Selling on Amazon allows brands to reach millions of consumers—but that exposure comes with costs. They include smaller margins, more competition, the risk of commoditization, and less knowledge about customers.The scorecard in this article helps brands determine whether the benefits exceed those costs by examining things like ease of shipping, need for customization, distribution issues, and counterfeiting concerns.
Before we get to more-complex analysis, let’s consider the threshold issues some companies will face. Despite Amazon’s desire to be “the everything store,” not every product should be sold on Amazon. Third, some products are difficult or expensive to ship, which complicates any effort to sell online, regardless of the platform. If a company’s product is especially large, heavy, or fragile; has a limited shelf life; or requires refrigeration, then shipping is challenging—and shipping via Amazon can be even more so.
When thinking about margins, brands should focus on the costs that result directly from selling through Amazon. Brands pay the platform in different ways. Some companies become sellers on the platform; in that case Amazon receives a commission on each sale. If Amazon fulfills the delivery, brands pay for shipping and storage.
In response to complaints about counterfeits and copycats, in 2017 Amazon started offering a “brand registry” program that allows companies to protect their intellectual property and trademarks. However, with many sellers on the platform, the process is often cumbersome, and not all brands can or are willing to enforce and protect their brand image. Removing unauthorized sellers or counterfeit brands from Amazon can be challenging, and legal action is expensive and time consuming.
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Sell more initially, but be prepared to be replaced. Classic Porter’s 5 forces.
Selling on Amazon is like selling in a crowded market. Selling through your own e-commerce website is selling one-on-one.