The retail landscape is changing rapidly these days. In light of COVID-19, eMarketer forecasts a 14% decrease in brick-and-mortar sales in the United States but expects ecommerce to grow by 18%. This is consistent with a June 2020 survey by Deloitte, which found that, globally, less than half (47%) of consumers felt safe shopping in-store.
This infographic by BigCommerce gives us a helpful look at the details of these trends.
If you run a brick-and-mortar store, now is the time to consider adapting to ecommerce shopping trends to compensate for low in-person traffic. And while past headlines have often talked about “Amazon killing retail,” the truth is that the marketplace can be a valuable ecommerce channel for small sellers. Sixty-three percent of product searches now begin on Amazon, empowering merchants of any size to reach a massive audience.
Unfortunately, many retailers still buy into some of the myths about selling on the Amazon marketplace—myths that keep them from taking advantage of a profitable channel. Keep reading to learn how you can use the “retail-killing” giant to strengthen your retail business in a post-COVID-19 world.
Myth: It’s Not Profitable to Sell on Amazon
Many retailers assume their businesses won’t be profitable on Amazon due to the marketplace’s selling fees, free two-day-shipping culture, and fierce price competition. Because of these factors, many small retailers believe they either can’t afford the cost of business on Amazon or simply don’t have a product that is competitive enough.
However, JungleScout’s data tells a different story. The company’s 2020 State of the Amazon Seller report found that 86% of Amazon sellers were profitable—and two-thirds of all Amazon sellers achieved profitability within their first year.
The bottom line is that, while selling on Amazon is certainly not free, shopper volume and engagement on the marketplace are potentially high enough to outweigh these costs in the case of most sellers.
Selling on Amazon also has lower associated costs than the alternative of starting an online store. Designing and launching a good website will likely run you between $12,000 to $150,000, to say nothing of yearly maintenance costs that come with running your own ecommerce store. Compare that with setting up an Amazon seller account, which, depending on your plan, costs either $0.99 per item sold or $39.99/month, with no per-sale fee.
In order to run a profitable business on Amazon, it’s important to have a foundational knowledge of the marketplace. Here are few topics worth learning about:
- Learn how to set up your Amazon store. It’s not difficult to get started, but there are a few basics you need to know. BigCommerce’s Definitive Guide to Selling on Amazon is a great place to start.
- Understand the marketplace’s seller fees. This will help you calculate costs and decide how you want to approach the marketplace. Start with Sellbrite’s Amazon Seller Fees You Need to Know About in 2019 for a comprehensive overview.
- Leverage Fulfillment by Amazon (FBA). This program handles all the fulfillment, customer service, and logistics involved in selling your product and makes your products eligible for Amazon Prime. This makes it a great option for small retailers who have minimal time and resources. The majority of Amazon sellers use FBA exclusively, or a mix of FBA and their own fulfillment. You can learn more about it in our guide to Amazon FBA.
Starting your ecommerce venture on Amazon can help your business remain profitable in the short term while you navigate the current challenges of physical retail.
Myth: The Competition is Too Fierce for Small Businesses
It’s no secret that many shoppers use Amazon to hunt for the lowest price. This leads retailers to view Amazon marketplace as a race to the bottom, one that can be won only by massive brands or sellers with connections to cheap wholesale suppliers.
While it’s true that competition is fierce for certain products, the amount of competition you face depends largely on your business model and the products you’re selling.
Retailers who resell well-known products in their store will likely find themselves competing with other brand resellers. On Amazon, when multiple sellers offer the same item, they must compete on the same product page for what’s known as “the Buy Box.”
The Buy Box is the default purchase option that shoppers see when they come to a product page. Which seller “owns” the Buy Box will vary based on Amazon’s algorithms, but if you don’t own the Buy Box, shoppers will have to click “Other Sellers on Amazon” in order to find your product, something they’re unlikely to do.
According to BigCommerce, 82% of Amazon sales go through the Buy Box. They estimate the percentage is even higher for mobile purchases.
If you are the only seller for a specific product, you automatically own the Buy Box. As a result, retailers of original or boutique brands and niche products have a distinct advantage when it comes to competition.
