As online marketplaces like Amazon have become increasingly popular among shoppers, they’ve also been criticized for putting smaller retailers out of business. After all, it’s hard to beat free, fast shipping, low prices, and a huge selection of products. But it turns out businesses don’t have to beat online marketplaces like Amazon, eBay, or Jet. They can simply join them and reap the rewards. And that’s exactly what millions of businesses–including Nike and Sears–have started doing. So, what happened when NetElixir sent a survey to about 500 owners of small to medium-sized businesses that sell products on sites like Amazon? It turns out the overall feeling is that Amazon is a boon for most business owners who sell online. Here are the specifics of what NetElixir presented in its webinar, entitled Amazon for Small Business: Friend or Foe?
Amazon vs the Company Website
When NetElixir’s survey asked business owners what kind of success they have had with Amazon, eBay, and Jet, the main response was encouraging. About 60 percent said over half of their online sales took place on these three virtual marketplaces.
Out of 60 percent who have had success on these sites, about 27 percent said the number of their sales that come from such marketplaces is about even with the number of sales from their own website. Furthermore, about 21 percent said approximately 75 percent of their online sales come from Amazon, eBay, or Jet. And about 12 percent said all their sales come from these sites.
The Pros and Cons of Selling on Amazon
When asked what the main benefits of selling on Amazon are, business owners had the following responses:
- Increased sales potential – 52 percent
- Increased brand exposure – 33 percent
- Solid infrastructure – 11 percent
Maybe the reason many business owners don’t mind Amazon’s success is they’re making more money and getting more brand recognition along the way, so it’s hard to complain. And some business owners just don’t want to reinvent the wheel when it comes to selling online, so they’re happy to use Amazon’s existing setup to sell their products, at least until they get their own website up and running.
Granted, there are some disadvantages of selling on Amazon, with the following being the top three:
- Lower margins – 45 percent
- Not owning the end customer – 29 percent
- Commoditization of brand – 10 percent
Paid Ads on Online Marketplaces
According to NetElixir’s research for its webinar, most business owners have not found success with paid ads on Amazon. More specifically, less than 30 percent of those who were surveyed said they have run paid ads there. And of those business owners, 40 percent said their paid ad campaigns on Amazon have not been effective.
When NetElixir asked them why that is, these were the top responses:
- Lack of paid ad knowledge – 24 percent
- Lack of budget – 24 percent
- Not the right channel for my business – 21 percent
Apparently, most business owners’ success on Amazon doesn’t extend to the paid ads feature! But perhaps it could if they increased their budget and knowledge of paid ads.
Another finding in this webinar involved increased interest in paid search. It seems that no matter how much success some sellers have had on Amazon, Jet, and eBay, they still hope to improve their own website so they have a better chance of being found and selling products from there.
After all, about 60 percent of business owners said their biggest challenge is acquiring new customers. For now, online marketplaces make that a little easier, but becoming adept at paid search will help, too.
According to NetElixir, when you get better at paid search and invest in your own website to sell, you can create a unique customer experience, improve the journey to purchase, enhance brand image, and use analytics to tweak your marketing efforts.
But acquiring new customers is just one of the challenges business owners told NetElixir about. In addition, 18 percent said a big challenge is retaining customers, and 15 percent have trouble converting customers.
So how do these business owners plan to fix these issues? Focusing their budget on certain areas is a start. Business owners told NetElixir they plan to invest in the following in the next five years:
- Paid search (online ads) – 27 percent
- Amazon – 25 percent
- User experience on company website – 23 percent
- SEO – 15 percent
In its webinar, NetElixir noted the companies most likely to succeed on Amazon and similar online marketplaces tend to have low overhead to offset the lower margins. They also learn to embrace Amazon’s programs, such as Prime.
To see these stats for yourself, register with NetElixir to download Amazon for Small Business: Friend or Foe? And if you sell products through online marketplaces, do you agree with the business owners who answered this survey, or do you have anything to add? Let us know!
This article was first published on The Marketing Scope.