The Explainer: Amazon and eCommerce
Amazon is the largest eCommerce platform in the Western world. To its sellers, it’s also a single point of access to the largest audience of buyers on the planet.
The tech giant offers entrepreneurs the chance to offload fulfilment, payment processing and even SEO to a single platform. And with all that tech taken care of, entrepreneurs can spend more time on their business and products.
But as Amazon’s shadow grows larger over the eCommerce landscape, some online entrepreneurs feel the control of their selling has been surrendered rather than relinquished. If an online business wants to go-it-alone on the internet, is that still a viable business decision?
A group of eCommerce experts and online sellers joined a BusinessCloud roundtable to discuss the pros and cons of joining the largest internet company in the world.
Is Amazon beneficial to business?
“It’s a bit of an abusive relationship really,” said Asif Mahmud, founder and director of Eruptive Brands.
His product development start-up monitors and researches items before refining them and adding them to one of its new or existing online brand ranges.
His company uses Amazon among other channels to sell its finished products, which are typically in the DIY and hardware sector. He said he had mixed feelings about the utility of the platform.
“I think Amazon is a great place, the best place to launch a brand,” he said.
But once a brand was on the platform, he said he began to wonder if it was possible to take that propulsion into the internet at large and retain a customer base.
“The question is how can we use Amazon and the fact that they’ve got a guaranteed search volume for a keyword which my product contains? How can we use Amazon and then take those products back off Amazon?”
Helen Davies, founder and MD of iKaboodle and its EasyTots and EasyPets brands, shared the sense of ‘lock-in’ to the platform.
Davies entered the online entrepreneur space after completing an Amazon selling course in 2015, which she said cost thousands but whet her appetite for the potential of business growth.
The firm now sells a branded range of compactable plates and bowls.
“I started the business as a side-line, and launched some products that were generic items that we labelled,” she said.
“It wasn't until a year later that we launched our own brand, and then I could see the potential. Amazon is responsible for allowing me a platform to get the business started, which I'm very grateful for.”
The product was the first of its kind on Amazon, but Davies said that the category became more saturated with similar products and the competition quickly increased.
“The products that I launched had a lot of USPs and there was nothing quite like it at the time. There is now,” she said.
“My share of the category was more significant. That's just something that I have to deal with by finding other sales channels.
Davies said that having ‘all her eggs in one basket’ was “very, very scary. We started to diversify after that”.
“When we started, Amazon was 100% of our turnover and a few years later it had reduced to 70%. I'd like to get it to 50% and then I've got a balance.”
Is fulfilment key to its appeal?
Cherelle Hunter is another Amazon seller, and the owner of the MAGconnexx brand, which sells magnetic building block toys to promote creative and STEM-inspired play.
Her business model sees the toys sent directly from China to an Amazon warehouse where they are shipped to customers.
She said she used to sell her products on eBay but transitioned to Amazon in part because fulfilment was taken care of. She described it as the ‘Google of shopping’ and wanted to make sure the business was on the platform.
“I like that they send out the goods to the customer so I don’t have to do that myself," she said. When a customer returns an item, Hunter said that they are sent back to her business, or can be destroyed by Amazon.
While a proponent of the platform, Hunter said that the returns policy sometimes hurt the business.
“The returns policy can be abused because Amazon is not seeing what people are returning before sending them back the money.”
She explained that, having previously sold electrical items via Amazon, customers had returned the wrong product but Amazon had refunded the transaction.
“You can search for a really good Samsung TV on Amazon and it will have two and a half stars or three star reviews. A lot of those reviews shouldn’t really be there."
Mahmud added: “Once you give Amazon full control of the returning products, you lose the customer completely. The whole customer buying experience will be Amazon and you don't have a chance to capture any unhappy customers to put things right.”
He said that the reviews of products on Amazon factored in shipping and returns, which is outside of the control of a business and provided no opportunity to interact.
“Putting everything on Amazon and allowing them to in effect become your retailer could be a mistake,” he said.
What share of sales should be wired in to Amazon?
While some of the sellers said they were looking at other platforms as alternative and additional revenue streams given these fears, a decisive plan for a post-Amazon business was not easy to define.
Guy Levine, founder and CEO of digital agency Return, said his firm has 47 clients on Amazon. Every single one of them is “doing whatever they can to reduce that [presence]”.
