Why Amazon Is Not Ecommerce and Why You Need Both
There is often confusion about where Amazon falls in the direct-to-consumer ecommerce space. Many businesses consider selling on Amazon to be the same thing as owning an ecommerce channel. However, true DTC ecommerce is when you own the platform you’re selling on (your website) and most importantly, you own the direct relationship with the customer.
Amazon is not that. While your products are being sold online by Amazon, you do not own the channel and you do not own the customers. They do. Amazon is doing ecommerce. You are effectively selling through a 3rd party wholesaler.
The truth is that selling through Amazon has benefits, but it has even greater downsides that, if left unmanaged, can kill your business.
In this post, we will explain the differences between selling on Amazon (or any marketplace) and selling direct-to-consumer using ecommerce. We’ll also explain why it’s important to sell through both channels, and how to create the healthiest blend so that your business is stable.
How is Amazon Different from Ecommerce?
When you list your products for sale on Amazon, Amazon is in control. They own the landscape. They determine the selling rules and whether or not your products are eligible. Their algorithm determines where your products show up in search. And they own the customers.
What are the Risks of Selling on Amazon?
There are some great benefits to selling on Amazon that we’ll cover further down in this post, but there are also some serious risks.
1. Amazon Makes the Rules
Amazon makes the rules and can change them at any moment. That’s why we never recommend that a business use Amazon as their primary sales channel. If the majority of your revenue comes through Amazon and one day your products (or you as a seller) get shut down, there is nothing you can do about it. You can lose your business overnight. You might think this is unlikely, but it happens more often than you’d think, and not just to small mom-and-pop shops.
2. Amazon Owns the Customer
In addition to the potential risk, it’s important to realize that you do not own the customer relationship. Amazon does. There are several issues with this, but here are two important ones. First, customer lifetime value is the single greatest key to growing a consumer brand. With Amazon you really can’t effectively influence customer loyalty. Second, the value of your business is largely based on your customer list. Your customer relationships are assets. Developing a brand relationship with them is how you build a valuable business, and this can’t effectively be done on Amazon.
What are the Benefits of Selling on Amazon?
Simply put, there are two main benefits to selling on Amazon
Because of the massive volume of customers, if you are in the right category and employ the right strategies, you have the potential to generate significant revenue from Amazon as a channel.
Amazon is an incredible discovery platform that gives you access to lots of potential new customers. Many customers go to Amazon to search for products and compare reviews. Many go to Amazon to buy everything. Being present on Amazon will get you in front of new customers you might not otherwise capture.
What Role Should Amazon Play In Your Business Strategy?
Amazon should not be your primary channel, for the reasons mentioned above. Your owned ecommerce channel needs to be your top revenue stream if you want to build a healthy, stable business. Why? Because having the channel you have the most control over be the main driver of your business affords you the most health as a business. The success of your ecommerce channel also gives you strength and leverage when you go into other channels such as marketplace like Amazon or big box retail relationships. If you get this sequence wrong, you will hamper your growth and increase your volatility significantly.
If your owned ecommerce channel isn’t your strongest channel or isn’t even started, it’s time to make the transition and focus on growing your ecommerce store. If you’re currently doing well on Amazon or other retail, that’s great. Now is the time to invest into your owned channel while things are still good. Let’s dig into why.
3 Steps To A Healthy Ecommerce / Amazon Relationship
1. Make Your Owned Ecommerce The King
Unlike with Amazon, in your own ecommerce channel, you own the customer data and therefore the customer relationship. As mentioned earlier, this is a significant business asset. When you have a direct line to your customers and have ultimate control over your communication with them, you can build loyal brand fans and focus on initiatives like a revenue producing email program. This will increase the lifetime value of your customers substantially, and increasing lifetime value is the only way to grow into the health stage of a business.
In order to have a sustainable, healthy business, direct-to-consumer must be the strongest channel. If you are just starting out, make sure to build up your own ecommerce channel first before selling on Amazon. This will allow you to strengthen your brand and build a loyal customer base. Only then should you sell on Amazon as well (making sure not to cannibalize your own ecommerce sales).
In the long run, it is important to be present on Amazon in addition to selling through your own ecommerce store. Not only is it a great discovery mechanism, but you’ll likely be missing out on easy sales if you don’t have your products listed for sale on Amazon.
2. Watch Marketing Spillover
Once your brand is well known and you’re spending significantly on marketing, many potential customers will see your ads and then go look for your products on Amazon. If they don’t find your products there, they’re likely to purchase from a competitor that is available on Amazon.
3. Manage Your Brand
In addition to competitors stealing your potential customers, you could find other sellers selling your product. This is definitely an issue you want to avoid. You need to control your own brand’s presence on Amazon and other marketplaces.
Make sure to be present on Amazon, but remember that it’s always ecommerce first. Build your own channel and keep it strong. Don’t let Amazon become the lion’s share of your business, because it puts your business at serious risk.
If your true ecommerce channel isn’t your strongest channel, now is the time to start investing into it.