What is the potential for smaller ecommerce merchants?

With the growing dominance of Amazon and Ebay for regular consumer products, what future is there for the smaller ecommerce enterprise?

Amazon and Ebay both highlight price. Many shoppers on these sites don’t care who the real supplier is, as they rely on the platforms to make sure that the provider is reputable. This is particularly true of Amazon. Really many Amazon shoppers do not even understand they are purchasing from a third party.

Moreover, there’s the growing tendency for both manufacturers and authorized distributors to market directly on Amazon and prevent the retailer completely. Few retailers can compete on price alone against the maker. Indeed, with such big platforms, why should the producers care for retailers? They could make better margins by selling direct.

If rival retailers stop selling, producers can stop competing on price and improve margins even further.

Manufacturers: direct or wholesale?

Recently, manufacturers and vendors have begun moving into two different camps. Some want to keep on selling through brick-and-mortar shops, and therefore keep prices at a specific level. Others seek greater profit by selling straight on Amazon.

In the E.U., producers that seek sensible prices aren’t aided by legislation which strictly prohibits price fixing and minimum pricing. So they tend to ask their product not sell on Amazon or Ebay.

Smaller retailers can compete on intangibles, like customer service, packaging, and delivery. They can provide a more personal service. The issue is that the majority of Amazon and Ebay shoppers don’t choose providers on such factors.

So what could be done?

Avoiding lower-value products

The first thing is to recognize the trend. Identify those providers who sell direct and undercut your prices. If you’re an ecommerce-only business, there’s not much point in stocking these providers’ products. If they won’t support you, then stop giving them your business.

My company is slowing going up market. We’re changing what we stock into more costly, collectible items. We will trade shows to get those providers that create the costly merchandise and that cater for the more discerning buyer.

To put it differently, we’re turning the question around. We would like to sell to customers who care about the provider, who need superior customer service, and that seek items which are carefully packaged, promptly dispatched, and properly scrutinized before they are marketed.

There’s absolutely no point doing so to the lower-value goods. Whilst a genuine collector may still need perfection for a $10 item, it’s not cost effective for us to attain. So we’ve moved to the $50 price point. We’ll leave the lower-value things to the box shifters and just stock items where we have enough margin to attain perfection.

Finding new providers

In our search, we’ve found some lovely new providers. Some completely prohibit sales on the likes of Amazon and Ebay. Others put restrictions (as far as they legally can) about selling on these platforms. We expect lower sales volume, but a much greater profit per sale.

Both Amazon and Ebay have noticed this movement by manufacturers. They don’t at all like the concept of items which can’t be sold in their platforms. They are slowly starting to wake up. They aren’t happy. They’ve begun to lobby governments. They’re playing the”we would like to improve competition” card in truth, they would like to spoil all contest.

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Amazon and Ebay have become bullies. They would like to control the marketplace. But they’re not geared up to provide excellent support for quality products. Amazon would say otherwise, the Purchase Box is won on a range of factors, not just price. In fact, however, price is the overriding element. The only other meaningful element is Fulfillment By Amazon, for products that utilize that service. But posting, packing, and speed are highly variable for goods on Fulfillment by Amazon.

Unless Amazon and Ebay get their way and force manufacturers and providers to prevent restricting retailers from selling them, I see a future where there’s room for the smaller, niche sites — sites that may create a relationship with a client and build loyalty. These websites can get to know their clients as individuals and provide outstanding service and superior merchandise.

This is the potential for the smaller ecommerce retailers. It’s something brick-and-mortar retailers have known for a long time: You must be a destination store. You can’t rely on passing trade and you can’t afford to have a store in a prime retail location.

So become unique. Be the best at what you sell. Leave Amazon and Ebay for the discerning masses.