Selling on Amazon vs your own site: Which is Better for Your Business?
You have streamlined your supply chain, and inventory is in your warehouse. At this moment, you have some stuff that you want to sell online and make money. All that you want now is a perfect place to sell online. Hence, the big question, where should you sell?
For so many good reasons, it looks like a decent idea to sign up on Amazon as a seller, upload your products, and start selling on the go. However, would it be the right decision? Did you consider options other than selling through Amazon or any other marketplace? You also have the option to create an online store and sell from there, so why wouldn’t you consider it?
The question – should I sell on Amazon or my own website – is the biggest dilemma of the decade for entrepreneurs. After all, who wouldn’t want a more profitable option?
In fact, not just Amazon, but there are few other online marketplaces too, which have acquired great names among customers and merchants. Names like eBay, Etsy, and Alibaba need not any introduction. Amazon is the most diverse marketplace. With a customer base for almost every kind of product, it attracts most of the attention from the customer’s and merchant’s perspective. Moreover, Amazon has the biggest network of B2B services and offers an incomparable infrastructure that saves merchants from the need of setting up an online marketplace and managing it individually.
Here, we will take Amazon as a representative of the online marketplace community and compare the pros and cons of selling on Amazon vs selling on your own site. This is a detailed guide to help you make an informed decision and analyze your individual goals to find out if selling through Amazon is in your interest, or should you just create an online store of your own.
1. Selling on a Marketplace
If your first thought is selling through Amazon, you must understand the fundamentals of the marketplace model of eCommerce. A marketplace is a third-party platform where they allow multiple sellers to set up their storefronts and sell to the customers visiting them. In return, the marketplace takes a cut(s) from every sale the sellers make via their platform.
Consider an online marketplace as a brick and mortar shopping mall. The shopping mall is the platform where different sellers rent a space to set up their individual storefronts. In return, they pay rent to the mall owner. The best thing about selling in a shopping mall is customers know about it already, so sellers need not care about calling customers to the mall, as it takes care of all the advertisements and promotions. Neither do the sellers have to worry about the maintenance of the mall.
Exactly in the same way, when you create your storefront on Amazon-
• You need not invest in the development of your website • Amazon takes care of its website security and payment security • You need not worry about the maintenance of Amazon’s website • You get access to an already developed infrastructure of B2B services
Nonetheless, it looks like a profitable decision to start your online business on Amazon and encash the loyal customer base of the massive brand for your good. However, like every other coin, this too has another side. Let’s analyze the pros and cons of starting an online store on a marketplace to uncover the secret catch:
1.1 Pros of selling on a marketplace
Here are some more pros of selling through Amazon or other marketplaces:
1.1.1 Prepare to sell at the lowest investment
Since setting up a storefront on a marketplace saves you from numerous hassles of running your own website, you can save the cost that could incur in developing your own infrastructure. You are not even responsible for maintaining the website. In short, you can run an online business without hiring a team of developers and IT experts, which is a mandatory investment when you create an online store of your own. If you have your supplies, you can access the website and other existing infrastructures of the marketplace to start selling on the go.
1.1.2 Encash on the trust of your marketplace
Like a shopping mall, people already know about the popular marketplaces, and their customers have this trust in the brand. Moreover, platforms like Amazon have already done a lot to instill trust factors among their customers while setting up an online marketplace. The sellers inherit the reputation of the marketplace by default. Hence, you need not worry about getting people to trust the site or driving traffic to it; the marketplace takes care of it. Instead, you can encash the trust and focus your efforts on attracting the customers once they enter the website.
1.1.3 Enjoy the privileges of SEO
One of the best things about selling on a third-party website is you need not worry about SEO at all. The marketplaces like Amazon, Etsy, eBay, and Alibaba already possess well-established SEO. They have teams who take care of SEO for the website. Their listings get an instant reputation among the search engines due to the inherited pedigree of the brand. It’s one of the best pros of selling on amazon vs your own site, as an individual online store can hardly expect that kind of authority in the SERPs, especially when your website is still new to the public and the search engines.
I would like to give an interesting example from Amazon to explain how the platform manages to enhance both SEO and user-experience through a simple strategy:
When you upload a product on Amazon from your seller dashboard, it does not create a new URL unless you are adding a unique product. Instead, Amazon asks you to list your product under an existing catalog. Let’s take iPhone 11 pro for instance. The website already has a product page for iPhone 11 pro. Hence, if you too want to sell the same model, you have to post it under the existing list. That means the URL of the product page remains unchanged, and so do the SEO authority. If the particular page was ranking already, it will keep on ranking, irrespective of a new seller uploading the same product just a few seconds ago.
