Amazon: Friend or Foe?
As a manufacturer it’s impossible to ignore Amazon.
But is Amazon friend or foe?
Greater Goods manufactures a whole line of home appliances. They have a pretty extensive product line: https://greatergoods.com/products
They’re also quite popular on Amazon.com:
This is probably why they’re transformed their whole site into a giant bridge to Amazon. This is their product page and the only purchase option is a link to Amazon:
But is Amazon Greater Goods’ friend? I’m not sure because when I go to their Amazon page, which, don’t forget, is being heavily advertised on greatergoods.com, I see their product page but also a few enticing ads for direct competitors. This is good for Amazon but is it good for Greater Goods? You tell me.
My mind immediately goes to the dozens of distractions that someone will face the moment they arrive at Amazon’s website. Even if they go with the intention of purchasing your product, it would be so easy to forget about making that purchase and getting lost checking out something else.
Plus, Amazon takes a big chunk of revenues off the top of any sale. I think time better spent would be to improve your checkout experience and CRO on the website. That’s what we’ve tried focusing on and it’s been working great the last 8-10 months!Reply
First of all, you’re exactly right. No point trying to out Amazon Amazon. Better to stick with our own strengths. For example, Amazon is very transaction oriented, with bullet points for product description. Whereas on our own site we can tell a more detailed and vivid product story.
So glad to hear about your CRO progress over the last 10 months.
You must write a guest post one of these days and talk about your #1 CRO lesson!Reply
Do they have a choice?
My casual understanding is that 50% of ecommerce, and I presume it is >50% if you are a generic product.
For a highly generic blood pressure monitor, the chances are that most of their traffic is people googling their brand after seeing it on Amazon. So my presumption is that the user is on their site to do extra diligence. (An interesting question is why? Do they need more info. trying to suss out credibility, aftermarket service. Cheaper price from going direct?)
The transaction is happening on Amazon whether they like it or not. The decision they can influence is whether the sales goes to them, or one of the other 10 generic blood pressure monitors.Reply
Hey, Gajan. I see where you are coming from and this is Amazon’s core thesis too.
You’re right in that the default behavior is that most will discover and buy directly on Amazon. These people are lost to us.
15% would discover on Amazon but visit the manufacturer site for due diligence (as you suggested). Right now the manufacturer is pushing these people back to Amazon. What if, however, when the user clicks the Amazon button on the manufacturer site a popup appears that says,
“You could certainly buy us on Amazon. HOWEVER, if you buy directly from us we’ll get to keep a little more, which we’ll reinvest in newer and better blood pressure machines. Either way, we appreciate your business.”
This will not convince everyone. But if the copywriting were improved further it might change the mind of 10%. That’s a good start.
What small changes can we make today?
That’s all marketing should hope for. But we should work on this every single day. 10% here, 10% there and before you know it you have 20%.
Thanks for commenting. It made my day.Reply
What is the lifetime value of the customer? Surely they want to be able to have direct communication with their customers by way of feedback, reviews, exclusive launches, etc. This seems to a short term strategy without thinking about the long term implications of Brand and audience building….Reply
Hi, Andy. I totally agree with you on this point. I get the value of convenience but, to your point, if this manufacturer (Greater Goods) had access to this customer info they would have significantly increased lifetime value. Greater Goods has an extensive product line: https://greatergoods.com/products
Thanks for adding your voice to the discussion.Reply
Great questions, Rishi. It is both good and bad for Greater Goods without a clear winner. I can think of 3 good reasons that benefit Greater Goods with this “affiliate strategy.” First, they benefit greatly by driving off Amazon traffic to their Amazon listings. Sending significant, well-converting traffic from off Amazon to their Amazon listings definitely increases their Organic Search Rank as well as the Best Seller Category Rank. The better those two rankings, the more sales Greater Goods will enjoy overall on Amazon. Second, there is the added benefit of Affiliate Revenue. Greater Goods receives a commission for every sale that happens after a customer clicks “Buy Now on Amazon”, even if that product is not their own. My guess is that they will earn less in Affiliate Revenue than they would selling their own goods, but this revenue can be substantial. Third, by NOT selling directly on their own website, they are insulated from having to collect sales tax from each state where they have hit the minimum. In a few months time, Amazon will be required to collect and remit from every state in the United States on behalf of the third party sellers. Collecting and remitting sales tax for eCommerce sales is time-consuming and expensive for small sellers and pushing it to Amazon can provide big benefits.
On the negative side, you can forget about being able to contact or remarket to any Amazon customers. It’s getting to be nearly impossible to do this, so whatever it cost to drive that Amazon sale must be seen as a one-off rather than a customer that will buy additional items on your website. In my experience, a growing customer base/email contact list and sales on your own eCommerce website greatly increase a company’s market value. Additionally, it is imperative that every sale, after the cost of traffic and the Amazon seller fees must make a sizable profit. There is no such thing as a “loss leader” for Amazo sales.Reply
So in my opinion, while the immediate and short-term benefits of driving sales to Amazon are real, you give up a lot in terms of building a viable customer base that can be remarketed to when you cede that customer to Amazon. While growing your own customer list and driving your own eCommerce sales can be pricey, the long-term value of a growing and loyal customer base is worth it.
