Why this idea means business : We explore why selling with Amazon is a challenge. Learn how their customer obsession impacts suppliers. How their shopping experience isn’t all it’s cracked up to be. And how tough their business approach is. Read this to prepare for the challenges of selling with Amazon.
We’ve all got that job we keep putting off.
Taking your old clothes to the charity shop. Cleaning behind the fridge. Doing your tax return.
You know you need to do it. But you put it off, as you know it won’t be fun.
In e-Commerce, that job would be selling with Amazon. Despite them being the world’s leading online retailer, selling with Amazon can be hard.
Amazon’s customer obsession
Let’s start with Amazon’s customer obsession.
Jeff Bezos claims this is the ‘secret sauce’ behind Amazon’s success.
They relentlessly focus on customer needs.
Everything’s for the customer. They want to know everything about them. This is how they grow their business (and yours), they say.
Their aim to have the widest range of products (to be the ‘everything store’) and offering access to quick or free deliveries are great for customers. These drive a great deal of people to shop with Amazon.
But Amazon fuels that level of range and order to delivery support by being incredibly tough on suppliers. They don’t make it easy to sell with them unless you buy into their way of working.
Selling with Amazon - bigger businesses
Bigger businesses interested in selling with Amazon should be prepared for a long and drawn-out negotiation process.
We’ve worked with a couple of these who were negotiating with Amazon for over a year.
Part of the challenge is that Amazon sees their huge US scale as a great starting point in the negotiation. But if you’re not planning to sell your goods there, you have to point out that the US business isn’t relevant.
All the costs you pay selling with Amazon
Then there’s all their extra ‘services’. Which all come at a cost that steadily chips away at your margin.
Want a dedicated account manager at Amazon? YOU pay for that.
Want access to their data to make better judgements about future activity? Yep, that’ll cost you too.
When you add in all the operational costs (freight charges, damages and returns) and advertising and innovation costs (display advertising, promotions, A+ content, events, paid search) you suddenly find Amazon’s customer obsession is partly funded by you, as the supplier.
Amazon loves to squeeze every last cent out of their suppliers. That’s not good for your profit and loss.
It makes selling with Amazon more challenging for big businesses who want to protect their margins.
Selling with Amazon - smaller businesses
What if you’re a smaller business though, and want to start selling with Amazon?
That’s even more of a challenge.
They have a fixed fee structure with zero negotiation.
You pay a selling fee. Plus a referral fee. And sometimes also a closing fee.
Plus if you use Amazon for fulfilment (creatively called Fulfilment by Amazon – FBA), you pay an additional fulfilment fee.
All these fees come out of your margin.
They do a great job of making Selling on Amazon sound reasonably priced. You can start with a flat $1 per unit sold fee (or a $50 monthly subscription). That’s your seller fee just to get on the site as a seller.
But you’re then adding a 7%- 15% referral fee depending on your category. Your closing fee if you operate in certain categories is another $1. And if you use their fulfilment service, you have to cover anything from $1.32 (for say a mobile phone case) up to $14.57 for a large oversized item (like a computer monitor) per unit sold.
You also have to pay for the storage space your items use in their warehouse which can be between $19.40 and $26.50 per cubic metre.
And we haven’t even talked about the cost of advertising and media to get your products noticed on their site. Or the many strict clauses you have to sign up to in their seller agreement.
Head starting to spin?
Now you can start to see why selling with Amazon is challenging.
Solid grasp of your business commercials
Don’t get us wrong, many people make a good living selling with Amazon. But you must have a solid grasp of your business commercials to make sure you stay profitable. You have to work out your online business model very carefully when selling with Amazon.
This is the same business which patented the simplicity of the 1 click buy button. But, setting up a commercial agreement with Amazon which suits you rather than suits them is about the least simple thing you can do in e-Commerce. They don’t deliver a great customer experience for suppliers.
Amazon’s shopping experience
Amazon’s shopping experience when you visit the site as a shopper has clearly been optimised to maximise conversions.
That’s no secret.
They have such a huge amount of data, they clearly put things in front of you as a shopper which are most likely to make you buy.
But, if you spend time clicking around on Amazon, it’s not a particularly enjoyable experience.
Choice overload
There’s something quite soulless and clinical about the whole experience.
Plus, we wonder if many people are put off by the overwhelming nature of the experience. And they only visit if there’s something specific they want.
Look at Amazon’s bewildering array of options for customers. Prime, Prime Now, Pantry, Go, Family, Fresh, Subscribe and Save, Whole Foods, Kindle, Alexa and Echo. (full range of services not available in all markets, but surely on the way everywhere?).
It’s choice overload for customers. It’s not great design. You see everything at once.
There’s not a lot of progressive disclosure or chunking on the Amazon website. (See our design psychology article for more on those).
One of Amazon’s core principles is a passion for innovation. We understand each of these innovative services tries to solve a customer need. And, we understand that for every service a customer signs up for, they spend more with Amazon and become a more valuable customer.
Clever.
But, when you go on to the Amazon site, isn’t there a lot of information to process? So many categories. So many menu options. And, so much cross-selling. Audible. The Amazon Echo. Amazon business services.
It’s an overwhelming online shopping experience.
If you know what you want, it’s a great place to get in and out of. But as an online shopping experience, urgh. It’s frustrating.
It’s not really where shoppers want to spend any more time than they have to. And we can’t help wondering if many online shoppers stay away because of that urgh factor.
Though to be fair, Jeff Bezos probably isn’t losing too much sleep about it.
Amazon’s approach
And finally, there’s their working style when you interact with them.
There’s something in their culture and approach which makes selling with Amazon a real challenge. They’re relentless in what they do. And ruthlessly efficient. In terms of e-Commerce personality style, they’re almost all “Red” types. Competitive Extrovert Thinkers, who hate to lose at anything. They’re all business. Their whole operation feels cold and machine-like. That can be exhausting to work with.
Amazon news coverage
Then you see frequent stories in the press about how poorly they treat their warehouse staff. And even among the more skilled staff, there are many stories about how they have a toxic work culture where there’s little empathy for staff.
And infamously, in terms of being competitive, when they can’t beat someone, they buy them out. Like this list of over 100 acquisitions by Amazon since they launched.
Conclusion - Selling with Amazon
Don’t get us wrong, we don’t hate Amazon. Not at all. They’re a really interesting company to observe. If you haven’t read The Everything Store* biography of Jeff Bezos, by Brad Stone, we recommend a read.
For example, we love their aversion to PowerPoint. The story of their supply chain set-up is fascinating. And many businesses could learn from the way they do creative approvals and decision-making.
And because of their scale and innovation, it’s almost impossible to avoid them in e-commerce.
We haven’t even talked about their web and data hosting side Amazon Web Services which is huge.
But be prepared for a challenge when you decide to work with them. They’re hard work because their business is about them and their customers, not you. But like that chore you put off, there’s a time when you need to knuckle down and just do it. And you’ll feel better once you get going.
Check out our online retailer strategy guide to find out more about selling with Amazon. Or e-mail us if you need help with your Amazon sales plan.
* As an Amazon Affiliate, we earn from qualifying purchases (yes, we recognise the irony in the context of this article).
Photo credits
Amazon boxes : Photo by Hello I’m Nik on Unsplash
Woman peeking out from bush : Photo by Sharon McCutcheon on Unsplash
Bored in front of computer : Photo by Magnet.me on Unsplash
Money on fire : Photo by Jp Valery on Unsplash
Superman hero figure : Photo by Esteban Lopez on Unsplash
Frustrated Man (adapted) : Photo by Usman Yousaf on Unsplash
