I talked a bit about selling on Amazon a few weeks ago. I want to revisit that subject and give you some more things to think about.
Let’s focus on the disadvantages. There are several and they are significant.
Price-sensitive customers with heavy competition based on price
If you sell on Amazon, as a general rule you are dealing with a customer base that is heavily focused on buying at the cheapest price. There is nothing wrong with that –but you have to understand that if you want a piece of the pie, you are going to have to at least match the lowest price of any competitors. Likely, there will be many competitors and they will all be beating down each other in a race to the bottom where margins are ultra-thin and profits are almost non-existent.
Shrinking gross margins is a common problem on the internet, but it is especially true on Amazon where companies really don’t have much ability to stand out. Even if you have a great customer feedback rating, you will probably have competitors that have the same great rating. At that point, getting the sale requires a thin margin and luck.
Inability to customize the shopping experience and brand yourself
If you sell vitamins on Amazon, you are going to have to work with a product page that looks essentially the same as one selling jewelry. You won’t be able to include a clever tool that helps a customer pick an appropriate vitamin for their age. You can’t include a tool that enables customers to search for products with a particular raw ingredient. If you use Amazon fulfillment, you can’t put your own inserts into the packages to move the customers to other products.
The customer experience is a primary way to differentiate and build loyalty and a lasting business. Amazon sales are just transactions. The only loyalty that is being built is to Amazon itself.
Limited customer data
Email is the single most important piece of data you need to run an ecommerce business but Amazon does not give it to you. That in itself is a huge deal. You don’t get phone numbers. The only thing you really get is physical addresses. Compare that to a sophisticated commerce website that not only collects contact information but also acquires the pages the customer visits, product categories they are interested in, and a wealth of other data.
For these three reasons alone, I would recommend that you look at Amazon as a way to augment sales rather than as your primary source of sales.