It should be noted that the path to being competitive on Amazon will look a little different for resellers and brands. For resellers, the focus should be on winning the Buy Box. (Tinuiti has a great guide, How to Win the Buy Box, to get you started.)
Sellers of original products, however, can leverage their experience with their industry, products, and customers to stand out from the crowd. As such, there are a few strategies that can work especially well for brands but may not work as effectively for resellers:
- Use Amazon Sponsored Products advertising. A great way to quickly build sales and brand exposure, even in a category with many established competitors, is to use Amazon’s PPC advertising (something both brands and resellers can use.) Check out our guide 3 Major Amazon PPC Management Challenges (and How to Solve Them) for a good primer on successful Amazon advertising.
- Promote to your existing customer base. If your customers aren’t willing or able to shop in-store right now, direct them to your new Amazon store for purchases. This can help you gain traffic and reviews more quickly and offers a helpful service to your customers.
- Optimize your product page for SEO. Many sellers don’t take the time to make sure their product pages rank high in Amazon searches. Follow the process outlined in Tinuiti’s Amazon SEO: Everything Sellers Need to Know in 2020 to make sure shoppers can find your products easily.
- Leverage your expertise. You’ve worked hard to become an expert in your product, your customer, and your industry. Sellbrite has a great article that expands on how you can use your knowledge to provide extra value to customers and differentiate your brand on Amazon.
A thriving Amazon business doesn’t often happen overnight. But with time and effort, you can build a strong presence in the marketplace, even with millions of other sellers there too.
Myth: Retailers Will Lose Brand Equity to Amazon
You’ve put a lot of effort into cultivating the brand and reputation of your brick-and-mortar store. It’s fair to wonder whether selling on Amazon will erase all that hard work and make you one more faceless seller in a sea of product listings.
Many sellers don’t put any effort into customizing their Amazon store or product listings, which leads some to believe you can’t be unique on the marketplace. However, many small businesses have actually seen a lot of success in both launching and building a brand on Amazon, and there’s good reason for that.
For example, the marketplace offers exposure to national and international markets. On Amazon, small businesses, such as Mama Moon Boutique, that may have been obscure or only locally known can expand their brand recognition to large markets. Not to mention, Amazon’s credibility as a company has been shown to extend to products sold on the marketplace. Natasha McCrary credits this with her success in expanding 1818 Farms from a small farmers’ market brand to a fast-growing lifestyle business.
To take advantage of these features, you must factor Amazon into your overall branding strategy instead of viewing it simply as an “add-on” sales channel. Here are some ways you can get started:
- Set up an Amazon Storefront. This essentially gives you your own branded “store” page, where you have more control over design and messaging. It’s a great way to build customer loyalty and communicate your brand’s value. Tinuiti’s has a simple 5-step guide on Amazon Storefronts to get you started.
- Make use of Amazon’s brand-building tools. Amazon offers sellers a built-in suite of tools designed specifically to help them build their brand. This suite includes features for brand protection, analytics, product page optimization, and promotion, among others. You might not be ready to use all of them right now, but it’s good to know the tools are available.
- Leverage your product pages. Infuse your brand into your product photos, sales copy, and answers to customer questions and reviews, as you would with your in-store sales displays and customer service. Check out Creating a Unique Amazon Product Listing: A Step-by-Step Guide to learn how.
Branding may be more challenging on Amazon than in your own store, but it certainly is possible. With persistence and patience, you can communicate the unique value and aesthetic of your business on Amazon while increasing exposure.
Supplement Your Brick-and-Mortar Sales with Amazon Marketplace
In light of ecommerce trends and new pressures brought on by COVID-19, Amazon may not be the enemy of retailers. With a strategic mind-set, brick-and-mortar retailers can use Amazon as their path to selling online. It’s not necessarily a replacement for your physical store, but it is a good way to strengthen your business during these challenging times.
Iain McNicoll, U.S. country manager at global payment provider Payoneer, sums up this shift well:
"People see Amazon as crushing small business. Really, I think it opens up a door for small business, allowing them to now reach new customers that they wouldn't have been able to reach in the past."