Your online store or Amazon? How retail companies can compete with technological giants
May 26 2021
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Do you wonder how to compete with Amazon? Put your offer on their marketplace and sell via this channel or set up your own platform? The answer isn’t that easy. Yes, there are benefits from selling through tech giants but there are severe risks as well. Your own online store or Amazon? Today I will answer that question.
What is better, Amazon or your own online store?
It depends on what do you want to do. Do you want to establish your own brand and focus customer’s attention towards it or to make the money but work for an image and internet traffic of a third party? Economic benefits could be big but in a long run, your own online shop has serious advantages. Amazon, its pros and cons are already known, especially in the West. Today Amazon is a place of business for Europe as well, especially central and eastern Europe.
Many business owners are wondering how to compete with Amazon. Does it even make sense? Can you measure yourself to a giant? You analyze the business model of your online store and a Marketplace, compare your operational costs and campaign costs, fees, and costs of running your own technological backbone. Costs are not the only aspect you should think about.
What is better – Amazon or your own store? As a shop on my website, talking about threats, nothing is that simple. I will show you the benefits and disadvantages of this solution.
Amazon – pros and cons
Let’s start with a statement. Yes, selling your products on Amazon has its benefits. Nobody questions that and doesn’t try to undermine it. The offer of foreign products overtook Amazon’s own offer years ago. That means thousands and thousands of businessmen trust the platform. The problem is that nothing is that simple and threats are real.
- Access to foreign markets and consumer base. It’s a basic argument for running your sales on the platform. Who wouldn’t want to reach millions of potential customers all over the world?
- A solid technological base and selling platform. You don’t have to worry about the costs of building and maintaining the infrastructure. Everything is on Amazon’s site. The base for selling items, billing mechanisms, security of financial transactions – you don’t have to think about it all.
- Brand recognition. If you sell on Amazon, it means the store is trusting you. You can participate in the Amazon Vendor Central program. In this case, Amazon is taking care of the selling process, you just provide the good in bulk.
- You make money but you work for Amazon’s credibility. Sure, customers see from whom they are making the purchase while they buying an item but it’s Amazon who wins in spades. If you wonder how to compete with Amazon, it’s not by playing by its rules. You have the money from selling the goods and the giant wins an image of the platform that has everything; every item on the planet. In reality, customers are coming to Amazon, not to you.
- The risk of making a competitive (similar) product. If something sells on Amazon exceptionally well and the firm has an idea on how to introduce a similar product on the market or making it its own, then Amazon buys the company or creates a similar product. In the first case, it has enough money for making the product successful, it can also burn money for years. In the second case, the giant artificially drops prices to an unreasonable level to eliminate the competition from the market.
- Amazon targets the market of online advertising. You won’t win this war. It’s not only the case of SEO, which I will explain later on. It’s about a global market of online advertisement, which is already worth $327 billion.
Two-thirds of this market is occupied by only three companies – Google, Facebook, and Alibaba, the Asian giant. They have talents, enormous amounts of money, and experience. By selling on their platforms, you generate profit but in reality, you work for them, not for yourself.
- Amazon Buy Box – a double fight with competition. A store on Amazon – is it worth it? It’s the question I hear more often with each passing month, so I will answer – it depends. Because the platform itself is opened to virtually anybody, anybody does it and sells. Amazon Buy Box is a special field on the right side of the offer. It holds two buttons: “Add to cart” and “Buy now”. This field is a battleground for multiple vendors; multiple offers with similar parameters compete to be in it. If you win the presence in this channel, you will significantly increase the sales potential for your products. This will translate to boosting your offer by special Amazon algorithms.
The problem is that you have to be qualified for the Buy Box. Naturally, it’s done by Amazon. The number of parameters is fairly large. The price (not too large, not too small), performance (the constant volume of goods in the warehouse and their accessibility for consumers), the higher tier account for the vendor (meaning higher profits for Amazon), qualification for the Buy Box program (low percentage of returns, number of years on the Amazon’s platform, other factors).
To gain and keep the Buy Box status, you have to provide a quality service. It demands a lot of effort to maintain the right track record and not to fall from the system. If you fall out, chances for profits are smaller. Again – you can sell but you can also REALLY sell (thanks to Amazon Buy Box). By having the Buy Box partners status, you work for your own profits, as well as Amazon’s profits. You work mainly for Amazon and its credibility as a stable sales platform.
- Someone has to run it. Here we approach yet another factor. Effective selling process on external selling platforms is an entire branch of marketing and sales knowledge. Someone has to operate within these bounds. Under ideal conditions: someone focused only on this task alone. A specialized and qualified individual that you have to additionally pay for. Companies fight for specialists that know a thing or two about marketplaces and this fact alone elevates salaries. If you choose between your own online store or Amazon, think about these costs as well.
- Additional spending on SEO. If you want to sell on Amazon, you have to optimize your offer for it. This offer has to be appropriately built (headers, paragraphs, pictures) but also written in the right way. Optimized for search algorithms. Again – a customer that wants a certain product, will not land on your website but on Amazon’s. Is it really what you want? Besides, optimizing for SEO is yet another cos. Sure, you can work on your offer for Amazon but is it something you are ready to burn money on?
- The necessity to fulfill norms presented by Amazon’s ranking factors. It’s an additional challenge because you can fall of the algorithms’ radar. Also, you have to take care of many quality factors that are important for the giant. Quick delivery time (1-2 days), price (competitive against other offers), quick responses to customers, Amazon Prime membership (the Pro version or Fulfilment by Amazon – FBA), product and vendor ranking established by customers, the level of product returns (the higher it gets the more you lose, and the less Amazon is willing to promote your offers).
How to compete with Amazon in an environment where every single part of the process and offer is ranked, and operational costs for this channel can be really serious? Few words on that below.
How to compete with Amazon?
In the simplest way possible – by playing your game. If you are still on the fence, read the pros and cons once again. Your online store or Amazon – this is a serious decision and a long-term investment. In both cases.
By working on your own technological solution (or buying an existing solution for an online store) you can equip it with your own and tailored solutions. Create your own quality norms. Work on your own rules for sales, communication with customers, distribution channels that will carry the news about products and promotions. Create a communicating vessel system that will work for you, not for tech giants. Making life easier for the competition but the way.
How to compete with Amazon? With clever ideas that will point potential customers towards your products and your company. It’s worth creating an entire ecosystem of solutions that will support sales. The first point towards that goal would be to take care of branding. This is the factor that builds trust and highlights your offer. Then you could work on business scaling.