Diversifying Online Sales Channels

The low cost of getting to market with third party platforms such as Amazon can be attractive to companies due to the flexibility and opportunity for quick sales. For years, vendors around the world have taken advantage of what the Amazon platform offers them, with tools ranging from fulfillment and inventory management to payment methods and shipping logistics, making them more compelling to larger audiences than if they were trying to sell on their own.

The benefits of selling on third party platforms also come with some drawbacks that often do not align with the brand’s long-term ecommerce strategy. Brands should weigh each partnership carefully to be sure that the pros outweigh the cons. 

Since last June, lawmakers have been engaged in an antitrust investigation on how four of the richest and most powerful CEOs in technology have grown too big by stifling the competition. Lawmakers have collected many hours of testimony and have obtained over 1 million documents throughout their investigations into Amazon, Apple, Facebook, and Google. 

The news comes after Amazon’s CEO Jeff Bezos was questioned last week before a US House antitrust subcommittee about his company's unfair practices against smaller sellers on its platform. He appeared along with the CEOs of Apple, Facebook and Google, who also are being questioned about their business practices. They will testify before Congress this week to defend their powerful businesses from the government.

While being questioned last week, Bezos confirmed that the Buy Box algorithm favors products shipped with Prime and Amazon fulfillment services. Jeff Bezos also said Amazon ties the use of its fulfillment services to winning the Buy Box. Effectively, Amazon has compelled sellers to use Amazon’s fulfillment services to get the kind of placement on the site that actually results in sales. 

Lawmakers have argued that this practice undercuts small businesses that have no option but to sell their goods on Amazon’s online marketplace. In April, it was reported that Amazon employees also used data about its own sellers to create and launch competing Amazon products.

Brands selling on third party platforms are allowing access to their products and giving away some control over their brand, including their reputation for customer satisfaction. This tends to be a bigger issue for luxury brands that offer premium products at high price points or products with aesthetics that differentiate them in a crowded market. Brands who utilize Amazon may never be able to provide better experiences than companies who have greater control over their user journeys, such as direct to consumer online stores.

Companies need to consider a wide variety of channels to drive their online growth. Amazon may enable national and international expansion for brands but may not entirely support these strategies long-term. It’s important for companies to holistically think about their omnichannel ecommerce strategy. This includes direct-to-consumer online stores and social media sales, where appropriate.

Marketplaces such as Amazon may remain part of the selling strategy of many up-and-coming brands, but companies should still look to maximize their growth opportunities by having a diverse range of online channels. An over-reliance on one sales channel should be a long-term concern for any retailer, even if the sales numbers continue to grow. Brands need to objectively weigh these short-term benefits against their goals for long-term growth because, at the end of the day, Amazon is always going to look after Amazon first; they have no loyalty to any other brand.