C ompeting without Amazon: The advantages and challenges of other marketplaces.
It’s no secret that Amazon is the juggernaut of the online sales world. With 60% of all US online sales in 2015 alone taking place on Amazon.com (http://www.marketwatch.com/story/amazon-accounted-for-60-of-online-sales-growth-in-2015-2016-05-03), and over 54 million homes with an Amazon Prime membership (http://money.cnn.com/2016/01/26/technology/amazon-prime-memberships/), Amazon has the widest scope on the online marketplace. However, with the increasing demand for better performance for third party sellers as required by Amazon or the need for large amounts of cash flow to maintain and sustain Fulfillment By Amazon sales, the option to seek alternate marketplaces can seem a potentially fruitful proposition. With multiple sites catering to different demographics of sellers and customers, listing on places such as eBay, Jet, Rakuten, or eBids; more niche sites such as Etsy and Ruby Lane; or your very own store website can appear as paths to establishing a successful brand as a marketplace seller. What can you gain by utilizing these alternate channels and what adjustments will you need to make to your operations in order to manage the challenges these options present?
The breadth and depth offered by Amazon, both in terms of visibility to customers and access to hundreds of millions of listings, come with a price. Amazon has significant commission fees, ranging from 6% to upwards of 15% depending on the item’s category. Comparatively, eBay and other competing marketplaces allow sales with lower marketplace fees, allowing you to net higher margins per item, or offer even more competitive pricing to increase sales. In addition, in keeping with their brand identity of utmost customer satisfaction, Amazon has continued to increase and expand on the standard metrics that sellers must maintain in order to compete for the all-important Buy Box. By listing on alternate marketplaces, your store is allowed additional flexibility for bad orders and negative customer experiences that would be prohibitive on Amazon. Finally, by competing on a smaller marketplace, you can often compete better on a per-item basis, whereas on Amazon you face the risk of dozens of resellers fighting for Buy Box exposure while also risking competing directly with Amazon themselves. The advantage of alternate online marketplaces lies in your ability to make more money per item with fewer competitors without needing to fear marketplace restrictions given the leeway offered by these sites. These limitations are further reduced when selling on your own site; with multiple easy-to-use webstore tools such as Magento, Shopify, and Estoreware, sellers have more methods than ever to present products directly to their customers. This allows you the freedom to fulfill orders on your terms and at your prices, all while placing your brand front and center.
So with the advantages posed by seeking different marketplaces or selling through your own website, what prevents this from being a viable business model?
At the heart of the matter is scalability; without the means to scale effectively, a store will quickly find itself limited to one or two sales channels. Even with the tools offered by companies like ChannelAdvisor, the means to generate exposure comparable to what is offered by Amazon quickly becomes cost and time prohibitive. While channels outside of Amazon offer greater flexibility with regards to customer service, any advantage gained by this flexibility serves only as a crutch when a store lacks the means to effectively scale. In this way, reliance on marketplaces and personal stores while ignoring Amazon is effective only on a per-order scale; the limitations that prevent a store from being successful on Amazon are the same limitations that will prevent the store from effectively generating reasonable exposure and revenues by attempting to compete on multiple smaller marketplaces. In essence, to ignore selling on Amazon is to ignore the barriers to growth that a store faces.
Ultimately, the answer to the question "Can you compete without Amazon?" depends on the need to do so in the first place. If a store wants to compete outside of Amazon because of difficulties in customer service, order management, and data management that restrict the ability to perform to Amazon’s standards, then the store will encounter the same difficulties as it spreads itself thin across multiple marketplaces because the foundation of the store cannot manage on a greater scale.
With an understanding of the limitations of multiple marketplaces, the infrastructure and resources to manage orders from multiple sales channels, and the logic and technology to manage inventory from the store warehouse and dropship distributors, then the ability to grow a store without Amazon is certainly a plausible proposition. However, if a store already has a firm handle on these requirements, there should be no problem for this store to compete on Amazon in the first place!
Amazon is the biggest game in town for online sales, and your ability to succeed on the most challenging and widely used marketplace is indicative of your ability to successfully scale your brand out to multiple smaller marketplaces. If you find that your store lacks the means to be competitive on Amazon, or if you have had troubles sustaining growth, MPLogix is here to help. Click here to read on about our comprehensive marketplace management solution to see how you can sustainably grow your brand.