Amazon.com Is Writing New Rules for E-Commerce
I read an article by John Dvorak yesterday on Marketwatch titled The Online-retail Trend is Not What You Think that inspired this posting. The trend is not at all what he thinks either as he oversimplifies e-commerce by writing it off as a merely a replacement for the mail-order/catalog industry. He sees Amazon as the new "Sears and Roebuck" of the 50's and 60's where we can go to shop for many types of products, but nothing really more than that. He contents Amazon and the other e-commerce businesses impact the mail order industry only, not physical storefronts. (I do hope his argument helps influence the internet sales tax debate though.)
He fails to realize the disruptive changes that are occurring because of the ability for consumers to find and buy anything from any store that can manage to turn up in a Google, Bing or Yahoo search, an Amazon search, or a on comparison shopping site. Contrary to his stated shopping habits, people do buy clothes, jewelry, office supplies and products besides books and CD's online. Things they would never have found in any catalog in the past or even their local brick and mortar business during the Holiday season in 2009!
Amazon- The Marketplace of Marketplaces
But, I'm not writing this post to argue with his contention, you can decide that for yourself. The trend that I am watching is one that goes beyond Amazon being the new "Sears & Roebuck. The old Sears created a huge marketplace for product manufacturers. The new Amazon is creating a huge marketplace for manufacturers and other stores!
Why is this likely to succeed and disrupt brick and mortar stores? Because consumers get to see these stores bid and compete for their business all within Amazon.com. It's like visiting 3 or 4 physical stores or websites simultaneously. Research the product selections, read reviews, see tech specs, read about the merchants, zoom in on images, select your product, add it to your cart and go to the next set of products and stores! When's the last time you were able to do that at Best Buy?
Amazon wants to be your storefront of the future, whether you are a manufacturer, an existing online merchant, Ebay reseller, or a brick an mortar store without the means to develop your own e-commerce site. Now, Walmart, Sears and others also want to be your next Marketplace of Marketplaces! This concept is far beyond "mail order". This potentially expands anyone's business to worldwide visibility and accessibility, on their marketing dime. It will eventually lead to fewer and fewer physical storefronts.
How does this affect your online business? I don't have a clue, but you should be asking and answering that question for yourself. Two years ago you could not buy any beads or jewelry findings on Amazon as they only sold items with a UPC code in their store. Most of our items do not and will never have a UPC code. They were experimenting third party storefronts on Amazon, but it was fairly limited in scope. Now, there are at least a dozen of my competitors who run an Amazon storefront for jewelry supplies in addition to their own e-commerce sites and/or Ebay stores. Many were Ebay vendors who are finding an easy transition to the Amazon model of selling a single item and dealing with shipping.
I now see Amazon as a direct competitor to our business because of their size, convenience and customer loyalty. If you can buy a strand of 8mm White Rice Pearls on Amazon along with your new cook book and a blender and get free shipping on all of them with one click checkout, would you buy there or visit 3 separate sites and pay 3 shipping fees?
Amazon - The Marketing Opportunity
We decided to try and turn Amazon into a lead source rather than a direct competitor. At this time, we are not interested in being an Amazon storefront, but we do run Product Ads for more than 3,000 products in their store. We submit a monthly product feed and bid using a PPC model within their store category of craft supplies. For about $200 in December, we received 700 clickthroughs and a 4.3% overall conversion rate. The overall ROI was higher than we received from PPC on any search engine last month and FAR higher than we ever received from a comparison shopping site. Needless to say, we will be working to refine and expand those results in 2010.
Eventually, we may revisit the Amazon storefront concept. There are some "red flags" there currently - high fees, the way they present the default product images and descriptions and more, but those will become more sophisticated over time and probably change from red to green.
If you haven't looked at what they are doing for 3rd party sellers, you should. If may offer some real benefit to your business to open a storefront or at least advertise on Amazon. As Walmart and Sears expand these services, I suspect many of us will also need to look at what they offer as well. In 10 years, it may be a bizarre concept to operate your own e-commerce storefront if your sales are less than $50 Million.
At this point, I suspect Amazon is stealing business from more other online stores than brick and mortar storefronts. But where will future investments be made? If you had a great idea for a retail store with unique products, would you spend money to open one in your neighborhood or build one out on Amazon? Food for thought.
This post is filed under Evolving eBiz and has the following keyword tags: Amazoncom, ecommerce storefronts, product feeds, ppc, mail order.
8 Comments
Jamie Estep says:
Amazon's practices are suspicious at best and down right unethical in many cases. They allow merchants to open up stores. They use data from those store's product sales to determine if a market is worth entering. If it is, they start selling the products, and in many cases put the merchant out of business. I've seen multiple cases of exactly this.
I can see the benefit of such a large and well used marketplace, but seriously this is just wrong. There's a reason why most manufacturers don't sell directly to consumers, because they would undercut their retailers. Amazon is no different except for some reason the retailers don't care.
If you open a store in a mall, the mall isn't going to start selling the same products as you when they find out how well they sell. Why would you allow Amazon to do the same thing at your expense?
Dale Traxler says:
Good points and I don't disagree with you at all about the risks. Their data collection is very much worth being concerned about. I am less concerned about it as an advertiser since they don't know what my conversion rate is or what consumer end up really buying.
You hit on one my main points, Amazon is changing trying to change the "traditional rules". They don't see themselves as a mall or a store in the traditional sense. Time will tell if they succeed, but it's hard to argue that many consumers see what Amazon is doing by aggregating merchants and products together is useful.
