What’s the future for smaller ecommerce retailers?
With the growing dominance of Amazon and Ebay for everyday consumer items, what future is there for the smaller ecommerce business?
Amazon and Ebay both emphasize price. Many shoppers on those sites do not care who the actual supplier is, as they rely on the platforms to ensure that the supplier is reputable. This is especially true of Amazon. Indeed many Amazon shoppers do not even realize that they are buying from a third party.
Moreover, there is the growing trend for both manufacturers and authorized distributors to sell directly on Amazon and avoid the retailer completely. Few retailers can compete on price alone against the manufacturer. Indeed, with such large platforms, why should the manufacturers care about retailers? They can presumably make better margins by selling direct.
If competing retailers stop selling, manufacturers can presumably stop competing on price and improve margins even further.
Manufacturers: wholesale or direct?
In recent months, manufacturers and distributors have started moving into two distinct camps. Some want to continue selling through brick-and-mortar stores, and thus keep prices at a certain level. Others seek more profit by selling directly on Amazon.
In the E.U., manufacturers that seek sensible prices are not helped by legislation that strictly prohibits price fixing and minimum pricing. So they tend to ask that their merchandise not sell on Amazon or Ebay.
Smaller retailers can compete on intangibles, like customer service, packing, and delivery. They can offer a more personal service. The problem is that most Amazon and Ebay shoppers do not choose suppliers on these factors.
So what can be done?
Avoiding lower-value goods
The first thing is to recognize the trend. Identify those suppliers who sell direct and undercut your prices. If you are an ecommerce-only business, there is little point in stocking these suppliers’ products. If they will not support you, stop giving them your business.
My business is slowing going up market. We are changing what we stock into more expensive, collectible items. We are going to trade shows to find those suppliers that create the expensive merchandise and who cater for the more discerning buyer.
In other words, we are turning the question around. We want to sell to consumers who care about the supplier, who want superior customer service, and who seek items that are carefully packed, promptly dispatched, and properly inspected before they are sold.
There is no point doing this for the lower-value goods. Whilst a true collector may still require perfection for a $10 item, it is not cost effective for us to achieve. So we have moved into the $50 price point. We will leave the lower-value items to the box shifters and only stock items where we have sufficient margin to achieve perfection.
Finding new suppliers
In our search, we have found some lovely new suppliers. Some completely prohibit sales on the likes of Amazon and Ebay. Others put restrictions (as far as they legally can) regarding selling on those platforms. We anticipate lower sales volume, but a much higher profit per sale.
Both Amazon and Ebay have noticed this move by manufacturers. They do not at all like the idea of items that cannot be sold on their platforms. They are slowly beginning to wake up. They are not happy. They have started to lobby governments. They are playing the “we want to increase competition” card whilst, in truth, they want to bury all competition.
Amazon and Ebay are becoming bullies. They want to control the market. But they are not geared up to deliver quality service for quality products. Amazon would say differently, that the Buy Box is won on a number of factors, not just price. In truth, however, price is the overriding factor. The only other meaningful factor is Fulfillment By Amazon, for products that use that service. But posting, packing, and speed are highly variable for products on Fulfillment by Amazon.
Unless Amazon and Ebay get their way and force manufacturers and suppliers to stop restricting retailers from selling on them, I see a future where there is room for the smaller, niche sites — sites that can develop a relationship with a customer and build loyalty. These sites can get to know their customers as individuals and deliver outstanding service and superior merchandise.
This is the future for the smaller ecommerce retailers. It is something brick-and-mortar retailers have known for a long time: You have to be a destination shop. You cannot rely on passing trade and you cannot afford to have a shop in a prime retail location.
So become unique. Be the best at what you sell. Leave Amazon and Ebay for the less discerning masses.