Part 1: Advantages and disadvantages of own website
Online sales have become an extremely profitable business opportunity. In 2023, e-commerce is expected to reach a market share of over 21.5 % of the global retail market, which corresponds to a value of USD 5.78 trillion. This represents an increase of around USD 473 billion or 9 % compared to 2022. By 2025, e-commerce is expected to account for almost a quarter of the entire retail sector.
If you intend to start your own retail business, it is obvious that e-commerce can no longer be considered an optional add-on. Rather, it is an indispensable component to be successful.
Building your own e-commerce business has never been so straightforward. Thanks to the rise of Amazon, many retailers have found a user-friendly marketplace where they can offer their products without having to deal with the complex world of website creation, marketing, search engine optimization (SEO) and other technical aspects. But the question arises whether Amazon is really the sole guarantee of success. Can it provide the same visibility as a dedicated website? And most importantly, does the existence of Amazon justify the investment in a standalone website? Let's compare the pros and cons of both approaches and see if Amazon is really the universal solution for all online retailers.
Advantages of own website
The idea of having Jeff Bezos as a competitor may seem intimidating at first glance. Nevertheless, it should be kept in mind that Bezos is not directly a competitor, but rather a businessman who owns an extremely popular marketplace. Although Amazon may seem intimidating at first glance, owning its own website offers immensely important advantages.
Branding and user experience
An outstanding advantage of operating your own website in the Amazon comparison is undoubtedly the opportunity to build your own brand. Although Amazon does not explicitly prohibit this, sellers are encouraged to refrain from branding, as customers may start looking for their products outside of the Amazon marketplace. For Amazon, this may mean a loss of revenue. However, a strong brand identity is critical if you want to build a loyal customer base. Loyalty significantly impacts your overall image, user experience optimization, and marketing strategy. Let's say, among other things, you sell original baseball caps on Amazon, and someone asks one of your customers where they purchased them. On Amazon, the answer would undoubtedly be "Amazon." On your own website, however, the answer will undoubtedly be the name of your brand. But more on marketing in a moment.
The possibilities for designing your brand are endless when you run your own online space. You can customize and personalize layouts to your heart's content. By building your brand identity, you gain notoriety and prestige. Why wouldn't you rise to become an authority in your industry - something Amazon sellers are denied?
Large profit margins
This is another significant advantage of operating independently compared to having a presence on Amazon. Although Amazon undoubtedly offers considerable reach, margins are often limited due to a number of factors. Competition plays a big role here. If you have high-end products manufactured, you will incur higher manufacturing costs than the market average. Since most customers tend to follow the lowest price principle, price is second only to convenience as the main motive for shopping on Amazon. In fact, 82 % of Amazon shoppers say that price is a deciding factor when choosing a product. As a result, you are often forced to shop around the bottom in terms of price, regardless of the quality of the product.
In addition, Amazon charges various fees to its retailers, including sales fees, shipping fees, and storage fees.
If you have a high-quality product, having your own website not only gives you the opportunity to charge a reasonable price, but also the chance to minimize those additional fees. This leads to higher margins and increased profit, so you can improve the quality of your products instead of compromising to maintain production at lower cost rates.
Building customer relationships
Under Amazon, you don't have direct customer relationships - Amazon manages them. Although you get feedback, no lasting customer connections develop, except perhaps negative feedback or refund requests. There is no actual connection.
With your own website, you can interact directly with your customers. You can give special gifts, pursue a more personalized sales strategy, get valuable feedback, and emphasize the positive aspects of customer interaction instead of just dealing with the negative ones.
Of course, customer relationships are an invaluable asset to growing your business through word of mouth, special promotions and loyalty discounts.
Probably the biggest advantage, however, is that you have access to customer data. This data is critical if you want to improve your service and products and accelerate your growth.
Ownership of customer data
Owning your customer data is critical to your rapid growth. It allows you to better target your audience, understand their behavior, and troubleshoot problems with your products or services. When you work with Amazon, the company owns the customer data, and you only get bits and pieces of that information. This, of course, limits your ability to understand your customers and improve your marketing and sales strategies.
For example, let's say 90 % of your customers buy your product after less than 3 seconds on your product page. In this case, you can reduce the written content, add more images, and make the buy button more user-friendly. On the other hand, this should spur you to explore why someone buys a product without getting to know it better first.
Diversification and risk mitigation
Running your own business means being prepared for all eventualities. Relying solely on Amazon as your only source of income carries a high risk. Your account can be suspended for a number of reasons. Even if you manage to restore it, this will cost you time and leave you hanging in the air. Moreover, you are at risk of falling out of favor at any time, since Amazon can change its policies at will.
With your own website, you avoid all these risks. First, you can diversify your sales channels and revenue sources as you like. For example, you can sell your products through YouTube Ads, Google Ads, Facebook Ads and TikTok Ads. This way, if your account is suspended on any of these platforms, you will still have additional income streams available. Not to mention SEO and offline marketing, which will undoubtedly give you an extra boost.
