forefront.
Consider doing a quick Google search, and form your own perspectives about the company. Understand that selling on Amazon may influence your brand perception with some consumers.
Research consistently finds that consumers prefer to shop with companies—of any size—that reinforce strong values.
Amazon has influenced the fabric of global small business. Small businesses of all types—e-commerce ventures and storefronts—need to balance the opportunity to expand their own business needs to sell on Amazon with their customers’ values.
Your consumers are your ultimate stakeholders.
Amazon may empower your business
Amazon brings value to small businesses, and has the potential to be a stronger partner to the evolving online retail and e-commerce economy. Your business can benefit from building on Amazon. Whether Amazon is the “right” e-commerce partner depends on the unique needs of your business.
This article was produced by the Quickbooks Resource Center and syndicated by MediaFeed.org.
Featured Image Credit: Deposit Photos.
