Part 2: Advantages and disadvantages of Amazon
The advantages of using Amazon
Of course, we can't help but acknowledge the truth: Amazon represents a kind of "godsend" for numerous small retailers who simply want to focus on selling their products without building a big brand. Amazon undoubtedly offers a multitude of advantages.
With revenues of nearly $514 billion in 2022 and a market share of 37 % in the US, the quality of its services speaks for itself. Although Amazon has certain policies that may seem restrictive, there is no question regarding the excellence of its services.
Furthermore, Amazon's marketplace enjoys the popularity of 2.3 billion monthly visitors, which is extremely attractive for many small retailers. So, if you are building a business on Amazon, you will undoubtedly benefit from this enormous presence. However, it should be noted that not every e-commerce website, despite its credibility, can attract such a large audience. Rather, you should keep an eye on the trends on the platform and not just blindly follow the numbers. For example, if your products are highly specialized medical devices aimed mainly at business customers (B2B), Amazon might not be the ideal platform for you. Despite its 2.2 billion visitors, the likelihood of this target group being interested in your products is low. All in all, despite its excellent reputation, Amazon may not be the best choice for B2B sales.
Trust and credibility
When it comes to trust and credibility, Amazon is undoubtedly an industry leader. If you are a new retailer, building trust will likely be one of your biggest challenges. However, Amazon has gained the trust of customers worldwide. Selling your products on this platform is therefore made much easier regardless of your market presence. This is why many new retailers consider Amazon as a starting point.
An outstanding advantage of selling on Amazon is the use of the Fulfillment by Amazon (FBA) service. FBA provides a comprehensive service that streamlines the entire order fulfillment process. You can send your products to an Amazon-provided warehouse, which significantly reduces your costs for maintaining physical inventory. Amazon takes care of storing your products in secure and climate-controlled warehouses.
In addition, Amazon takes care of packaging and shipping, which saves not only money but also time.
Customer service and return process
In addition to the fulfillment center, you get access to Amazon's extremely well-organized customer service program. This saves you significant costs, as providing around-the-clock customer service is extremely expensive. Not to mention the handling of returns. Amazon takes care of every returned item, inspects it, and even restocks or resells it. This smooth returns process goes a long way toward keeping customers happy and reducing your workload.
No liability for personal data
Managing other people's personal data involves considerable effort. Once you start collecting data, you are responsible for keeping it safe and secure, which of course comes at an additional cost. With Amazon, on the other hand, the responsibility for data security lies with Amazon itself, since the company collects the information when you use it. This relieves you of the obligation to store and delete personal data upon request.
Although this may seem like a small advantage at first glance, you will quickly realize the enormous stress that handling other people's personal data can cause once you are confronted with it.
Since you won't have to spend on domain names, hosting, designers and everything related to setting up your own business and market presence, you'll save significant financial resources. Although using Amazon is not free of charge, it is definitely cheaper compared to the alternative solution. So, if you are starting out with a limited budget, Amazon might be the better choice, as a tight budget is definitely not conducive to running an e-commerce website.
No special knowledge required
Finally, Amazon stands out for its ease of use. You don't need any special knowledge or skills; neither time nor money need be invested in building a website. All you need to do is follow simple instructions, and you'll be able to run your own business in no time. This is essentially the "quick start" button for retailers.
Disadvantages of using Amazon
Of course, not everything is always so smooth at Amazon. The advantages we discussed earlier regarding having your own website can also be seen as disadvantages when it comes to Amazon. However, there are a few more aspects to consider.
Lower profit margins
Although we have already thoroughly discussed the lower profit margins, it is worth reiterating them. The biggest issue here is that the reduced profits are due to taxes, fees, and the fact that Amazon is constantly featuring your competitors' products. In addition, cheaper substitutes or copies of your products can reduce your return on investment (ROI). While you may realize savings in infrastructure, marketing, and shipping costs, those savings must offset initial losses and narrow profit margins.
Limited brand control
A significant disadvantage of Amazon is that it attracts attention. Even if you offer an outstanding product, people remember buying it from Amazon. The packaging has the Amazon logo on it, the confirmation emails come from Amazon, and all communication is done through the big company. This has a significant impact on your overall brand presence. In addition, this can hinder your efforts to grow independently over time. You are literally relying on Amazon to build your audience.
Dependence on Amazon
Yes, Amazon is similar to the mafia. Once you're in, you rarely get out again, since the entire Amazon business model preferred over your own brand. Therefore, you'll be completely dependent on their traffic. Moreover, once you use the convenient logistics centers, you won't have to worry about controlling your inventories, a solid marketing plan based on your stocks, sales and shipping schedules.
Not to mention that while Amazon allows for easy international expansion, it limits you to the geographic areas to which it ships. For example, if you want to sell products in Eastern Europe, Asia, the Middle East, or Africa, you'll need to check Amazon's logistics center locations to determine if your products can be shipped to specific countries and at what cost.
Lack of control over the customer experience
The worst part is that you have no control over the customer experience. Bad reviews can occur because of a rude customer service representative, damaged packages, or unfriendly suppliers. If you have access to your customers and build a relationship with them, you can mitigate these devastating effects. However, if you are completely dependent on Amazon, you can only hope that Amazon will resolve the issues in your favor. In most cases, however, bad reviews will be associated with your product, resulting in a negative overall rating.
Limited access to customer data
Your dependence on Amazon doesn't just affect products. While it's convenient not to be responsible for managing personal customer data, it limits your ability to make informed decisions about your marketing strategy and product development. This can make it harder to move forward on your own, since you lose your audience as soon as you leave Amazon. You would effectively have to start from scratch.
Another significant disadvantage of Amazon is that your business can be copied. Of course, this is a problem all over the Internet. However, Amazon also allows people to create low-cost imitations to target your customers and offer similar products at a lower price. Because of Amazon's restrictions on your branding, you can't effectively spread your message and make it clear that using alternatives won't get the same results as your offering. As a result, many of your customers will continue to be disappointed.
Lack of brand identity
The lack of a clear brand identity is undoubtedly one of Amazon's most serious drawbacks. A strong brand identity opens up numerous opportunities, builds trust with customers, and converts ordinary shoppers into loyal followers. An expressive brand identity is also critical to growing your business. However, with Amazon, growth opportunities are limited, and you can never expand beyond this point, as others will quickly take over some of the business.
Regardless of these drawbacks, millions of retailers have chosen Amazon for good reasons. So your choice depends primarily on your ambitions.
Is it worth investing in your own website now?
As is so often the case, the answer to this question is, "It depends on a number of factors." In fact, both using Amazon and building your own website have their specific advantages and disadvantages.
If you're looking for quick and comparatively straightforward retail profits, Amazon may be just what you're looking for. In addition, Amazon is great for selling small, frequently requested products, especially those that don't require a strong brand identity.
However, if you offer unique, high-value or relatively expensive products, investing in your own website offers far more potential for long-term growth. Your decision will depend heavily on your long-term vision. Owning your own website will bring significant benefits over time, but it will be more challenging to develop and get up and running initially. So if you're working towards long-term success and want to build a brand that's more than just a retail store, but a name in the world of e-commerce, having your own website is essential.