It’s the most visited e-commerce platform in the U.S. and the dominant retailer in 28 other countries. But that reach comes at a price. Harvard Business School associate professorsays there are downsides for many Amazon sellers, like costs, competition, and the lack of data.
But that reach comes at a price. Harvard Business School associate professor Ayelet Israeli says there are downsides for many sellers – like costs, competition, and the lack of data. CURT NICKISCH: Now, you write in your article that, “Every brand should consider selling on Amazon.” Why? AYELET ISRAELI: Yeah, and it’s a very similar story, the only difference is just the online presence. So, Walmart is of course, still a huge retailer in the U.S., but their online presence out of total U.S. e-commerce sales, Walmart is roughly 5% to 6%. So, they’re much smaller than Amazon when you think about online presence.
CURT NICKISCH: Now, your article has a really thorough scorecard that you can follow. If you’re a brand, you can answer questions and score whether you should be selling on Amazon or not. So, let’s go through the key benefits of selling on Amazon and some of the considerations there. CURT NICKISCH: Now, you’ve got to be looking at what you’re shipping, right? Because Amazon has, for many people, really incredible shipping service and there are millions of Prime members. So, people who can order something and have the promise of getting it delivered for free with that membership within a couple of days. But if you’re selling stuff that’s hard to ship, or if it’s oddly sized or needs customization, that becomes more of a problem.
AYELET ISRAELI: Absolutely. There is this interesting conundrum here where if I’m a big enough brand and that I have enough customers that like me and will go to my website anyway, then I don’t need to be on Amazon because my customers will find me and buy my product. At the same time, I’m a strong enough brand that can actually survive on Amazon. So, I can do both things, right?
AYELET ISRAELI: Yeah. So recently, they actually had major crackdown of fake reviews and also Facebook groups that pay people for reviews and things like that. You’re definitely not allowed to pay for your reviews and you cannot offer a free product for your reviews. Although I think all of us as customers have seen brands do that? Really the question is then, how do I get reviews? Because reviews are so powerful. And there are a few solutions for that.
AYELET ISRAELI: Yeah. So, we see, the technical term is just a mess of how when brands first start out on Amazon, especially if they weren’t there before, because there are all these savvy sellers that are able to find their product for a lower price, maybe a store went out of business and sells it to them or something like that, and then they go and sell it online under a bunch of different names. You’ll find for one specific product, like 10 different versions.
CURT NICKISCH: Let’s talk about something that is just a key, key consideration and one of the big reasons that many companies decide to not sell through Amazon, and that’s data. In the modern age, as a business, you collect customer data and you get a lot of insights about how customers use things by seeing who buys it and how they use it and what reviews they do and what other applications there are. All of this data is extremely valuable to you as a maker of goods.
So part of the question is really, what do you care about as a brand? And it might not matter to you. But we’ve seen in recent years, how important data is. And some of the trends that we’ve seen in retailers in the last few years as they develop their retail media network and advertising is also selling aggregate levels of data to give you some insights about customers in general.
AYELET ISRAELI: Yeah. But what we’ve seen companies for which the relational element is important for do is try to still incite customers to go to their website, sign up for their newsletter, or things like that, that would still close the loop and connect the customer directly with the brand.AYELET ISRAELI: You can still put a card in the package. Warranties is something of the past I think, but maybe that works for some people.
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