Lack of direct competition
Since Amazon is a marketplace, customer satisfaction is a top priority. When your product is displayed on Amazon, a variety of similar products or even alternatives are also displayed. In addition, Amazon displays as many different accessories as possible for main products and additional accessories. This means that customers might buy them from different sellers.
Let's say you offer mountain bikes, and customers probably want to buy additional accessories to go with them. Instead of purchasing lights, locks, and other accessories that normally come with a bike from you, they might choose to go with another supplier. Either way, they will get them through Amazon at the same time. If you have your own website, this is not necessarily the case. Usually, customers prefer the convenience of ordering everything in one place rather than ordering from different websites and paying shipping costs multiple times. For example, if you sell a vacuum cleaner, when customers buy the main product, they are likely to buy the additional filters, attachments, and other accessories from you as well, rather than looking for them elsewhere.
Absolute marketing freedom
Perhaps the biggest advantage of building your own website is the unlimited marketing freedom. Amazon is a template-based website where the landing pages all look the same. There are only minor deviations from the standard. When it comes to your own website, you can design and customize the landing page to your liking. The "one-size-fits-all" method on platforms like Amazon is impractical from a marketing perspective, as each product has a different target audience and each target audience has different content requirements. Of course, some products need a more detailed explanation, while others rely mainly on images.
Furthermore, Amazon's design neglects the emotional aspect of purchase decisions. For example, if you want to buy a summer dress, a sterile landing page won't evoke the emotional response needed for a spontaneous purchase. However, if you surround the dress with a beach background, summer fruits and cocktails, it will undoubtedly increase the customer's buying mood significantly. The customer will not simply buy a garment, but a vision of how he will wear this dress.
While the advantages of having your own website are extremely tempting, you should also consider the disadvantages before jumping the gun.
Disadvantages of own website
While there are undoubtedly many advantages to running your own website, it is crucial to carefully weigh the potential drawbacks. Especially in terms of developing your website brand, there are some aspects to consider when compared to Amazon.
The high acquisition costs
Before you set out to run your own website, you should be aware of the financial aspects. The initial costs are considerably higher than what you would pay for a presence on Amazon. You will need to purchase your own domain and invest in first class hosting service invest. Moreover, if you don't have the necessary skills and knowledge in web design, you will have to hire designers to create a professional website. Although nowadays, thanks to platforms like WordPress, creating a high-quality website has become easier, it still requires some basic understanding of web design. So, before you choose a website instead of Amazon, carefully consider your budget and make sure you can afford to run your own website.
Managing and optimizing your own website, as well as creating various landing pages for your products and marketing campaigns, requires a significant amount of time. In fact, this process takes a lot of time. Although you can use templates, the search engine optimization (SEO) efforts alone require considerable time. That's not even talking about all the other tasks involved in running an e-commerce website. So, if you were hoping for a work-life balance, you may want to rethink your expectations in the early stages. At least until your business becomes profitable and stable, you will be intensely challenged.
When you operate on your own, you are also responsible for finding your customers. Amazon has a huge customer base, which is undoubtedly tempting. However, if you choose to have your own website, your visibility is limited. Attracting customers depends solely on your SEO efforts and paid ads. Especially in the beginning, this can be a real challenge. Nevertheless, with an effective SEO strategy and a slick marketing campaign, you can build your audience in a relatively short time.
Higher marketing costs
As indicated earlier, you're almost entirely on your own when it comes to marketing in the early stages. With limited reach and without the broad Amazon user base, you'll likely have to invest significant resources in marketing campaigns across multiple channels. This will cost you a lot. Make sure you have a significant budget for ads in the first few months, as each visitor to your site will cost you. Nevertheless, this will completely reverse over time as you gain visibility and popularity. Your marketing budget will shrink and, in some cases, even disappear completely.
Payment and security concerns
Although you benefit from control over customer data, you also have a responsibility to keep it secure. You need to make sure you use secure methods of data collection and storage, which requires additional financial investment. You also need to take care of processing payments, setting up payment gateways, and other essentials. Cutting corners on data security is the worst decision you can make, as it can result in serious legal problems.
Infrastructure, logistics and customer service
One of the biggest advantages of Amazon is that they take care of all the infrastructure, logistics, and customer service. When you operate on your own, you have to take care of these tasks yourself. This includes warehousing, logistics, and setting up the appropriate infrastructure to ensure delivery of your products. At the same time, you need to set up a customer service center, which is not without its challenges, especially if you want to do everything yourself.
Despite all the disadvantages, running your own website is the right choice for many merchants. However, the same is true for Amazon. So let's take a look at the advantages Amazon has to offer.
Read the second part: Advantages and disadvantages of Amazon