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To Amazon Or Not To Amazon.

Posted by Sebastian Little on

I received a sales call from an undoubtedly enormous call center full of Amazonian sales people. A gentle speaking man identified himself as a representative of Amazon and said he wanted to inform me about some new programs for selling. Normally I don't let the sales calls get that far but the "Amazon Question" has been on my mind so I took this opportunity to hear him out.

Let me begin by telling you that I have an Amazon Prime membership primarily for media but I do occasionally order goods. I am not going to pretend to be holier than thou. While I appreciate the fast service and competitive prices I have a nagging feeling that every time I order something on Amazon a little piece of my soul slips into some dark abyss. I suspect that many of you feel the same way. It's not that I resent success, it's that there is something wholly icky about Amazon. They have my business but not my love or even my like... Just for comparison I will point out that Apple Computer has both my business and my love.

I Amazon despite myself...

Back to the sales call.  So Amazon has recently rolled out a B2B platform called Amazon For Business. The tag line is "It's where you shop for work." It promises to reduce the work of your business in a lot of ways and to increase your customer base. I am sure that these claims have some merit. Amazon can in fact do all of the fulfillment for business and retail sales - essentially I would be farming out all of the warehousing, packing and shipping to Amazon for a price. The salesman pointed out that Amazon is by far the biggest buyer of ad's on google search which I am sure is true. 

Changing from my independent business model to a more administrative model using Amazon for most of the nuts and bolts would put me into a large pool of other businesses which could work out well or it could be horrible. I am not naive & I know It's not a straight forward solution as they would like me to believe. The fact that there is a whole industry dedicated to increasing your relevance as an Amazon seller is a huge tip off that this is another version of the competitive world of SEO that I already play in.

I wanted to tell the salesman some of the things I don't like about Amazon from the POV of a seller - on or off of the Amazon platform. I told him about the violation of MAP (Minimum Advertised Price) which is big problem for countless companies, manufacturers and importers. From what I can tell (unscientifically) Amazon is probably the biggest source of below MAP sales on the web. There is practically no recourse. While it reduces prices which may sound great to the reader, it also has the potential to make e-commerce unsustainable for smaller independent businesses. 

This is how it works. A company has a product to sell and wishes to use other resellers to increase the sales. The company sells the product to the reseller at a wholesale discount with the stipulation that the reseller will not offer it in any advertised form below a certain price. This is done to protect the other resellers from having a bunch of stock that they can't sell unless they in fact sell at a loss (after costs). For some reason that I still have not worked out, some sellers will use Amazon's seller program to undersell the product using a different business name than they used to purchase the goods. All of a sudden there is a race to the bottom with the resellers vying to sell the products if even just to get rid of the inventory. Wouldn't it be simple for Amazon to refuse sales below manufacturer MAP's? But that would reduce the furious sales that appear to benefit nobody but Amazon themselves in the form of commissions that they take from each sale and even from the fulfillment fees if you go that way too. In order to make my point I used a real live example of a product - which I know the price from the manufacturer & the MAP and which is routinely sold at a loss or break even (which actually is a loss after you factor costs). 

In the screenshot below, note that the Amazon price is $10.00 under MAP ($48.00) with free shipping & please look at the bottom left corner where other sellers are offering the product 'new' from $18.00 below MAP - which puts the product at an effective loss after you factor cost to hold and seller fee's.

The salesman listened and then replied. Here is where he lost my respect utterly and completely. He actually had the audacity to suggest that the product was a "loss leader." For those of you who don't know, he means that product is one that is sold at a loss to get buyers in the door to buy other goods with nice healthy margins. The problem is that on Amazon and the web in general people don't shop that way. As a seller, you are bound to sell all of your loss leaders and get stuck with the rest. Incidentally I am not a fan of loss leader marketing in any format.

He asked me if there were any products that I could be competitive with on Amazon. I replied, "I could do that but why would I want to?" I have a good business with a loyal business customer base and a steady retail base. I do a good business and I actually enjoy most of the 'work' of my business, even the fulfillment. Arguably selling on Amazon would increase the number of transactions but it's all moot if those sales are "loss leaders" that drain my resources and simultaneously enrich the world's biggest retailer...

So in answer to the question in the title... No thanks...

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