Is Amazon a friend or foe for businesses?
Whether a small startup or global behemoth, the decision to use Amazon is now one all companies selling products online must at least consider.
The e-commerce giant is often the first place consumers turn to when searching for products online, ahead of Google and a brand’s own website, and accounts for around a third of UK e-commerce sales in total.
On the face of it, surely every business should list its products on Amazon, right? Well, it’s not quite that black and white, and there are a number of potential drawbacks to using Amazon as a seller, from the commission rates to being at the mercy of the platform.
As an entrepreneur that has relied heavily on Amazon to help both my current (Pott’d) and former (TCA) businesses get off the ground, I would like to offer my own two cents on the topic. Yes, I have made the decision to use the platform for my own ventures, but I have plenty of insight into both Amazon’s pros and cons that I think will help businesses like yours decide whether to follow suit.
Easy access to customers - Amazon’s reach is the main attraction. The website attracts over two billion visitors a month – that’s a lot of potential eyeballs on your products. When you consider how much people trust Amazon and enjoy the benefits of using Prime, this can easily translate into sales and repeat business, which I can certainly attest to in the cases of TCA and Pott’d.
It’s simple to start using - If your products are ready and you want to start selling them relatively quickly, then Amazon is a great bet. All you have to do is provide a few details, create your product listings, and you’re good to go.
Amazon handles storage and fulfilment - Speaking of ease, another big benefit of using Amazon as a seller – particularly for small businesses – is that the company will take care of storage and fulfilment for you. Most companies use Fulfilment by Amazon (FBA) and send products to Amazon for them to pick, pack, and ship any orders on their behalf.
It aids international expansion efforts - With access to overseas customers and extensive fulfilment services to over 100 countries and regions, relying on Amazon makes it much easier for businesses to expand internationally. I found Amazon invaluable in helping TCA and Pott’d do just this, enabling both companies to break into markets across Europe and the US.
Missed brand opportunity - The best brands connect with their customers, something that increases brand loyalty and can generate referrals. However, building this type of community is very difficult on Amazon. Not only are you unable to collect customer data to contact them with, but it’s incredibly hard to convey your brand identity on an external platform, making it much trickier to forge customer relationships.
It can be expensive - Of course, selling on Amazon isn’t free, and these costs can soon add up, particularly for small businesses. The company charges a referral fee for each item sold – typically 15%, though this depends on the product category. Make sure you know your margins, for most small FBA businesses, Amazon is probably making more money from their businesses than they are.
You’re at the mercy of Amazon - I’ve touched upon the lack of control sellers have on Amazon above, and this manifests itself in so many other ways that can be extremely frustrating. Just ask anyone who’s used Seller Support recently. You can also be banned by Amazon at any time for first-time errors or even by mistake.
Amazon has notable shortcomings - From the proliferation of fake product reviews and the problem of Amazon competing with its own merchants, to poor seller support and risk of technical errors, Amazon has a lot of issues. I’ve experienced some of these first-hand, including randomly losing access to the TCA account for several days and having to compete with brands using fake reviews.
So, is Amazon a friend or foe for businesses? Well, like with many things in life, the truth lies somewhere in the middle. If you run a small business, using Amazon can be a great way of getting products out there. However, should you run a larger, more established company that wants more control over its operations and to form closer relationships with customers, using the platform may not be the right solution.
With all being said, selling on Amazon isn’t an all-or-nothing decision either – many brands list a few products on the platform while also encouraging customers to buy directly from their website. The trick here is knowing which products to sell where.
Ultimately, it’s up to your own company to weigh up the pros and cons of using Amazon and work out if doing so is likely to be worth it. Only if the answer is yes can the platform truly be your friend.