Amazon started as online book store and has grown to be the worlds largest online retailer.
Can you afford not to engage with Amazon?
If you listen to many retailers and of course President Trump, you’d think that Amazon ruled the world of retail and already had everything sewn up. That isn’t actually the case, but retailers still need to consider how they are going to engage with Amazon and what is in their best interests.
Amazon do have a market share close to 50% of ecommerce spend in the US. That’s massive, especially when compared to eBay who grab about 6% or 7% of online spend in the US. But, Amazon sell perhaps $200 billion online whereas Walmart, the giant off US retail, sell over $380 billion in the US. Where Walmart lose is that they only sell around $11.5 billion online in the US.
Amazon sell just over half what Walmart do but Amazon are growing rapidly but their real share of US retail is only about 5% (still massive, but certainly not a monopoly). Online it’s a different story and Amazon have such a lead on Walmart it may be unassailable.
With Amazon’s dominance online, retailers need to decide if they need to engage with Amazon or if they can operate without Amazon. A new paper from Wunderman Commerce suggests that there are three routes to market for brands and retailers to consider, and two of those channels are relatively new.
There is the traditional retailer channel with multiple retail outlets and of course online commerce. There’s direct to consumer (D2C) sales which some manufacturers and brands are exploring but may cannibalise retail channels unless separate product lines are created for D2C sales. And then there’s Amazon which is too big to ignore but equally can be considered as too big to want to engage with.
One interesting point that Wunderman Commerce cite is the relatively recent withdrawal from Amazon by US retailer Birkenstock. Before the announcement that the US-based shoe company was delisting its products from Amazon, the company had about four listings for the Birkenstock “Arizona”. After the announcement, there were more than 440 offers on Amazon so by withdrawing from the marketplace they ended up with even less control as to how their products were being sold.
Wunderman Commerce argue that a balanced ecommerce strategy means being on Amazon as well as making full use of other channels, collaborating and competing. Working with Amazon allows you to reach a large proportion of digital buyers all in one place, build your brand, quickly build revenue, and benefit from Amazon’s market leading expertise on customer experience, loyalty and revenue.
Collaborating and competing with Amazon is the way forward. It may be tough to retain control on Amazon whether you’re acting as a vendor or a merchant, but only if you engage with Amazon can you retain control of your listings and your brand experience on Amazon.
Well we have not sold anything thing on Amazon now for 8 months since we pulled all our offers.
Am not daft enough to say we will never trade on Amazon again, but I will not be told I have to (everyone seems to gasp when they I say I do not sell on Amazon this year)…
Even I thought we would go scurrying back, especially with the decline in eBay however we still are doing OK, and margins are way up as we are actually controlling our business and costs. Don’t get me wrong we have had to replace the shortfalls but have so far on more niche sites.
All we were doing on Amazon was chasing pennies anyway. Our accountant split up our various sales channels and both Amazon (by a distance) and eBay offered the worst bang for our buck…