Why I Left Amazon…
Amazon, the king of online shopping, runs the world’s biggest online store, which makes up more than half of online sales in the US alone and a major stake across Europe and globally through acquisitions.
However, most of the products listed on Amazon.com are not products of Amazon. They are from other retailers known as “third-party sellers.
According to Statista, it is estimated that around 53% of products sold on Amazon are from 3rd party vendors.
Hardly surprising for a marketplace that thrives on being the world’s ‘storefront.’
Although Amazon is serving as the online “storefront” for most retailers, several companies are leaving Amazon in pursuit of independence.
More than 1million businesses! Including brands such as IKEA and Nike.
This made me wonder why a company would go through that.
Leading to pros/cons thought experiment over a quiet evening (once my dad duties were done).
Some of the pros:
- Amazon is the leading product search and discovery platform, driving valuable traffic and leads for merchants. There are more product searches on Amazon than on Google. According to Sir Martin Sorrell, former CEO of WPP, Amazon is a huge threat to Google when it comes to search.
- Unparalleled convenience of delivery and handling logistics, especially with Amazon expanding its fleet.
- Personalization and recommendations allow for greater product discovery to expose to more customers than the target demographic.
Naively speaking, it’s great being a seller on Amazon.
I tried my hand being an Amazon merchant by selling my old university textbooks and other items with little effort, especially using the ‘fulfilled by Amazon’ logistic option.
Some of the cons to consider:
- Your business will have to compete with several thousands of other sellers.
- Amazon focuses on the products, not the sellers. This implies that you have minimal means to showcase your brand presence.
Reasons companies are leaving Amazon.
The following are some reported reasons for companies to ditch selling on Amazon.
- Counterfeit products from unauthorized sellers, damaging brand reputation as well as revenue impact.
- Cross promoting Amazon’s product lines next to listings. Since Amazon has the purchasing power, they can easily undercut the market on price and quickly set you aside.
- Amazon owns the analytics to launch competing for product lines.
Why I left Amazon
Let’s assume my second-hand university book emporium took off.
These were the motivators for me to leave Amazon (hypothetically): The customer experience, AOV and CLV.
- Amazon does not allow me, as a merchant, to control the customer’s experience during and post-purchase. The buying experience, though optimized with 1-click, is sterile. According to Van Noy, Customers are only loyal to Amazon and not your brand. As a result of this, I do not have control over the upsells, x-sells to increase the AOV at all.
- More importantly, Amazon does not share buyer data with sellers. No 1st or 3rd party date to build up a customer profile, preference center, or re-targeting strategy. I do not have the customer’s email for any remarketing, for example. I could not explore options such as Facebook lookalike/psychographic targeting based on similar product affinity. At best, a poor effort when it comes to personalization.
To stay and be competitive on Amazon is a price-driven game. The long game is to double down on owning the customer’s relationship, even if it means cutting the safety net and embarking on new challenges.
And, that’s why I personally ‘decided’ to leave Amazon as a seller.
Amazon vs. Direct to consumer (DTC)
Direct to consumer (DTC) is marketing, meaning when brands sell directly to their end customers without selling through intermediaries (a retailer, wholesaler, distributor, or other outlets).
What made DTC brands work?
Though Amazon is known to be the king of online shopping, however, DTC brands are getting creative to stand out and find success within a crowded and competitive marketplace.
What made DTC brands work is not the lack of intermediaries but the way these brands have built a relationship between the brand and its consumers. According to Jen Rubio, co-founder of Away, the difference between a good product and a good brand is emotion.
Benefits of DTC
- The DTC model allows brands to build a real relationship with their end consumer — When selling directly to your end consumer, you can tell your brand’s story directly to them.
- According to von Bernuth, Amazon doesn’t allow you to capture a buyer’s email. With the customer’s physical address or email, the brand can provide a more unified marketing experience.
- Consumers will have a better experience than they have historically had — When you sell your product to a middleman or a retailer, you gain very little control over what occurs between them and the customer.
Branding on Amazon
On Amazon, brands are being replaced by algorithms informed by product reviews, sales, and click.
This is a system of hundreds of millions of products designed to compete for the top position in search results and ultimately netting the sales.
According to Dr. Dennis Mumby, a professor of brand research at the University of North Carolina, in the 1980s, the value of the brand itself was increasingly recognized separately from the product.
Corporations understand that the key to value accumulation is not in the product, but the brand. Amazon’s algorithm fights it — it robs the product of brand value, but instead offers reviews and ratings.
This environment creates space for endless short-lived private label brands flooding the system. Even Amazon’s owned brands are not brands; they are a collection of products when the brand does not matter.
With the resurgence of CDP’s and a cookieless future seeming viable, owning and acting on 1st party data will, in my opinion, separate and create market-leading brands/companies.
According to a study by Walker, 2020 is the year that experience is to overtake price as the deciding factor for consumers.
“Growth implies change and change involves risk, moving from the known to the unknown.” George Shinn.
For better or worse, a million companies are having to (re)forge new relationships with their customers. An excellent opportunity to own the end to end experience and equally a great risk to lose the customer’s confidence if not executed well.
What could be a winning reason to implement going into this brave new post-Amazonian age? To find out, follow me for my next posts, I will be sharing my thoughts then.
(Opinions are my own and not the views of my employer)
Originally posted on Linkedin Jan 13, 2020
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