Google already knows everything about what a huge number of merchants sell as well through Google Analytics. Items, prices, average order size, etc. Who is to say they won't join the marketplace game through Google Merchant in the future? I would not put it past them at all.
larsomatic says:
I agree with Jamie.
I know of a specific instance where Amazon contacted a friend of mine (who is a manufacturer) and placed a huge order after one of their biggest dealers started having a lot of success selling on Amazon.
Guess what's about to happen to that other dealer's Amazon sales!
Brad says:
Your statement: "I now see Amazon as a direct competitor to our business because of their size, convenience and customer loyalty. If you can buy a strand of 8mm White Rice Pearls on Amazon along with your new cook book and a blender and get free shipping on all of them with one click checkout, would you buy there or visit 3 separate sites and pay 3 shipping fees? " isn't 100% accurate.
If you sell on the marketplace and a customer buys from you and then buys the cookbook and blender from Amazon (sold by Amazon) the customer pays no shipping for the Amazon products, but would pay for shipping from the marketplace merchant. I have this happen all the time. I want to buy 2 used books -- sold by 2 different merchants and then I want to buy something sold by Amazon -- I pay for shipping 3 times.
LightMan says:
There is no doubt about, no discussion required, the jury is in! Anyone who has ever been an Amazon Marketplace Merchant is well aware of their backstabbing business practices.
Dale Traxler says:
Thanks for all that feedback. Are there any satisfied Amazon merchants out there? There a lot of you still selling on Amazon.
You've convinced me that being an Amazon merchant may have evil attached to it and everyone should be wary, as I always have been. Would you disagree that there is still benefit from their Product Ads? I have never had a negative experience in the 6 months we've run Product Ads on Amazon. Essentially, that's just a variation on PPC search ads. All clicks go directly to our stores and Amazon gets its $0.25 for the click.
As a side note, I just read an article on publicbroadcasting.net from Reuters that Proctor and Gamble is launching a website this month to sell its products directly to consumers. They will also focus on improving their relationship with Amazon and Sears........ More disruption in traditional marketplaces.
Article is located at http://www.publicbroadcasting.net/kunc/news.newsmain/article/5/0/1599990/Business/P.and.G.floats.selling.products.on.its.own.website
jewelrysprout says:
Hi everyone. Wow, where to start? I am a jewelry merchant on Amazon. Jewelry is a closed category and is by invitation only. I have been selling on Amazon for almost four years. It has been one of the most wonderful experiences of my life and being invited to sell jewelry there is something that I will be forever grateful to Amazon for. I am very blessed at the the opportunity to be a part of Amazon.com. My sales are much, much better on Amazon than what they would be in a brick and mortar store.
Dale, regarding what you said about beads and findings not being available two years ago without a UPC code, that is not true. I have been on Amazon for almost four years and I was able to put up beads if I so chose since the beginning. I am not required to have UPC codes.
As for Amazon's fees, I would pay them and more. The visibility that the merchants get is unlike any other. We have thousands of affiliates helping to sell our products. If I put my business name into Google with quotes (no one else has the name), there are 410,000 hits. The hits come from what I've done, of course, but they also come from thousands of websites that have my products on their site. If you sign up at linkshare.com, you will pay over $10,000 a year to have affiliates put your products on their sites. And you have to pay the affiliates some kind of commission in addition to Linkshare's annual fee. AND you will not have as many affiliates as you would while being on Amazon. Amazon's fees are low for everything they provide their merchants.
Jamie, I have to disagree with you also. Amazon's practices are not suspicious, nor are they unethical. Nor have they put me out of business because we both sell jewelry. I don't know what you've seen multiple times to come to your conclusion, but I've seen and experienced the opposite of what you are saying. Four years ago, Amazon did not sell jewelry. My sales on Amazon were not affected at all when they started selling jewelry. As a matter of fact, my sales are better now than they were when I was selling jewelry on Amazon and they weren't. My best friend is also an Amazon merchant. She sells children's clothing. She carries some of the same things that Amazon carries. Her sales are excellent. Both our websites direct visitors to Amazon. We both twitter. We advertise our Amazon store in many ways. People go directly to our Amazon storefronts and buy our products. Just because a merchant sells on Amazon doesn't mean that merchant shouldn't promote his or her products. I still promote my products in many ways and my sales are great.
Lastly, Amazon treats all the merchants the same, whether big or small. They want their merchants to succeed. I have had products featured on the front page just like the merchants with thousands of products in their store. I am always treated with kindness and respect whenever I communicate with Amazon. And they go out of their way to be helpful. The people at merchant support will help you with anything. They will even go through your keywords with you and tell you what is good and what isn't.
I have had nothing but a positive experience selling on Amazon. I am humbled by it because I know that there are many jewelry stores that would kill to be in the position that I am in. Stores can't get in because the category is closed. Also, jewelry hasn't been doing well for some time due to the state of the economy, but my store on Amazon is. I never take that for granted.
Dale Traxler says:
Thanks to Jewelrysprout for adding a detailed commentary on successfully doing business on Amazon. You were very fortunate to get into the Jewelry category when you did.
Interesting that you were able to sell jewelry parts years ago, because I had that discussion with Amazon when the jewelry category was still open and they told me that because we sold parts with no manufacturers ID or UPC, we did not qualify for the category or anywhere on Amazon at that time. Guess we missed out through the art of miscommunication.
