Many small to midsize businesses see at least half or more of e-commerce sales come from selling on Amazon or other online marketplaces. Retail search marketing company NetElixir surveyed more than 500 SMB owners and managers that sell products on Amazon and discovered the giant marketplace has a big impact on SMBs, in ways that make it both a friend and a foe.
In fact, 60.2% of those surveyed are seeing 50% or more of their sales going to marketplaces and 26.6% of retailers are seeing a split of 50% to marketplaces and 50% on their own websites. Just 22.7% are getting about 75% of sales from their own branded sites and 21.3% are experiencing 75% on other marketplaces.
For the SMBs that reported 100% of sales from one of these two channels, 12.3% of those sales are through marketplaces, and 8.3% are on their own sites.
“Having worked closely with retailers for over 10 years, we have always known that Amazon is a strong e-commerce contender that can both help and hurt retailers,” said Udayan Bose, CEO of NetElixir. “It seems that 2017 is the year that this understanding became mainstream, and as a search marketing agency specializing in retail, we felt it was important to have a way to quantify small and midsize retailers' experience with the e-commerce giant.”
Why are so many SMBs choosing to sell on Amazon? More than half cited increased sales volume as the greatest benefit, 32.6% said increased brand exposure, and 11.3% noted solid infrastructure.
But selling on Amazon has its downsides. Almost half, 45%, said it was lower margins, 29% said it was not owning the end customer, 9.5% noted commoditization of their brand and 8.2% said lack of access to data.
Although selling on Amazon may have its benefits, advertising may not, as 60% said their biggest challenge was acquiring new customers. About 68% of those surveyed are not running ads on Amazon and of those that are, 40% said the ads are not effective.
"The love/hate relationship that SMBs have with Amazon is interesting," Bose told FierceRetail. "Also, while understandably 45% of sellers said low margin while selling on Amazon was the key problem, only 8% said lack of access to data was an issue. We find this inability of small retailers to adequately value their customer data to be surprising."
Looking toward the future, Bose believes that since the increased sales potential offered by Amazon is valued the most by retailers, SMBs will keep shifting from selling on their own websites to selling on Amazon.
"This will—it already has for some—create a high level of 'dependence on Amazon.' After some time, if Amazon decided to increase their margins, SMBs will struggle to stay afloat," Bose added.