Mark Bennigsen, Service Development Director at Columbus UK, added that whatever share of sales a business decides to put on Amazon, it can’t afford to ignore it.
“It's got to be seen as a channel, and an important channel. The question is where that channel fits in your larger strategy. You may have a market where you want to keep certain products out of that channel, or you may not. It's hard to say. But don't ignore it.”
Columbus, which has its UK base in Nottingham, is a global IT services & consulting firm.
Bennigsen added that not all customers expect the simplicity of an Amazon transaction, particularly for larger purchases.
“We have a client who offers expensive products and they have VIPs, who are very rich people and always buy the next bit of kit. It’s a great business, but what they need is a really focused, perfect web portal experience which is going to tick all the boxes.
"You're not going to get that on a standard platform.”
What are the alternatives?
Amazon’s biggest competitor is Google – and more precisely Google Shopping. When shoppers search for items through Google, there is an opportunity to steal away shoppers from defaulting to the Amazon customer journey.
But even within Google Shopping, Amazon has a hold on outcomes, says Katie Joyce, a Google Shopping Expert at Bidnamic.
The Leeds-based firm uses machine learning to boost Google Shopping performance by refining listing.
Joyce said that Google Shopping accounts for about 33% of online shoppers' activity, and the only other major player is Amazon. But, she qualified, “Amazon put a lot of business through Google Shopping, which actually makes it a bit bigger”.
“I would always tell my clients to sell on Amazon, but to be clever about it. A lot of my clients have different pricing on Amazon but Google Shopping is not price sensitive.”
Joyce said that detailed search queries, known as ‘long tail’, have more chance against the likes of Amazon. Her advice was that while it was sometimes more costly to appear in Google Shopping, the cost could have a more positive long-term effect on sales because results take visitors to a company’s own website.
A customised website experience still had a lot to offer, she said. “You're getting so much more that way in terms of brand experience, customer service, and you've got all the data too.”
‘Social commerce’ was also maturing, said Harry Luscombe, commercial director of Mercarto Enterprise Technologies (MET).
The marketplace technology firm offers a platform that integrates with retailers, brands, buying groups and enterprises.
Previously head of new business at social media agency Social Chain, Luscombe was well fit to talk about the role of social channels in selling goods.
“There's been an uplift in sales over the last five years via social channels and there has been a lot done on Facebook and Instagram,” he said.
But he warned that social channels are not a one-stop-shop from advertisement to purchase. “As consumers we want to see reviews. It takes more than one ad to make us want to purchase.
"When you are a white label good trying to sell on social commerce, you need reviews and standard processes in place rather than expecting that consumers will see one ad and buy a product.”
Luscombe said that while brand trust could be created via reviews, brand recognition would ultimately win out, protecting a retailer from changes in platform.
On the still relatively new technology of voice-based commerce, Luscombe said the advice was the same.
“You're not going to say you need toilet roll, but you might say ‘send me some Andrex toilet roll’. The brand wins.”
Is brand more important than platform?
Tony Madden, UK director of Mood Media agreed. The firm provides in-store products such as digital signage, on-hold services, messaging music and even scent to elevate brand experiences.
On listing on Amazon, Madden said: “Keep the brand separate, and use Amazon as a channel. Look to Amazon for what they do well - innovation, user experience and customer service.
“Every time you're trying to make a decision as a brand, use that as your shopping list. So when you're about to make a business decision, as if it’s about customer service, or improvement.
"You lose your brand if you go all in on one channel - that's the one thing at the moment that keeps you safe."
Does Amazon have a masterplan?
On preparing for the next wave of changes in the eCommerce world, Levine said that it was important to think big.
“We’re worried about Amazon, but they’re not worried about us. Look at the investment they are putting into technology and AI,” he said.
“People used to say that Google AdWords would never be able to write themselves, but now Gmail now finishes off most sentences as you write them.
“The selling of products might just be a front for learning how to build scalable, secure technology solutions for understanding what users want. I think it’s likely both.
“We’ve got to be looking at what they are doing next. Do Google really want driverless cars or do they want to create a new medium where a windscreen can be replaced by a screen and play stuff to a captive audience?
“The tech giants are not spending £10m a year for AI programmers just to build cars.”