I am wondering if anybody in the community has experience with Amazon.com's merchant programs, and whether or not they are a boon or a negative factor to a growing e-retail business. They have been aggressively reaching out to us over the past few months and I am unsure of which way to proceed with it.
As some background, I have a small-but-growing e-commerce business, running proprietary software, with annual sales well above $1M and accelerating. Our target industry is extremely diverse in the number of products (we are at 30,000+) which is likely why Amazon is interested in our catalog, if I had to guess.
The stories I recall hearing about Amazon's marketplace programs in the past seemed overwhelmingly negative, but that was a few years ago and I have not heard anything more recently. My main concern is that we would effectively be chopping our margin in half and then competing against ourselves, so to speak. It feels like revenue would spike in the short term, but at the expense of the long term health of the business.
Am I right? Or is it worth trying out? Any other pitfalls?
Selling on amazon, ebay will expose your business to customers you did not have. I have a friend who is in a similar situation this is what he does.
Items where he can be competitive on, and those with low returns he sells through amazon with fullfilment from amazon. This gets you amazon prime shoppers and more trust with buyers.
Items that face returns he usually sells through amazon but not through their fullfilment.
He uses amazon ads, (with careful tracking) to advertise items that are cross-sells, upsells.
My view of it is that if someone is shopping on amazon, they are a big brand shopper. Think of it as getting your clothing line into nordstrom or your toys into toys-r-us. Chances are that buy will only go to the main stores (amazon in this case) and never really consider your small site.
I say do it, but make sure you are careful to track your costs and profits.
Dont expect the same profit margin as selling direct, but expect to have your overall sales / profits increase.
If it doesnt work for a pre-determined budget, then keep tweaking or stop.
One other aspect to be aware of is the administrative overhead of dealing with their merchant program. They don't make it particularly easy.
Unless you have software that will programmatically take care of the integration, be prepared to acknowledge each order individually, and paste in tracking numbers upon shipment (unless you are using their Fulfillment Program). Also, if you are fulfilling the items yourself, you may be required to submit a spreadsheet to bill Amazon for each order sold. In my experience, this adds quite a few minutes to processing each order.
I wouldn't suggest that it's a deal killer, and you can avoid some of this depending on your setup, but it is something to consider.