For sellers that make their products available through Amazon, finding the right level of independence is a constant struggle. Companies need Amazon to reach their customers, but they also must compete with Amazon for those very same consumers. It’s a confusing situation, and the proper balance is a little different for every retailer that partners with the online giant.
That’s about 2 million sellers currently. They provide about 40 percent of all items sold through Amazon, paying the online retailer fees equivalent to anywhere from 6 percent to 40 percent of the purchase price to do so. The costs are high, but the costs of not selling through Amazon ultimately might be even higher. As one third-party seller explained, “It’s costly, but the upside is getting your product in front of a big audience. That outweighs the added costs when you’re trying to grow.”
Because of Amazon’s dominance and effective search engine marketing efforts, the search engine results for products often list it first or second. In many cases, Amazon appears even before the actual producer of the product. Furthermore, Amazon establishes strict rules that prevent the sellers from trying to lure customers to leave its site and buy directly from the manufacturer. Thus while small businesses might need Amazon to expand their market, relying on Amazon also imposes general limits on their potential growth.
A presence on Amazon also might limit the firm’s ability to build its own brand. Amazon customers may tend to pay less attention to the brand name of the product they are buying, because they consider it simply a part of Amazon’s offering. Still, for some companies that complete up to 80 percent of their sales through the retail giant, it is their best option.
Other firms argue that a presence on Amazon is just another marketing tool. It provides some increased brand exposure, and it ensures that the brand’s product comes up in searches. However, considering how many companies seek to make a name for themselves through Amazon, the competition is severe. Inexpensive or even free shipping within just a couple of days is the norm, a service that smaller firms often have trouble providing.
Despite the challenge of remaining true to the brand and the potential for getting lost in the crowd, sellers continue flocking to the site. Ultimately, as one analyst explained, “You can’t really be a high-volume seller online without being on Amazon.”
Discussion Questions:
- From a retailer’s perspective, what are the advantages and disadvantages of selling through Amazon?
- If you owned a retail operation, would you sell through Amazon? Why or why not?
Source: Angus Loten and Adam Janofsky, The Wall Street Journal, January 15, 2015