Focus on building your ecommerce business, not Amazon's

A couple of years ago, I worked with a merchant with a love/hate relationship with eBay. He used the analogy of being “addicted to eBay like a crack addict”.

He did a ton of business on eBay but that takes a ton of effort. His staff was constantly overwhelmed and worked on little else. They relied so heavily on eBay for sales, they were, in effect, addicted. He was afraid he couldn’t afford (or so it seemed) change.

Most importantly, he wasn’t able to focus on other, more profitable, ways to grow his business.

I covered some of the negative aspects of eBay on my personal blog a couple weeks ago.  

But how about selling on Amazon’s seller central? That’s totally different, right?

I mean, how could it be anything but positive? You get to sell to Amazon’s vast customer base, don’t have to pay a penny until something sells and don’t have to deal with eBay’s demanding and cheap users.

Well, just like your mother once told you, there is no such thing as a free lunch. And selling on Amazon’s seller central is no different.

To understand why, I need to explain my simplistic view of ecommerce. I believe there are three things to worry about:

1)      Exposure - Getting in front of as many of the right prospects as possible as cheaply as possible.

2)      Profitable Conversion - Maximizing the profit and revenue generated from those prospects

3)      Ownership - Maybe the most important - is getting them to buy from you again and again and again.

Well, how does Amazon match up?

1)      Exposure? A+ There is nothing like Amazon’s installed base.

2)      Profitable Conversion? Hmmm…. A little more mixed. There are tons of ways to be creative on Seller’s Central, but at the end of the day, you are competing on price. After including your commission, you aren’t making a ton and what worse, most of the cross-selling and up selling opportunities all belong to Amazon.

3)      Ownership? F- Basically, you are paying a 15% commission to build Amazon’s business. You do a great job of customer service and offer a product at a great deal? Great! Amazon’s relationship with that customer just got deeper.

The problem is that it all looks easy. It all seems so predictable.  You list products; you ship products and you collect the money from Amazon.

But you aren’t building your own business. Think about it – in essence, you are an interchangeable fulfillment house for Amazon.  They can (and will) replace you in a blink of an eye.

I have a friend who had some temporary issues with his warehouse outside his control. Despite a couple years of stellar service, Amazon shut him down overnight.

He ended up not just laying off his employees but declaring bankruptcy.

If he had been building his web business, the warehouse issue still would have been painful. He would have lost some customers, but he would still be in business today.

So sure, keep selling on Amazon, but don’t forget to build the rest of your business.

And my friend addicted to eBay? I just talked with him. He is doing great. He’s broken his eBay addiction and business is better (and more solid) than ever.