Amazon is the biggest global online marketplace for consumer goods with billions of online shoppers purchasing from it every day worldwide. In 2019, with over 280.5 billion net sales vale, Amazon shared 52.4% of the total eCommerce market in the US.
Although Alibaba, an online marketplace with both B2B and B2C channels, leads Amazon in overall global eCommerce sales with $756 billion of value, Amazon is still the biggest accumulator of B2C sales. A seller on Amazon bags all kinds of values from the brand that makes his/her business promisingly accessible to the masses overnight.
Still, not every entrepreneur prefers Amazon
The stats look so adorable and Amazon feels like heaven for its vendors. So, why don’t all eCommerce website owners just switch to Amazon, rather than investing a whole lot of money in running their proprietary eCommerce stores?
Interestingly, a survey by UK eCommerce business owners in 2019 revealed that only 20% of the eCommerce business owners would want to sell on Amazon’s marketplace while 46% would want to create an online store of their own. Despite the handsome stats, why do most entrepreneurs still invest in their own eCommerce websites instead of boxing up the shares this giant marketplace offers them?
The thing is, selling on Amazon is not all breezy. There are pros and cons of selling on Amazon as well as on your own independent website. It depends entirely on your analysis to compare both the aspects and deduce the best option for your unique case. If you are hooked-up to starting an eCommerce business but can’t figure out the correct pathway through the act, you must go through this detailed analysis to find yourself the most suitable way to curb this dilemma.
Pros of selling on Amazon
If you follow the rules and regulations laid by Amazon and list your products accordingly, there is a chance per-se to bag the benefits of selling on Amazon and boost your revenue on the platform. The website attracts millions of daily traffic, which it feeds to thousands of on-site sellers to convert. This instant exposure to Amazon’s user-base would hardly go unrewarded for the sellers of the platform.
A cherry on top would be the highly optimized catalog management system of the platform that works day and night to promote products in prominent spaces to the users. There is no doubt that Amazon has one of the most optimized front-end with promising attributes to generate a massive amount of sales every second. Besides, Amazon runs paid Google Search Ads on its own investment to attract as much quality traffic to the marketplace.
Amazon is a global marketplace and trusted brand by worldwide online shoppers. Just by associating with the brand as a seller, you get instant access to use decades’ old reputation to make people trust your business, too. With Amazon’s hereditary standing in the international market and excellent infrastructure, you will get a chance to expand your local business in various global markets.
You can move beyond geographical limitations and reach out to the interested customers spread across different parts of the planet. The best part is, Amazon takes care of the entire infrastructure required for the international expansion. As a seller, you need not worry about the needed technology and shipping infrastructure for expansion.
Customers hardly search about brands on a marketplace. Instead, they search for specific products they are interested in buying. They do so to check out all the alternatives they can find on the site. Even if some customers use a brand name to search, the marketplace search algorithm makes sure that it returns even the related products from other brands in the search result.
For example- Instead of searching for “Samsung SSD for laptop”, users are more likely to search for “SSD for laptop”. The search result populates the listing from all the sellers, irrespective of the brand. It increases the opportunities for a seller to drive new and unique customers because it is likely to discover a product more easily than limiting the choices with a brand. This also means that customers loyal to certain brands can discover a related seller more easily.
Cons of selling on Amazon
Competition from all around:
Without a doubt, the competition for a seller on Amazon is unimaginably harsh. To make it worse, the competition is not just from other eCommerce websites but also from other sellers on Amazon and the Amazon as a seller itself.
Amazon allows multiple sellers to sell the same product. However, not every seller makes it to the “Buy Box“. Only one seller who makes it to the buy box gets prominent attention while the rest of them stay in a lesser prominent ‘other sellers’ box.
It’s obvious that if your listing does not end-up in the buy box, the other seller who is already in the same has more chance to beat you in the competition. You will be competing with dozens of other sellers to secure a place in the Amazon buy box, which is not an easy job.
Things do not end here. Amazon has also started investing in its in-house consumer products, which it sells through the website. If you are selling a USB cable, it’s more likely that Amazon itself might be competing with you and all other sellers for the category. As of now, Amazon has placed an in-house product of its own brand in almost every category on its site. I can only say to such sellers that ‘good luck competing with Amazon on its website’.
