Chapter 1 The Case for Multi-Channel Expansion to Marketplaces
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The world is full of famous rivalries. Coke vs. Pepsi. Windows vs. Mac. Godzilla vs. Mothra.
And, used to be, marketplaces vs. webstores.
It’s a story nearly as infamous as David and Goliath –– independent websites trying to keep their head above water when it comes to the power and visibility of marketplaces like Amazon.
It's romantic to think of independent sellers as the underdogs, an agile kid going up against a powerful giant –– little hope in his court.
That is if that were the actual story of David and Goliath. It isn't.
See, David was never an underdog. Goliath was always set to lose. It’s human inaccuracy that has long gotten the story mixed up.
“So here [David] is, this shepherd, experienced in the use of a devastating weapon, up against this lumbering giant weighed down by a hundred pounds of armor and these incredibly heavy weapons that are useful only in short-range combat,” tells Malcolm Gladwell. “Goliath is a sitting duck. He doesn't have a chance.”
Innovation is what made David successful. It’s our misunderstanding of his choice of weaponry that confounds us and makes us think he was ever an underdog. No, he instead was using modern technology and agility to his favor –– easily ousting the giant before the giant could comprehend the situation at hand.
This metaphor isn’t to say Amazon and your independent webstore are David or Goliath. No, your business gets to choose whether it will be David or Goliath.
Will you diversify? Will you use all the modern tools at your disposal to come out ahead? Or, will you choose to stand there, armored in and weighed down. Will you choose to be a sitting duck –– or will you decide to pull out your slingshot?
What if you could have a recognizable brand, selling through your own store and at the same time use Amazon to drive additional sales? That would be the best of both worlds, wouldn't it?
That would make you David –– and that’s what this guide is all about. This book will show you that it’s not only possible to sell on both marketplaces and your own webstore, but that it helps build a stronger, larger and more profitable business.
The Amazon Seller's Solution Provider DirectoryTo find Amazon experts who can help grow you business, check out our Amazon Seller's Solution Provider Directory.
It’s a Multi-Channel World After All
If you go to ecommerce meetups or conferences, you can pick up on single-channel thinking in the way people speak. They’ll often say “I’m an Amazon seller” or “I have my own online store.” Now and again someone will say, “I’m a multi-channel seller,” but most of the time they equate their business with the channel they sell through.
You don't hear that from consumers. From their point of view, the world is intrinsically multi-channel. They don't say, "I'm an Amazon buyer," or "I only buy from independent webstores." (Well, only very rarely!) They just love the convenience, choice, price, and overall experience of online shopping – wherever that may take them. Of course, everyone has their preferences, but few will insist on only ever buying through one channel.
In 2015, Amazon and eBay accounted for 29.1% of U.S. online retail sales. And that’s growing. Amazon in particular, despite already being the largest online retailer, continues to outgrow ecommerce as a whole year after year (read more about Amazon's evolution here).
That's a huge chunk of the market for just two companies. But it doesn't tell the whole story. eBay sells nothing itself. All the sales attributed to eBay are in fact third-party businesses selling through the platform. Amazon is a retailer in its own right, but 48% of its unit sales are from third-party merchants – an estimated 58% of Amazon's total value.
So yes, these marketplaces occupy a vast space in ecommerce, but it's a space that's accessible to everyone. Online marketplaces are wonderfully convenient for consumers, but only because of the large number of third-party sellers already doing business there.
There’s also plenty of pie left for independent ecommerce websites. Within the 70.9% of the market not belonging to Amazon and eBay there are other large companies, of course, but also a buzzing independent ecommerce market. BigCommerce’s own research estimates that ecommerce SMBs will exceed $100 billion in total annual sales.
Both online marketplaces and independent ecommerce stores are huge, but their success and your success is not mutually exclusive.
What would it do for your business if you could succeed at both?
Marketplaces are from Mars; Webstores are from Venus
Online marketplaces and independent webstores operate very differently. It's easy to understand why businesses which succeed in one can be dismissive of the other. Here's a breakdown of some of the biggest differences.
#1: Marketplace knowledge
Marketplace sellers become very skilled in navigating all the rules, processes and policies of the platforms they use. When you sell through marketplaces, they make the rules, and you have to follow them. Independent sellers, however, are used to playing the game their own way. The labyrinthine marketplace requirements can be frustrating for them.
#2: Competition and price
Marketplaces are highly competitive places by design. Sellers have to compete very hard on price but find reward with higher sales volumes. Therefore, financial proficiency is crucial, and successful sellers become very skilled at managing their margins and squeezing one or two extra percentage points by cutting costs or automating processes. Independent sellers can be overwhelmed by the intensity of competition, and the loss of control over pricing.
#3: Sales volume
Marketplaces are tightly controlled and extremely competitive, but they have one thing in spades: ready and willing buyers. Their endless rules are there to provide a consistent, high-quality experience for consumers. The competitive environment has sellers fighting to deliver the best prices and service. And all those varied sellers give rise to a very broad product selection. It's a recipe that buyers love. Play the marketplaces game well and you'll get big sales with very little external marketing effort.
It is not a free ride. Marketplaces charge substantial fees for all that exposure. Their fee structures can be complicated, but 12% to 15% of the sale price is fairly typical. You pay that day in and day out, on each and every sale.
That being said, selling on your own webstore is not free either. You have to pay to process every sale there, as well. As you know, it varies based on your payment gateway, the method of payment from your customer, and their location, among other factors.
Finally, this brings us to the core benefit of having your own webstore: control. With your own independent storefront you can:
- Give your store a unique brand personality.
- Present your products in whichever way works best.
- Let your imagination run wild with marketing tactics.
- Show expert knowledge of your product niche.
- Distance yourself from competitors’ pricing.
And your webstore customers belong to you. You have their order history and data on how they use your site, what items are in their shopping cart, and what pages they are viewing. You can now market to them directly, which is powerful when done properly.
Marketplaces have amazing potential to generate sales at a predictable, fixed cost. Webstores have equally amazing potential to build a brand and make repeat sales – at a less predictable, but decreasing cost.
Different Strokes for Different Folks
Online marketplaces and independent webstores can be complementary sales channels, but you might need to take a different approach to each one. Your webstore requires in-depth communication with your customer and ever-changing marketing that speaks to their wants and desires. On a marketplace, customers are just as important –– you'll need reviews and sales to increase your Amazon page ranking, for instance –– but you as the seller are one step removed.
Here’s multi-channel selling in a nutshell:
- Put all your inventory data into a single system.
- Publish that data to as many sales channels as possible.
- Sit back and wait for the orders to come in.
That’s it. Technology is an enabler that sets up and maintains the correct data on different sales channels, and brings all the orders back to one place for processing.
For businesses who sell through their own webstore, putting all their data onto a shared platform like Amazon can be a frightening proposition. That fear is not unwarranted. Not only will your inventory be exposed to thousands of competitors, but Amazon themselves will see exactly how well all your products sell. They’re not shy of competing with their own third-party sellers, and when Amazon competes, Amazon usually wins.
The solution is straightforward: you don't have to sell everything everywhere. Do you have popular products that you can offer at a market-leading price? Put those on Amazon, and use them to generate a healthy cash flow. Consumers will find them there anyway, so it might as well be you who gets the sale.
Then consider if you have any hard-to-find products that customers will seek out. Keep those on your own site, and use them to bring in new buyers – well away from the glare of Amazon’s floodlights. These are products that help make your store unique, so there’s no need to give Amazon a cut.
In the next chapter, we’ll take a look at businesses already successfully selling on Amazon and their own store.