It’s never been easier to start your own business. You don’t need a storefront or a warehouse space. You don’t need staff or promotional flyers. All you need is a product to sell and an online platform on which to sell it.
The place that many online retailers start is Amazon. Almost half of all e-commerce sales are transacted on Amazon, according to data from eMarketer, reported by TechCrunch. At the end of 2018, it was estimated that 101 million people in the United States had an Amazon Prime membership. And less than half of those sales are made by Amazon itself — Marketplace sellers accounted for 52% of unit sales on Amazon in the last quarter of 2018.
However, for merchants in the Amazon Marketplace, finding a way to rise above the competition is only one worry. I have found that the more success your business has on Amazon, the more you have to lose. And some sellers have lost a lot after being banned due to Byzantine rules that leave sellers with little recourse.
That’s why multichannel sales are more important than ever. Working with many online retailers at Red Stag Fulfillment, an e-commerce fulfillment company, it’s evident that online retailers with multiple outlets run less risk of business collapse than those who depend solely on a single platform such as Amazon. It’s important to consider selling on other large e-commerce marketplaces, such as Alibaba, Walmart Marketplace, eBay and Shopify — or even through your own branded website.
Don’t live and die on one platform.
If you can sell in the Amazon Marketplace, you should. However, it’s important to hedge your bets when you sell on one platform. Sellers may experience challenges with platforms, from difficulty reaching customer support to issues with the fulfillment and shipping services. A host of small problems can cut into your sales.
When selling strictly on Amazon, for instance, there are two big problems that can damage your business: having your account suspended and competing against its private label products.
1. Account Suspended
Amazon’s strict rules for sellers are one of the reasons that consumers have such confidence when they buy on the site. Amazon’s artificial intelligence is constantly searching for indications of fraud. However, this self-policing sometimes catches rule-following sellers and dumps them into the surreal limbo of suspension.
According to a , sellers can be locked out of their accounts for reasons that are vague and sometimes unfair. Unscrupulous sellers have figured out how to use the rules of the marketplace to take out competitors. Tricks to knock down the competition include framing someone for misconduct and stealing a trade name.
During the time it takes to get an account reinstated, sellers lose out on sales. If your whole business model is geared toward Amazon sales, this can be devastating.
2. Competition Against Private Label Products
Amazon’s data gives it insights, including which products sell well, which sales are most driven by brand name and products that are linked to outside categories. If you’re selling on Amazon, it is learning about your products, sales and customers, as well as that of your competitors.
The data Amazon collects gives it tremendous power. The company can use this data to develop and market private-label products and potentially outcompete those sold by Marketplace merchants. Amazon Marketplace sellers are used to fierce competition, but it’s hard to compete with a brand that also owns the sales platform. Amazon’s private label products include clothing, food, baby supplies, household supplies, vitamins, furniture, electronics and more, and the platform lets customers exclusively shop its brands.
Diversify with a platform mix that’s right for you.
While Amazon is a powerful platform for e-commerce, you shouldn’t focus your whole online retail business on just one sales channel. Multiple sales channels will give your business more resilience to recover if your product is suspended or Amazon’s private label products cut into your own sales.
When you’re looking for platforms to add to the mix, you won’t find anything with the reach of the Amazon Marketplace. But you might find sales platforms that allow you to customize your online storefront or reach targeted consumers in your market niche.
Here are some questions to ask as you embark on multichannel e-commerce:
• What software will you need to manage all your sales platforms in one dashboard? Which platforms are compatible with the software you currently use?
• Can your current fulfillment operations handle orders from multiple sales platforms? Which platforms does your third-party logistics provider support? Will you need to change how you handle fulfillment in order to add sales channels?
• What are the order fulfillment expectations of each platform? Can you ship orders around quickly and cheaply enough to satisfy these new customers?
• What costs are associated with selling on each platform? How will multichannel sales affect your profit margins?
• What are the limits of your production capacity? How will sales on multiple platforms affect your ability to fill orders on your current platform?
Take a healthy approach to online retail with multichannel selling. A diverse mix of platforms will help you grow your business and give you a safe harbor if one dries up.