Selling on Amazon: Are You Cannibalizing Your Own eCommerce Business?
Selling on Amazon may seem like a no brainer to most but, there are those brands out there that are hesitant to join the wave. One question that our Channel Key team is hearing surface from brands and manufacturers is, will selling on Amazon cannibalize my eCommerce business? Brands worry that if they start selling directly on Amazon, how much business done on the platform will take away from other channels. For example, if a brand that has no products on Amazon sets up a storefront, how much business if any would be taken away from their direct website sales, social sales, etc.
With Amazon’s vast understanding of consumer behavior and loyal support base, for most eCommerce businesses selling on Amazon, it is an absolute win and a necessity. If you aren’t doing it, you are putting yourself at a disadvantage. Amazon can be the advantage that your business needs to succeed in a competitive industry.
However, Amazon is a complicated marketplace because there are multiple ways for brands to source and sell on the platform. If not done correctly brands face the possibility of losing out on higher margins through direct-to-consumer sales and potentially the long-term growth of your brand. For eCommerce sellers, today’s digital landscape offers an array of opportunities.
Amazon has built up an incredible amount of consumer trust and adoption into its Prime program with over 100M members creating a shopping experience that is preferred by the consumer and often consumers will not buy if the product is not on Amazon. With Amazon being a product discovery platform for customers over 55% of all product searches start on the platform. As a brand or manufacturer, it becomes clear that this can be an expensive proposition to miss out on.
There are situations where those that are searching for your brand directly on Amazon are buying a competitive product. In this case that is considered a lost sale versus someone that goes and searches your brand’s products, cannot find them and is then forced to go to your brand’s website and purchase the product direct. There are multiple paths to purchase and the question here is, what is the cannibalism rate and if someone searches your brand on Amazon and they find your product, are they just going to buy it on Amazon or are they still going to go to your brand’s website to purchase there?
Amazon Seller Pros
Your product can gain major exposure on Amazon with millions of active customers. As a third-party seller, your products will be listed and recommended for relevant search inquiries, thus resulting in higher sales.
- Amazon is a brand discovery platform
- 900M+ views a month
- 55% of all product searches start on Amazon
- 100+ million Prime members in the US alone loyal to Amazon
Image source: statista.com
Image source: statista.com
Amazon Studies Consumer Behavior
Amazon fully understands the motives behind the online buyer community at a fundamental level. As a seller, you have access to the benefits of the extensive marketing research Amazon has already generated and endless marketing opportunities.
Other Things to Consider:
For Amazon, third party sales can be very profitable. Depending on the category Amazon takes a certain percentage of profit, before fulfillment fees, fulfillment center costs, and shipping costs. As the seller, you must determine if margins are high enough to invest.
Long-Term Brand Growth
Selling on the Amazon platform may cannibalize your eCommerce business in the sense that consumers shopping for your products aren’t necessarily loyal to your business but to Amazon itself adding to their massive customer base. This can result in your business becoming heavily dependent on Amazon for sales.
How Can Channel Key help your Amazon business?
As a full-service Amazon channel management agency Channel Key works with brands and manufacturers to develop the best strategy when launching or transitioning on the platform. There are many ways to reduce the impact of your success on Amazon to your website sales:
Controlling the price on Amazon to your own eCommerce site keeping loyal existing customers and price-sensitive buyers shopping directly from you. One of the simplest things to do is price slightly below Amazon to keep your loyal customers onsite and still capture new customers on the Amazon platform. You must make sure if you use this strategy you make sure the price of your items on Amazon stays at or above MAP (minimum advertised price) and website prices.
You will also need to decide which selling platform strategy will be best for your business in terms of making products available and selling on Amazon:
- Vendor Central (1P): Selling directly to Amazon. In this scenario, Amazon gets to set pricing and dictates how much inventory is at Amazon.
- Seller Central (3P): Selling on Amazon. This is where the brand sets the price and decides how much inventory is at Amazon.
Controlling your distribution is the most effective way to protect your products on Amazon. For most brands, this means monitoring resellers and keeping clean distribution channels by implementing strong internet reseller agreements. To be successful you must limit the number of resellers offering your product on Amazon.
Amazon’s vast understanding of consumer behavior and loyal support base provides brands and manufacturers with the opportunity to access their database and be competitive in the industry. Discover your online brand success with a welcoming platform that is continuously growing.
If you need a winning Amazon strategy or have any additional questions, please don’t hesitate to contact one of our Channel Key Amazon consultants. As a Full-Service Amazon Agency, we are dedicated to helping you increase your sales. Talk to our Channel Key team.
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