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Selling on Amazon: Are You Cannibalizing Your Own eCommerce Business?

Guest Author, Channel Key

April 27, 2020

This blog was updated on March 15, 2024.

In the competitive world of ecommerce, the decision to expand onto Amazon can be both exciting and daunting for online retailers. With its colossal reach and unparalleled customer base, Amazon has become the go-to platform for millions of shoppers worldwide. However, for some ecommerce businesses, the prospect of selling on Amazon raises concerns about cannibalizing their existing sales channels. The fear of losing control, brand dilution, and decreased profitability often loom large. But, is this fear justified? In this blog post, we’ll explore why selling on Amazon can actually complement, rather than cannibalize, your ecommerce business.

Understanding Amazon’s Dominance

Before delving into the benefits of selling on Amazon, it’s crucial to understand why it’s such a dominant force in the ecommerce landscape. Amazon’s rise to prominence is marked by its relentless focus on customer-centricity, unparalleled logistics infrastructure, and vast product selection. With over 230 million Prime Members (as of March 2024) and a market share approaching 40% of all online retail sales in the U.S., Amazon represents an immense opportunity for businesses looking to expand their reach.

Myth #1: Amazon Will Cannibalize Your Existing Sales Channels

One of the most common concerns among ecommerce businesses considering Amazon is that it will cannibalize sales from their existing channels. The fear is that customers who previously purchased directly from their website will switch to Amazon, resulting in a loss of control and margin erosion. However, research suggests otherwise.

Studies have shown that selling on Amazon can actually lead to increased overall sales volume for ecommerce businesses. This phenomenon, known as the “halo effect,” occurs when exposure on Amazon attracts new customers who may not have discovered the brand otherwise. Furthermore, Amazon’s sophisticated recommendation algorithms often lead to cross-promotion of products, driving additional sales across channels.

Myth #2: Loss of Brand Control

Another prevalent myth surrounding Amazon is that it compromises brand integrity and control. While it’s true that selling on Amazon requires adherence to the platform’s guidelines and may involve listing alongside competitors, businesses can still maintain a strong brand presence.

Through Amazon’s Brand Registry program, sellers gain access to tools and features designed to protect their brand identity. This includes enhanced content creation, brand-specific storefronts, and robust brand protection measures to combat counterfeits and unauthorized sellers. By leveraging these resources, ecommerce businesses can reinforce their brand identity while capitalizing on Amazon’s vast customer base.

Myth #3: Decreased Profitability

A common misconception is that selling on Amazon inevitably leads to decreased profitability due to the platform’s fees and competitive pricing environment. While it’s true that Amazon charges referral fees and fulfillment fees for its services, the potential for increased sales volume and operational efficiencies often outweighs these costs.

Additionally, Amazon offers various fulfillment options, including Fulfillment by Amazon (FBA), which enables businesses to outsource storage, packing, and shipping logistics. By leveraging Amazon’s fulfillment network, businesses can benefit from faster delivery times, improved customer satisfaction, and access to Prime customers—all of which can drive higher sales and repeat purchases.

The Benefits of Selling on Amazon

Now that we’ve debunked some common myths, let’s explore the tangible benefits of selling on Amazon:

  • Access to Prime Customers: By listing products on Amazon, businesses gain access to millions of Prime members who value fast, free shipping. This can significantly broaden their customer base and drive sales growth.
  • Global Reach: Amazon operates in multiple countries and regions, allowing businesses to expand their international footprint with relative ease. With fulfillment centers worldwide, businesses can fulfill orders globally without the logistical complexities typically associated with cross-border commerce.
  • Marketing Opportunities: Amazon offers various advertising options, including Sponsored Products, Sponsored Brands, and Amazon Display Ads, allowing businesses to increase visibility and drive targeted traffic to their listings.
  • Data Insights: Amazon provides robust analytics and reporting tools that enable businesses to gain valuable insights into customer behavior, product performance, and market trends. This data-driven approach can inform strategic decision-making and optimize marketing efforts.

Channel Key Takeaway

In conclusion, selling on Amazon should be viewed as an opportunity rather than a threat to ecommerce businesses. By leveraging Amazon’s vast reach, logistical infrastructure, and marketing capabilities, businesses can amplify their online presence, attract new customers, and drive incremental sales. While concerns about cannibalization, brand control, and profitability are valid, the benefits far outweigh the risks for many businesses.

Ultimately, success on Amazon requires a strategic approach, including careful product selection, optimization of product listings, and proactive brand management. By embracing Amazon as a complementary sales channel, ecommerce businesses can position themselves for sustainable growth in an increasingly competitive landscape.

So, if you’re still on the fence about selling on Amazon, it’s time to reconsider. With the right strategy and execution, Amazon can be a powerful ally in your ecommerce journey, helping you reach new heights of success and profitability.

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