You don’t control your store:
Selling on Amazon does not mean that you own an eCommerce store. You are merely a seller on the platform who has to abide by its rules and policies. Amazon reserves all the rights to suspend or delete your listings or the account itself. You can’t even create your listing but upload your product in an existing listing, which Amazon verifies and approves if it finds it viable for the marketplace.
Revenue sharing and fees:
Although there is a chance to increase your revenue by selling on Amazon, the marketplace takes away a major proportion of it as commission and fees. Amazon charges the commission above a monthly subscription fee for Amazon FBA, which is not compulsory to subscribe to, but it’s hardly possible to compete on the platform without one. You would want Amazon to take care of certain aspects of your business under the FBA program, and it is not cheap. A major portion of your revenue will exhaust in paying up Amazon for miscellaneous benefits and services.
We saw the pros and cons of selling on Amazon in the previous section, but selling on your website is also a mixed experience. Before you make up your mind, let’s examine the pros and cons of owning an eCommerce website too.
Pros of selling on your own website
The absolute control:
In most of the cases, unless you are using a SaaS-based eCommerce software, you own your website completely. Even while using SaaS, you can have much better control on your website than on your Amazon seller account. You retain the right to brand your website the way you want, list any product you want to sell, and adopt any marketing channel to promote it.
Unlike selling on Amazon, the transactions on your website are all about your own eCommerce business. You can control not only how your business functions but also how you are going to establish yourself as an eCommerce empire. You will have access to eCommerce marketing channels, eCommerce tools, SEO tools, and CRO strategies to build your own brand identity. Besides, you won’t have to share your revenue as commission or subscription fee and you can decide what to do with it.
Your own customer base:
Although Amazon gives you access to its massive user-base, it is still Amazon’s customer base. Your connection with a customer on Amazon is merely for a transaction. Since you can’t promote your own brand identity on Amazon, your customers only know that they have purchased from Amazon. When you create an online store of your own, you take the first step towards constructing your own brand identity. An identity that brings you sales, access to your customer data, and opportunities to drive repeat sales from the customers.
Cons of selling on your own website
Since you start from scratch, you won’t have enhanced visibility and reach among your target customers from the beginning itself. You are responsible to take your brand among the audience and prove yourself worthy of the attention after competing with dozens of others like you. You won’t have the hereditary brand identity of an internationally recognized brand name.
Lack of trust:
Even Amazon took decades to build the global reputation it enjoys today. This reputation gives ready-made credibility to the sellers on Amazon. When you start a relatively new eCommerce business, it takes some time to establish the trust factors among the target consumers. You have to act beyond your comfort zone to attract attention and compete with all other websites that customers currently trust.
It’s worth noting that proper customer support, niche business ideas, website security measures, trusted B2B solutions, and collaboration with popular figures for endorsement can bring trust factor and confidence in your website fairly quickly.
Since you don’t have access to Amazon’s world-class infrastructure while stating your website, you are responsible for building it on your own. The most crucial part of this infrastructure is the customer support system, without which it is not possible to run your business at all. You will have to invest in a flawless customer support system, ranging right from B2B collaborations to the B2C relations. All your suppliers, B2B partners, and consumers should get excellent support 24×7.
Amazon vs Your Own Site: To Conclude
So, when faced with the option of selling on Amazon vs your own site – which option should you pick? It would be wrong on my part to suggest the best option here. Both choices enjoy their pros and cons. It depends entirely on your long-term business goals, current financial status, ability to expand, and how well you are versed in running an independent business without support from a big brand.
Amazon might take away a major portion of your revenue, but in return, it provides incomparable benefits. While your eCommerce website might demand a much complex dedication, it makes you the owner of your business with absolute control.
Amazon is a great place to start with and learn the ins and outs of the eCommerce industry, while you might apply your acquired skills to set up your eCommerce business in the end. Besides, even if you are running your website, you can still use Amazon as an additional channel of sales. Think about it. Regardless of the Amazon vs your own site debate, it’s important to recognise that every channel offers varying levels of value.