To Sell on Amazon or Not to Sell on Amazon?
The Pros & Cons of selling on Amazon, and letting Amazon fulfill your orders vs Not
1) One of the largest retailers in the worldAmazon is one of the largest retailers in the world with tremendous reach. The main problem is that the space is getting crowded so it’s becoming more difficult to get noticed. First, Amazon has strict rules about branding and marketing to its customers, so it’s very difficult to cultivate loyalty among these customers. To them, marketplace retailers are really just part of Amazon. But more importantly, price is the most important aspect of winning the buy box and that makes doing so adjusting prices such that margins can become razor thin.
2) Sell & Fulfill orders minus the workFulfillment by Amazon is a win-win situation for many retailers because it takes most of the work out of selling and fulfilling. The merchandise exists in Amazon’s warehouse, Amazon markets it, Amazon processes it and Amazon fulfills it. That makes things pretty easy for the retailer, but it also takes away almost all of the value retailers’ offer to consumers. In this model, retailers act more as financial backers than retailers because really all they did was purchase the inventory. For that reason, it’s easy to see that no retailer is going to build successful brand recognition for itself by letting Amazon handle every aspect of its business while it remains largely in the shadows. However, this can be a fantastic way to supplement retail sales and a fast and easy place to liquidate excess inventory. The traffic on Amazon is enormous, so retailers can move more inventory through its marketplace at smaller markdowns that would be necessary to turn the same volume of merchandise on their own.
3) Leverage Amazon’s fulfillment structure to get the most out of itThe best way to take advantage of Amazon’s fulfillment structure is to understand the best way to leverage it. Let Amazon handle excess inventory, merchandise that is difficult to store or ship, or SKUs that you want to sell but not necessarily stock. For merchandise that is also sold in a retailer’s store or eCommerce site, it often makes more sense to sell on Amazon but fulfill yourself.
4) But how is this different then drop shipping?Fulfillment by Amazon works similarly to drop shipping directly from manufacturers. Amazon holds inventory in its warehouse, markets it on its website, and then fills orders. The main difference is that the retailer purchases the merchandise before it goes to Amazon’s warehouse so it’s important to use the same intelligence that dictates how much inventory is purchased for store sales.Amazon typically works with multiple retailers on every SKU, so it’s rather immaterial to them whether the order is fulfilled using your stock or someone else’s. But if you don’t supply them enough inventory, you miss out on sales. Conversely, if you purchase too much, it will sit there while you wait to earn your investment back. The same technologies that integrate with Amazon marketplace can be used when working with fulfillment by Amazon. Listing the product works the same way, the only difference is alerting Amazon that the merchandise will arrive in its warehouse and directing manufacturers to send it there instead of to you directly. Retailers can also send merchandise to Amazon themselves from their stockrooms if they want to free up space.
5) Give smaller retailers more selling opportunitiesIf you look at the top retailers on Amazon marketplace, you’re unlikely to have heard of many — or even any — of them. That’s really the benefit, it offers smaller retailers the opportunity to take advantage of a highly sophisticated marketing machine and expose it to enormous traffic. It gives every tiny boutique the ability to display its merchandise in a picture window on 5th Avenue. The real answer to this question is that any retailer can, and should, find success integrating with Amazon.
6) Success virtually any retailer can achieveThe definition of success is relative depending on what kind of business the retailer wants. Those interested in becoming top sellers can compete fiercely on price and try to win as many buy boxes as possible. That’s a legitimate strategy for a retailer that wants to deal in high volumes and low margins.
For most retailers, though, becoming a top reseller is not necessary and it’s better to look at Amazon as a piece of a larger omnichannel strategy. That strategy should also include other online channel partners like eBay and Walmart — it’s easy to integrate them in the same way without extra work. Looking at success through this lens, virtually any retailer can achieve it on certain SKUs that are priced and fulfilled properly.