Amazon has a dramatically higher conversion rate than selling directly.
If your conversion rate is three times higher when you send the traffic to Amazon (where customers can feel assured that they can easily return it and will get it on their doorstep the next day at no additional cost if it is Prime), then it doesn’t matter if you lose a fairly significant portion of them to distraction or a competing product.
Amazon fees all in are often cheaper than bringing in your own paid traffic from Facebook or Google, so it’s cheaper and someone else’s warehouse employees are sending out the individual orders instead of yours.
They aren’t YOUR customers if you sell to them on Amazon as Jason points out, but it’s often a good tradeoff when you can make significantly more profit by selling there.
In the long term, Amazon needs good quality products to sell so they don’t turn into Amazon’s Alibaba Dollar General Store. So I believe it can be win-win-win for you the seller, for Amazon and for the customer.
The biggest downside other than what Jason pointed out is that you could get your account closed or something bad could happen to your listing that is out of your control (like bad reviews from a black hat competitor, etc.).
I know people selling subscription items on Amazon who are indeed getting a lot of repeat purchases. So it is possible, but they still won’t be your own customer.Reply
Good comments, LH.
Just a couple of things. You are absolutely correct about conversion rates when comparing your own site’s conversions to those on Amazon. In fact, I regularly see conversion rates 10 times higher on Amazon than on brand eCommerce sites. However, smart CRO guys like Rishi can improve those eCommerce conversion rates. I was actually referring to the boost in Amazon rank and sales that you can get on Amazon when you drive off Amazon traffic to your Amazon listings. In my experience, driving traffic to your Amazon listings, when done properly, can increase your ranking, conversions, and sales. The best we can figure out is that Amazon gives that off-Amazon traffic some “extra love”.
Lastly, the price of doing business on Amazon has dramatically increased over the last 5 years, largely due to the requirement to use Amazon Ads to drive traffic and sales. This is On Amazon PPC traffic that is not technically a requirement, but whenever we have good organically ranked product where we turn off the Amazon PPC Ads, that product’s ranking drops like a rock.
In the final analysis, I believe an AND Strategy is the way to go. I try to teach my clients to be Channel Agnostics, which is to say that so long as you are protecting and representing your brand in the best possible light while maintaining Price Integrity, then we’ll sell stuff from the moon for them! ;). At the end of the day, customers want choice, and creating a great experience both on your own website AND on Amazon is a win-win. So long as you are profitable enough to manage the Sales Tax process, which ain’t cheap and is particularly burdensome to small sellers.
I have really enjoyed this thread with everyone’s comments. Thanks, Rishi!
In my experience (with a branded/non-commodity consumer goods product), Amazon has shown itself as both friend and foe.Reply
Amazon is challenging to deal with. Our products have been de-listed overnight for no apparent reason, managing pricing with 3P sellers and safeguarding against channel conflicts take a lot of energy to wrangle and all for the opportunity to make less profit than selling our products on our own website.
On the friendlier side, we utilize very effective methods to utilize their advertising tools which drive brand awareness & credibility (critical for a small brand), sales revenue and audience learnings that we can translate into other digital marketing channels. And, while customer data isn’t available to us directly for on-going up-sell and cross-sell opportunities, we offer an incented product registration program to capture customer data to gain their contact information and buying history that allows us to build a connection to our customer outside of Amazon.
To their credit, Amazon seems to have developed a magic algorithm to make it just favorable enough to overcome the pain points they create in the ecommerce space.
That’s a really balanced view, Tracey. Thanks for lending your voice to this diverse and far-reaching discussion.Reply
Interesting question, as always, Rishi.
Without spending too much time investigating, I would assume the Greater Goods website came well after their Amazon account was established and they are an Amazon first (or only) brand. I don’t imagine that this was once an e-commerce site that decided to remove their add to cart button and replace it with a buy on Amazon button. They likely created it to drive traffic to their Amazon listings. They understand the power of driving traffic that converts to Amazon and the lift it gives their products in both rank and triggering the Amazon marketing machine. If somebody clicks through their website to Amazon they’re pretty much already converted into a buyer, because the copy, images and video convinced them to buy and thus the CR for that traffic would be really high, even by Amazon standards.
As to your question… Amazon is both. Amazon is incredible for a small product based business. You can scale a business while keeping your headcount low. For most e-commerce business owners I know, the contribution margin of their Amazon business is similar to the business they do on their own website. Sure, they’re paying a referral fee, but the fulfillment costs are probably lower than their fulfilling from their own warehouse or 3PL. On their own website they’re also paying to drive traffic to it whether that’s through PPC or by creating and marketing content to drive organic traffic, or both. But, on the other hand, all sellers on Amazon that I know live in fear that their account will be suspended.
Another question is who’s the bigger foe to an e-commerce person, Amazon or Google? Either can smite you at any time!Reply
Hi, Brett. You deal with Amazon daily so I really appreciate your input on this topic.
You brought up a point I totally overlooked (and this is why operator opinions are so important): “Sure, they’re paying a referral fee, but the fulfillment costs are probably lower than their fulfilling from their own warehouse or 3PL.”