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E-commerce does not = Amazon

Sorry, we’re late…blame the electricity board for the power outage! Better late than never, so here are my Friday thoughts. E-commerce does not = Amazon. It is frustrating to me how so many ‘experts’ preach that Amazon is the be-all and end-all if you want to succeed in the US, or anywhere for that matter. They preach this narrative because of the Amazon FBA Gold Rush. It’s easy, right? You “don’t need a warehouse or expertise”, “it’s totally hands off”, and all those ‘bros’ telling you how to be an FBA millionaire (it’s not his Lamborghini btw…you know that right?) And because it’s easy pickings, it’s become the Wild West of the industry and subsequently the easiest place to target. It is unfathomably tedious to see new Amazon ‘agencies’ popping up every week who literally do not know the first thing about eCommerce. What most are actually doing, is counting on your lack of industry knowledge and exploiting that for as long as they can ride that train. There absolutely is a place for Amazon in your eCommerce strategy, I am not anti-amazon, but only as part of a wider approach. For most of us, the marketplace is overcrowded, unprofitable and insanely difficult to manage. Fact. As a standalone business, I seldom see Amazon work for anyone without an enormous ad budget and the cash to let it lose significant amounts of money for a sustained period of time whilst building velocity, reviews and placement. And if you’re selling big things and it’s your sole platform, oh boy…it’s going to be a painful journey of discovery! I know because I’ve done it, very publicly. It is catastrophic for many, and deflating for more, but here is the great news; Only 37% of eCommerce business is actually done on Amazon. That leaves 63% of the eCommerce market up for grabs! Why focus all of your efforts on Amazon then? What gives? If you follow the 3700 new sellers joining Amazon every day from the comfort of mom and dad’s spare room, what might happen?

You may end up in a red sea of competitive lunacy…(or you might strike Gold, and if you do/did I’m delighted for you) So what could you do? You could build a simple yet effective multichannel business, albeit requiring some actual hard work. What might then happen? We might make a meaningful profit, compete much less against overseas manufacturers for shelf space, and build a serious brand. You should utilise Amazon as part of your strategy, but on your own terms, not theirs, and best of all you could do all that and keep exponentially more of the profits…and I do mean exponentially. One of our longest-standing partners in the furniture category enjoys a 75% gross margin, and a 40% retained net profit on US sales (yes retained)…and they don’t use Amazon at all! Can you imagine! They were ready to fold a $15 US operation before I met the owner at High Point some years ago and convinced him to try our framework. We identify other niche-specific channels, gear our fulfilment up to service those, and build a more resilient business. It isn’t difficult, yet all I still hear about day in, day out is 'Amazon'. Can we not be any more original? There are channels that we and our partners sell on that major brands have not even heard of. As an example, we recently partnered with a $100m revenue brand, and they literally hadn’t even considered 2 of the strongest channels we operate on. We identified quickly that they could be leaving $10M+ on the table from these alone…they were flabbergasted! But you don’t know what you don’t know. Here are some things you can do to start dealing with this:

  • Find a great 3PL to escape the FBA trap and take control of logistics

  • Find the ‘next best fit’ channels in your sector

  • Make a quality pitch/application to sell with, or, to them

  • Get your pricing matrix right so everyone can play (NB/ tricky!)

  • Avoid cross-channel cannibalisation using creative positioning

  • Build a real brand in the US!

Simple. Of course, there is a whole lot more to all of this and plenty to go wrong if not done properly…but doable nonetheless. Jonny


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