1.1.4 No worrying about policy pages
1.2 Cons of selling on a marketplace
With so many benefits of selling on a marketplace, you have to deal with some downsides as well. Interestingly, a majority of the benefits turn into eventual cons. While they might not bother many of the sellers, most of them face serious consequences depending on their long-term business goals:
1.2.1 Prepare for the selling fee
While selling through Amazon or any other marketplace, you get some revenue. However, in reality, you are not getting any revenue but sharing it with the marketplace in return to some privileges, which you can acquire easily with one-time investments. You would be paying commission for every sale you make on the site. Not to mention that selling fee is not the only expense.
Amazon, for instance, runs a premium merchant plan with a monthly subscription fee. This is in addition to the per-sale commission. Besides, there are additional fees for a featured listing, sponsored listing, and other special mentions. You might think that you need not subscribe to the premium plan or any special listing, but eventually, you will become lost on the massive website among so many sellers who are paying Amazon to get better visibility.
1.2.2 The competition is fierce
There have been cases in the past when merchants have complained and sued marketplaces for deliberately suppressing their visibility and forcing merchants to pay extra to regain the same. Marketplaces have also found to be putting merchants and brands into loss by controlling the prices of products and deliberately forcing sellers to sell at low rates.
All this is a result of harsh competition in the marketplace. If you think that you would get a fair chance to compete with other sellers, know that it’s not about the sellers alone. Besides the competition from the sellers, you would also be competing with the marketplace itself. You know that Amazon has been launching its own products in almost every segment. Do you think that it would let you steal its sales? Amazon has thought about it thoroughly while setting up an online marketplace.
As a mere seller on a third-party site, you can’t up-sell, cross-sell, re-sell, or promote yourself. What started as a way to give small merchants a way to join the eCommerce market is now the one killing them. At some point in the past, marketplaces might have cared about their sellers, but now, they care about themselves. As a giant, sellers are just some replaceable spare parts to them. Just check the number of other sellers in the list on any product page of a marketplace site, dozens of sellers are ready to take your spot in the “Buy Box” if you don’t want to cooperate with the marketplace. Marketplace selling is no more about seller-to-seller competition.
1.2.3 No branding and customer acquisition
At first, it feels like marketplaces give you access to their existing, massive customer base, but in the actual scenario, you are just a testing ground for them. We saw how marketplaces are investing in consumer products and competing directly with the sellers on their sites. We call it a platform strategy, where companies open-source their less-confident resources to other businesses so that they can test them.
Take a particular product category on a marketplace for instance. When they are not sure if the particular segment is profitable, they open source the category for third-party sellers. Most of the time, the marketplaces don’t even have any idea about a viable segment, they just track the performance, as merchants experiment, fail, and succeed. Once the marketplace is confident that yes, the product is profitable, they invest directly into the same and start selling under their own brand.
As a seller, if you have been thinking that you are making money from a successful product idea, know that someday, you are going to compete with the marketplace itself for it. You won’t be able to do anything about it, since customers don’t know you, but they know the marketplace. The same URL, which featured your product until now, will feature a product from the marketplace.
You don’t have your brand identity, you don’t have customer data, and your customers don’t know you but the marketplace as a brand. You would be just making a sale for the site and get some money for it. You can’t expect yourself to turn into some eCommerce empire someday in the future. You have to decide if your goal as a merchant is getting a transaction, or acquire and retain a customer. Because selling on a third party site will give you a mere transaction but not a customer.
2 Selling on your own online store
Selling on your own website is entirely a different phenomenon. You get to list your products exclusively and you can control your website management, business process, and brand identity. For good or bad, you are responsible for everything that you want to do with your business, and thus, you can be your own in charge. However, there are certain pros and cons of starting an online store either.
2.1 Pros of selling on an online store
Here are the biggest pros of selling on your own website rather than depending on a third party to make things easier for you:
2.1.1 More control, more authority
It’s something that you don’t get while selling on a third-party site. There is no doubt that marketplaces make online commerce easy and less expensive for you, but comfort is not the thing you should seek if you are building an eCommerce empire. In your drive to set up a successful eCommerce business, you need absolute control over it. Since the online store is your primary point of contact with the target audience, you would want to control it without any limitation. That’s where building your own website is a good idea:
• You can select the technology of your website • You can choose the developers for your website • You can decide the unique features you want • You can explore new business opportunities • You can experiment with new revenue models • You can choose your B2B services, like payment gateways • You can choose your website hosting partner
Did you know that marketplaces reserve the right to suspend or block your seller account whenever they want? After reading the previous section, I think you now know that depending on anyone to run your business is not a good idea.
If you want to become the real owner of your business, you need your own website you can control. You must know that when you sell to a customer on Amazon or eBay, you don’t own that customer. The marketplace owns the customer. You can change this by selling from your own site.
2.1.2 You have access to better customer insights
Rather than depending on the marketplace to send customers to your store, you can become your own master and launch marketing campaigns under your brand identity to acquire customers. The sales you acquire under your brand identity on your website are not mere transactions but the beginning of a new customer relationship, which you can nourish to establish long-term relationships. You can integrate different analytics tools on your website to uncover your customer traits, which you can use to design highly targeted, well-informed, micro-focused marketing campaigns. Using the user stats, you can design your product pages, descriptions, navigation, and website layout to enhance the user experience and boost your sales.
