Today, Amazon is the largest online retailer in the world. It has built a huge marketplace for a large number of sellers.
It had around 1,029,528 new sellers in 2017 (source-feedbackexpress) With such a huge audience it does look like a very lucrative platform to sell IT products online. But how beneficial is Amazon for you as a value-added reseller (VAR)?
With Amazon growing so fast, should you be relying only on Amazon for running your business? No, you shouldn’t. You cannot ignore Amazon completely, but it cannot be your primary market.
A VAR needs to have their own e-commerce store AND sell on Amazon.
According to research by Survata Inc., 55% of B2C product searches begin on Amazon, similar trends are true for B2B searches too.
Amazon is the most visited market place by huge chunks of buyers, but you can’t afford to consider this single factor and run behind the herd.
What are the cons of Selling on Amazon?
Low margins of resellers will get lower because of the fees and percentage to be paid to Amazon
Amazon charges a significant percentage of commission for every sale. The commission can be around 8%-15% for certain products but may also go as high as 45%. The VAR business runs on margins as low as 1% – 2% and, if you choose to sell through Amazon your margins will fall further.
Amazon does decrease its commission during the sale season, but in return, you need to reduce your product’s selling price. You may get a chance to move your inventory faster during the sale. But such offers are occasional, and you can’t afford to depend only on them to make a profit.
Amazon will play you off against every other dealer
The reason Amazon is so attractive to consumers is because Amazon offers them hundreds of options to choose from for the same product. When you search a product, Amazon shows you various resellers of that product, their ratings, and, of course, the price. There will always be a seller who offers the same product at a price lower than yours. Customers are open to choose, and for all obvious reasons, they will buy from the seller who has the lowest price affecting your sales and revenue.
Whose customer is it? A seller on Amazon cannot collect customer data
A customer you get on Amazon is Amazon’s customer not yours. When Amazon gets you a customer, they have no direct contact with you and Amazon won’t provide you with their contact information. The customer is a dud to you as far as lifetime value is concerned. You cannot retarget them nor send them promotional emails etc.
Asking your current customers to visit Amazon to buy your product, is like opening a can of worms. They will have access to thousands of other resellers, and you will lose a loyal customer.
“You can sell on Amazon but not build on it”.
Another problem that you as an IT VAR may face on Amazon is to get product catalogs from multiple distributors. You will have to buy plugins for different IT distributors, this will be an additional cost that your business will have to bear.
Amazon may have a long list of cons, but yet you cannot afford to ignore Amazon. Either you adapt your marketing strategy to include it or get left behind.
What are the pros of selling on Amazon?
Built customer base
A new business needs exposure among its target market, this requires time, efforts and a huge marketing budget. Amazon has the budget to drive traffic to their website. They spend millions on marketing and branding. On Amazon, you get an existing customer base. AND a huge one at that!
Amazon has surpassed Google as the number one search engine for product related queries. You will not have to make efforts to reach out for customers on Amazon. They will come searching for your product.
A new channel for customer acquisition
Like we mentioned in the above point, Amazon has a massive audience and immense popularity. Your brand may not be as recognisable. Even an obscure brand stands a chance of gaining visibility to a wide audience on Amazon. Customers on Amazon may get to know of your brand and the products you sell through Amazon and if they like your products and pricing, could gather more information about you and eventually become loyal customers.
Trust and creditability
Amazon’s popularity is unmatchable, but with popularity, it has also built credibility. A buyer would trust your product faster if they find it on Amazon, they believe the product is Amazon certified. On the contrary, the same buyer could think twice before buying an IT product from your e-commerce store, they may doubt the quality of the product as well as the creditability of your store.
Amazon is the future. One you cannot ignore even if it does not behave well with you.
You can read our article on Marketplaces – The Untapped Market for a Value-Added Reseller for more information on the advantages and disadvantaged of selling on a marketplace like Amazon as opposed to an e-commerce store.
Recently, 1500 public organizations including public schools of Atlanta and Denver have signed a contract with Amazon to buy office supplies and books directly from the marketplace. The contract is for 5 years but may extend to 11 (source- The Washington Post, July 10, 2018)
This contract could be a huge threat to local retailers. But for office supply retailers who choose to join hands with Amazon, this is a great opportunity.
A balance between Amazon and your e-commerce store
Now that we have looked into both, the pros and cons of Amazon, maintaining a balance between Amazon and your e-commerce store is necessary. Remember to choose an e-commerce store that lets you export your product catalog to Amazon.
You cannot miss out on Amazon considering the giant that it is, at the same time you cannot depend on Amazon completely for your business. Your e-commerce store should be capable to cover up for the loopholes of Amazon.
VARStreet has built an e-commerce platform specifically for IT and office supplies resellers. Not only do you get the power of a ready aggregated catalog of over 40 IT and office supplies distributors, but very strong marketing and SEO features as well. We also offer omnichannel marketing and you can easily export your product catalog to Amazon and various other marketplaces.
Learn more about Value Added Resellers: