Many of our customers use import goods to sell on marketplaces like Amazon as their main income stream. We understand why; it’s simple, you don’t need to worry about marketing and you have instant access to the marketplace’s massive consumer base.
However, in the long term, is this smart? Is selling goods through a single marketplace (such as: Etsy, Ebay, Amazon, etc) a viable business option? Is it maintainable?
The answer, to be blunt, is probably not.
When you rely on a platform, that platform owns you and your business. It owns your success. If Amazon decides to change one of their policies, or a customer wrongfully files a case against you and your business is restricted or cut off . . . That’s your business struck out if you don’t have a back-up plan.
Some of the best advice you can use when selling online is to diversify your income streams and not to rely on one – so, if something does happen to render that stream unusable, you aren’t left stranded.
Why relying on any marketplace is a bad idea for your business
It’s important to note: we aren’t saying don’t use marketplaces. Marketplaces are great – they’re a brilliant way to gain business and kick off the ground without needing to take to much time to set up. What we are saying is that solely depending on a marketplace is not a good idea.
Let’s look at some of the reasons that solely relying on a marketplace is not a good idea.
Stunts your growth
When you’re reliant on a marketplace platform, you don’t need to put in all that hard work to grow and maintain a separate website – so most people won’t. However, all this means is that you:
A. Don’t develop a brand. This is bad for multiple reasons; the main one being that without a brand . . . to your customers, at least, you don’t have a business. In their mind, they didn’t buy that really cool USB stick from Calvin’sComicCreations – they bought it off Ebay. So, while you do make a sale, you often lose the chance to gain a loyal customer.
B. Have nothing to fall back on. In a way, this leads on from the previous point. Once you’ve left a marketplace . . . there’s nothing left. After your years of hard work, your brand name will in all likelihood still be unknown; you won’t have a loyal herd of customers and fans; if you want to continue in the e-commerce business, in all likelihood you’ll need to start from the bottom again.
Neither of these are good options.
Algorithm changes and updates
Marketplaces belong to someone else. They are businesses – and businesses (well, the good ones, at least) are constantly changing. These changes can be incremental to the marketplace, but absolutely devastating to your business.
The devil owns your soul
Well, not literally – but you have to play by someone else’s rules and if you leave them . . . well, where will you be then?
Profit margins aren’t as high
This is a situation that you’d have to work out for yourself, but are the benefits of the marketplace you’re on out-weighing the fees you’re paying to be on there? Often, the profit margin increases substantially if you remove the marketplace fees.
Your entire business is dependant on someone else
When you say it like that, it sounds unreliable – your entire business is dependant on a third party who has no reason to care about it. A third party who, to be honest, is going to want to earn more money for themselves and further grow their business.
Each marketplace is different, however. We’re going to look at a few different marketplaces and identify their risks.
Why Amazon shouldn’t be your only income channel
They turn your customers into their customers
Any marketer ever will scream the importance of email marketing to anyone who will listen.
You’ll be hurrying past, trying to mind your own business, when they appear.
At first glance, they look smart – polished. But as they get closer, you realise their suits are worn and dirty; their hair is ravaged and wild from where they’ve grabbed fistfuls of it in agitation . . .
Rabid eyes settle on you. The much-feared marketers start to hobble in your direction, getting closer, desperation in their frantic movements. Suddenly, their fevered excitement reaches a peak and, just as you prepare to run, they start barking email marketing facts:
E-mail marketing is the secret weapon for customer retention – and an essential part of driving sales for your business forward. If you asked pretty much any marketer to make a choice between e-mail marketing and their thumb . . . well, thumb-wars would be a thing of the past.
But guess what you don’t have access to when selling via Amazon?
Your customer’s emails. Amazon has access to them; Amazon sends targeted e-mail marketing campaigns and earns using them. Because, when you sell on Amazon, your customers aren’t your customers. They’re Amazon’s – and, although this is merely one example of how, there is a big difference.
This has actually happened many times.
At any time, Amazon can decide to implement a new policy that cuts your business off at the knees. Not too long ago, sellers could give customers incentives for reviews – discounts and free items in exchange for a review on Amazon – which a lot of businesses used to promote their products and kick-off an effective launch.
However, this approach no longer works. Why?
Amazon doesn’t allow it any more.
Many businesses were hit hard; for some, incentivised reviews were their main marketing effort. Policy changes like this can come into effect whenever Amazon decide to implement them and sweep the rug out from underneath your business’s feet.
Your business is subject to their whims; they can close you down whenever they feel like it
Expanding on our previous point, Amazon have complete control over your business – and, if they choose to close it down, you have to take it.
There are horror stories where businesses receive unfair feedback from a customer, yet still get closed down.
You have much less control over your business
At the end of the day, your business is yours. You want control and you want freedom. You want to be able to implement your ideas – and you can. Just not while your main source of income is through the Amazon marketplace.
Eats into your profit
Selling on Amazon comes with a bucket-load of fees.
In many ways, these fees are understandable – essentially Amazon is your marketing and, with such a massive built in customer base, it’s incredibly effective. However, these fees bite into your profit massively. Your profit margin once you sell on other platforms is much higher – so, once you get going, you have the potential to earn a lot more.
Why Ebay shouldn’t be your sole income
Ebay favours customers in disputes
This doesn’t necessarily sound like a bad thing – you aren’t planning to screw over your customers, so what’s the issue? Well, just because you aren’t out to get your customers doesn’t mean that they aren’t out to get you. There are have been many cases of ridiculous situations in which a customer can simply say “I didn’t receive my package” and get a full refund.
In fact, one of our customers used to host a majority of his business on Ebay and got burned.
“I had a huge setback with eBay. Which was 90% of my sales. As a result, the business lost about £20k of sales and a profit hit of multiple thousands!” – Panda eBikes
Ebay charges selling fees
How can you diversify your income streams?
Invest in your own e-commerce site
If you invest in your own e-commerce site, then it’s yours. It belongs to your business, you control it and you can implement any changes or ideas that you’d like.
Utilise various marketplaces
You don’t have to stick to one marketplace! Selling across multiple platforms not only means you have multiple sources of income; it means that you’re reaching an even bigger audience.
Although selling on marketplaces like Amazon comes with a legion of advantages and provides many benefits to your business, it’s worth diversifying your business’s methods just to ensure that your income remains reliable and secure. In the worst case scenario that something does happen to make the platform less suited to your business, having backup plans in place will be a literal life-saver.
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