This is something you can’t do when you are selling on a marketplace. You are limited by marketplace policies, no access to customer insights, and over-dependence on the marketplace to drive customers. This addiction actually hampers your abilities to establish a long-term sustainable business. When you want to build a long-term sustainable business, you don’t need mere sales but customers.
2.1.3 It is a futuristic approach
Setting up your own online store is the first step towards a stable eCommerce empire. In the end, you wouldn’t want to live at the mercy of the marketplace. Would you want to lose all your customers at once after the marketplace bans your seller account, or when you can’t afford to pay to the marketplace?
There is no doubt that you need a significant amount of capital, time, and effort to create an online store, but it’s a one-time investment to proceed towards a more independent future. Your online store might seem like an expensive investment at once, but it’s nothing compared to the lifetime revenue sharing with a marketplace. It’s obvious that you will secure a greater share of profits when you are not sharing your revenue with an intermediary.
2.1.4 Flexibility in marketing
Since marketplaces hold themselves responsible for website maintenance, security, SEO, and promotion, it’s obvious that they wouldn’t allow any third-party seller to tweak with the website. Although their income depends on the income from the sellers, they can’t risk sellers stealing away their customers. That’s why, marketplaces out harsh limitations on the brand identity and promotion of the individual sellers. That’s a huge difference between selling on amazon vs your own site. Your site gives you the obsolete control over tools and marketing channels you can use to promote your business:
• You can collect email data and launch email campaigns. • You can earn push subscribers and trigger push notifications • You can create your social media presence
In short, you get absolute flexibility to experiment with different marketing tactics and do whatever it takes to boost your sales and brand identity.
2.2 Cons of selling on an online store
I don’t call these as cons but more like challenges of selling on your online store. If you think you can deal with them for a greater benefit, you can become the master of your eCommerce empire.
2.2.1 The setup costs
The upfront cost that incurs while developing your eCommerce website is the biggest challenge. Many merchants with a great catalog prefer to sell on marketplaces because of the investment they need to create an online store. Moreover, the cost of managing a technical team to maintain the website is also a factor.
Although there are solutions like Genstore, Shopify, Magento, PrestaShop, WooCommerce, and BigCommerce to build eCommerce stores at affordable cost, merchants still find it easier to pay commission to a marketplace site than paying upfront for website builders. Especially, the merchants who work alone find B2B support from Amazon FBA and others more practical.
2.2.2 Invest time forming marketing strategies
When you are creating a new website, you also need time to research, find developers, form marketing strategies, device SEO tactics, and setup launch campaigns. It seems like a lot of tasks for merchants with less on no experience. However, it’s not much as there are B2B services who can help you with that. For example, eCommerce SEO and Marketing agencies. In fact, with a little research, you can become capable enough to formulate 90% of the marketing strategies.
2.2.3 Tie-up with payment gateways and other B2B services
An eCommerce store does not function on its own. It also needs various B2B services and third-party APIs to function as a whole. One such API is for payment gateways. However, you can’t just pick any random payment gateway for your website. It requires some research on the fronts like-
• Payment security • Transaction fee • Supported methods • Supported processors
When you sell on a marketplace, you don’t have to care about all these, as the marketplace takes care of the payment services.
So, what’s best for your business?
It’s a simple decision to choose between selling on amazon vs your own site, and you can make it by comparing two simple aspects of your venture.
Let’s say, you are selling handicrafts on Etsy, and you get decent 2-3 sales daily. If you can live with the marketplace limitations, low margins, and lost brand recognition while enjoying the ease of business via the marketplace infrastructure, you should stay on Etsy.
However, you must think if there is a possibility to boost your sales from 2-3 to 10-20 by any means. Ask yourself if you want to remain a merchant or a unique brand identity that could help you to set up an independent empire of handicrafts in the long run. If the answer is yes, and that’s what you want to do, that’s where you should go for your own website and your own experience.
Yet, that’s not what everyone wants to do. Some people just love making handicrafts and sell them on Etsy as a hobby. If you are a hobby seller and don’t want to build a serious eCommerce business, you should continue with your marketplace account.
Alternatively, you can also adopt a hybrid approach, and I think it’s the best. Setup an online store, run it on a full-fledge independently, but also set up an Amazon account (any marketplace) for extra exposure. It’s a fact that selling on the marketplace will give you extra exposure that you can’t expect on a newly launched website. You don’t have to give up on your marketplace strategy to start an online store of your own.
In fact, Amazon, eBay, and Etsy allow merchants to synchronize their website listings on Amazon product listings with mere API integration. With simple API integration, you can sell on both Amazon and your own store at the same time, right from your own dashboard. You don’t even have to manage them separately.
Hence, analyze the pros and cons of selling on Amazon or marketplaces vs the same for your own website. I am certain that you will come to a balanced conclusion. All the best.