We know that you shouldn’t put all your eggs into one basket and that you should spread risk. It, therefore, makes sense that you wouldn’t rely on one sales channel for your business, and that’s even more true if that one channel is a marketplace.
There are lots of good reasons why you might start your e-commerce business as an Amazon seller. It’s very easy to start up for one thing – maybe too easy which enables new competitors to come on board. It offers unimaginable customer reach and entry to global markets. Some would however argue that a business that only sells its products on a marketplace isn’t a business at all. You have no control over your brand (is it even a brand?), you don’t fulfill orders and you have no control over returns policy. Amazon controls your relationship with your customers (because they are not your customers, they are Amazon’s). You don’t do a lot of things a business would do. You have no control. Having no control over your own business can’t be good. In addition, you can be disadvantaged by changes made to the platform. And for some businesses marketplaces simply don’t work – low margin products for instance, as the marketplace charges will render them unprofitable. You won’t find many luxury products on Amazon either as the site isn’t geared to creating that distinctiveness that required for a luxury brand. Unscrupulous sellers can also hijack your account with counterfeit or substandard products.
There is also the prospect of every Amazon seller’s nightmare – being suspended or even banned. This can happen for reasons that are outside your control and it’s not hard to find examples of frustrated sellers desperate attempts to resolve issues with Amazon. In that sense, it is not a stable business. It could – literally – be gone tomorrow.
So it absolutely makes sense not to rely on one marketplace or even a variety of marketplaces. Having your own website will give you control over your business, enable you to build your brand, and isolate your business from the risks of relying on a marketplace that you have no control over.
You should view marketplaces as a means to quick and easy entry into new markets, allowing you to test that market before making a full-scale launch. Think of it as complementing your business.
Amazon can help you grow your business especially so if you have an exclusive product and good margins. If you have your own product it also makes sense to list on Amazon if only to prevent competitors from buying it wholesale and listing it themselves. It is better to exert what control you can over the brand rather than let someone else take that space.
The key is to be the master of our own destiny, and with a diversification of channels revenue will grow and risk will reduce.
Elver E-Commerce Accountants is an approved Amazon accounting service provider. If you would like to discuss how our Amazon accounting services can help you scale and improve your business, please give us a call on 01942 725419.