But today in 2016, most independent ecommerce entrepreneurs face the same daunting question: “What do I do about Amazon?”
Amazon isn't going away - in fact no other online seller dominates in the USA like Amazon. And Amazon's growth is outpacing the increasing sales seen for ecommerce as a whole.
According to emarketer, the top 180 online retailers had total sales just over $200 billion last year. And within that group, the top 25 retailers sold about $160 billion.
Amazon's press release of January 2016 announced that it topped $100 billion in revenue last year.
Amazon an early retailer that is reaching into Internet of Things (IoT) to help drive more sales into Amazon... it already has an easy app on smart watches for easy ordering; it has the Dash button for easy ordering; it is recruiting Prime members faster than ever for greater customer loyalty and repeat ordering. Amazon is getting its fingers into traditional brick-and-mortar retail selling, and it is offering same day delivery in many markets. The Amazon delivery drone seems inevitable. Everything Amazon is doing is building unto itself for a faster growing sales model than ever before.
For the much smaller ecommerce entrepreneur, this can be scary stuff!
So, what are the 2 options that today's ecommerce company has in response to Amazon?
- Sell something that Amazon cannot sell.
- Play with Amazon
If you are in control of your product, and it's unique without direct competition, you can keep it off Amazon. This means you'll drive customers to you for purchase. As long as there are not comparable products on Amazon at comparable pricing, it's all up to you.
What About Running a Service Company?
Until recently, have a business that's a service has been safe from Amazon. However, Amazon has started Amazon Home Services. This operates with a similar concept as Amazon's third-party sellers. When an Amazon customer in certain markets purchases an item needing installation or assembly (e.g., a large HDTV), Amazon now offers customers to hire a local contractor via Amazon for the installation... and pay through Amazon.
Can Amazon Home Services morph into buying a hair dryer on Amazon and setting up an appointment for a nearby salon at the same time?
Or buying a chef's knife and adding a nearby weekend culinary course to your Amazon cart?
This does not mean that professional home sound system installers, hair salons, and even babysitters are threatened by Amazon anytime soon. However, Amazon has already started reaching into professional services to take a cut of the margin from the participating contractors. For contractors who refuse to participate; they will not be listed by Amazon as recommended providers who adhere to Amazon customer service guarantees.
My takeaway - if there's money to be made, it seems that nothing is safe from Amazon.
Selling a product that Amazon does not sell
There are some unique products out there:
- If you're building a reputation as an artist of wonderful paintings or sculptures, you can control the sales channel.
- If you sell industrial machinery requiring hands-on training and a maintenance plan, Amazon so far has indicated no interest.
- If you are selling packaged expertise where you personally are the brand - e.g., Weight Loss & Diet Plan by Superman, you can control the sales channel.
- If your brand is so special that the experience of shopping with you is as important to the consumer as the product, you can be successful.
But if you're selling a commodity product (i.e., you are a retailer, you purchase from a wholesaler, and there are many other retailers that sell your product including Amazon), I don't see a promising path for most entrepreneurs to beat Amazon in the long run without another significant "secret weapon" for consumers. Against most retailers, Amazon will win on price, convenience, trust, and speedy delivery. That's tough to beat!
Here's the good news for entrepreneurs! Every day, Amazon has millions of customers with fat wallets wanting to spend money. Amazon has spent billions of dollars to bring all these customers to one place; and Amazon will continue building its customer base. Amazon has Fulfillment By Amazon (FBA) that gives retailers great rates to use Amazon as their logistics provider. And, Amazon tells all of us, "Sure, come sell to our customer base and piggyback onto the efficiencies of our distribution!"
Over the past many years, it was all about winning the Buy Box on Amazon, so your listing appears on Amazon's main product page; and not in the list of 40 other sellers.
With that model, it is a race to the bottom on pricing, contact monitoring on trying to stay on top, and hoping at the end of the day there is enough margin on your sale to make it worth it.
Amazon has given you two of the pieces to a successful model that lets you play with them:
- One of the most popular websites for people ready to purchase products
- An opportunity to hop onto their Prime offer, by utilizing Fulfillment by Amazon.
Ignoring Amazon is Not a Winning Strategy, nor is the status quo on trying to beat thousands of other retailers selling the same products, the same way, by shaving more and more margin off your botttom line.
You're an entrepreneur! You started something and have been successful enough to see the day that you need to adjust and adapt in response to Amazon.
Just like you made it this far, beyond some of your competitors, you can figure out the next horizon with your business in an Amazon world.