There’s no question that as millennials become a larger segment of the workforce and enter the world of consumerism, there is less and less demand for brick and mortar stores. But, we’ll go a step further and say most consumers have already become digitally clients of buying products online.
This mega shift from brick-n-mortar to a B2C economy has every business from the smallest artisan to the largest manufactures eyeballing a distribution relationship with Amazon and/or eBay. But, there’s still a big question a lot of vendors and manufactures still ponder about taking the plunge: Is it really worth it to make the transition to an online store, or does moving to a big online marketplace put my business at jeopardy at all?
Well, the short answer is that all depends. Amazon Business has more than 400,000 customers, which is quite a lot of incentive to try and use the biggest marketplace in the world.1 In this segment we’ll discuss ways to try and keep your business safe and protected while selling online.
10 Tips for Protecting Your Business While Selling on an Online Marketplace
1. Research the competition
First of all, it doesn’t make sense to make the transition unless there’s an online demand for your products. Is your competition selling online? If you are not the only seller of, say, gizmo XYZ, then you might want to research how many competitors already lurk in the online marketplace you plan to hit. You can use tools like Amazon sales rank calculator to help you quantify the monthly sales volume of gizmo XYZ.
2. Be aware of the additional fees
Can your business handle the additional fees imposed by Amazon or eBay? How about the restrictions they impose? While it might appear that your sales could increase, you’ll need to perhaps do a trial period to figure out if the additional sales can account for the additional marketplace fees. You’ll have to factor in the cost or percentage of each sale that accounts for the fee, and then see if you can solidly hit your sales goals repeatedly. Are the margins still there to make it worth it?
3. Measure the impact on brand messaging
If your brand means a lot to you, then you might find that an online marketplace isn’t for you. Because these marketplaces really cut out brand messaging and focus right on the products. They can also decide to carry some products, but not others. So, your involvement will be confined to a certain degree. Additionally, there is also limited communication methods for speaking directly with customers about products. You’ll have to weigh whether the limited customer communication is the direction you want, or do you want hands-on interaction?
4. Measure the impact on customer loyalty
This loss or limited brand messaging also carries over to customer loyalty. Remember, the customers are Amazon customers first, and your customers secondly. And, since your products are shipped by Amazon, you’ll lose the ability to track customers and their purchase habits. Will you be content being the faceless product supplier/manufacturer, in return for greater financial gains because of Amazon or eBay’s huge customer base? You’ll have to weight that for yourself.
5. Access to unique features
One of the upsides to selling on Amazon is that they spend a reported $13 billion per year on research and development, and the customer experience to increase traffic and sales. Sellers who use Amazon Business also get to take advantage of unique features, like quantity discounting, client/business pricing, tax-exempt purchases, and procurement software for backend integration.
6. Can you deal with comparison shopping?
Let’s not forget that Amazon doesn’t play favorites either, they have built-in comparison shopping, which essentially pits sellers against each other. Are you confident enough in your product and pricing to go head-to-head yet?
7. Keep some inventory in-house
Let’s say your market segment becomes too saturated with so many products at cheaper prices on one of these marketplaces that it becomes a hindrance, sales being to slump, and it becomes a real bust. What about your branded website? Did you already close that down?
One bit of advice we have gotten from others is leave newcomers to the online marketplace, and you should hold back at least 20 percent of their inventory in-house. That way, should you need to flip the switch and go back to being fully autonomous, you can do it with relative ease. You should also consider dropshipping. You can use directories like SaleHoo to search for suppliers and wholesalers; is salehoo legit? Yes, but you should always do your own research before you use any services.
8. Manage product fulfillment
You’re still on the hook for a certain amount of product fulfillment with either Amazon (via its Fulfillment By Amazon – FBA – services) and eBay. In term of Amazon, you just need to get your product sent to their fulfillment centers in bulk, and they take it from there. You can check the fee for Amazon Fba from various sources, including Amazon FBA pricing guide. On eBay, since it’s more of an auction oriented marketplace, you are still on the hook for direct shipping and fulfillment to the customer, or else contracting that out to a third-party fulfillment center.
9. Get insured
“Perhaps the biggest area of concern from sellers on Amazon is whether they should get liability insurance, because there seems to be a lot of sue-happy buyers of products out there anymore,” said product liability attorney George McLaughlin. McLaughlin advises manufacturers to take every precaution necessary to make sure products are safe, have good instructions, and warnings. “When manufacturer’s cut corners on their products, it can result in serious injury or even death.”
10. Focus on the legal stuff
Do you manufacture one of the latest “Internet of things” devices that allows devices to talk to each other, such as cars, electronics, dishwashers, thermostats, lights, software, sensors, etc.? Just remember each product has its own terms, conditions, warranty, and liability. When devices and applications are updated, communication and cooperation are required to ensure that IoT devices continue to function properly. If an IoT-type device causes physical injury or damages, there’s a pretty good chance there’s going to be liability issues and personal injury attorneys involved, according to Dan Brown of Brown and Brown Attorneys at Law.
1“Pros and Cons of Selling on Amazon Business” published in PracticalEcommerc, June 2017.