Selling through Amazon is extremely tempting for a simple, logical reason: you don’t have to pay for digital marketing to drive traffic to Amazon. The volume is bigger than any marketer can dream. Before Journelle, I worked at an Amazon subsidiary, Quidsi, and during my tenure, our core strategy pivoted from investing in its stand-alone sites like Diapers.com and Soap.com to rapidly scaling sales on Amazon’s Marketplace, exactly for this reason.
Amazon Marketplace vendors simply need to offer the most competitive price on a product to win the coveted Amazon “Buy Box”. “Buy Box” winners take all of the sales volume without any marketing spend required, making up for margin loss and commission to Amazon. To scale on Amazon, Quidsi capitalized on selection breadth and uniqueness, and created effective and predictive pricing algorithms to beat their competitors. Overnight, day-to-day business became more like trading stocks than traditional online marketing.
At the same time, there are downsides to relying too much on Amazon. First, there’s the risk of having too much of your revenue coming from a platform you don’t control. There’s also the risk that if you offer all your products on Amazon, you’ll cannibalize your own direct sales (and lose those higher margins). Finally, for high-end brands, Amazon’s site does not offer luxury customers a distinctive experience....
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Jeff Domansky