When good etailers go bad

by Craig Hannebus. Twenty years ago, starting a shop was a little more challenging than it is today. You’d have to find store space in the right area at a good rental. You’d have to get a shopfitter in to rebuild the inside from scratch. Things like shelving and signage would be at the top of your list of priorities. You’d have to find someone, or a group of people, to help you manage the store while it’s open during the day (and only during the day).

After that, you’d have to find a way to tell the world about your newly opened store. Of course, all this is after you’ve found that one golden product that everybody wants. All-in-all, it was a costly, time-consuming, and generally difficult exercise.

But then in the year 2000, Amazon launched its Marketplace offering. Amazon Marketplace is an ecommerce platform that gives third-party sellers the ability to put their products alongside native Amazon products and gain access to Amazon’s audience. As of Q3 2019, third-party sellers account for over 50% of all of Amazon’s sales. It’s a perfect partnership. Sellers not only get access to a massive audience (300 million active users), but they also get access to an ecommerce platform with all the bells and whistles. Bricks-and-mortar? Forget about it! All you need is an idea and a supplier. It seems almost too good to be true. Maybe it is.

The trade-off is that Amazon gets your data, and they get to keep it. This is incredibly useful for Amazon. Data leads to insights, and insights will lead to a better service. It’s a small price to pay for a better platform, and at the end of the day you’re still turning a profit, right? In theory, you shouldn’t have anything to worry about. But let’s be honest, if this were a bricks-and-mortar store and your landlord kept popping in to look at the books, you might not be very comfortable with it.

Getting started on Amazon is easy enough. You find your supplier, you label your goods, and you register. It’s that simple. You’ve done your research, and your product is in demand. You start turning a profit right out of the gate. It’s all hunky-dory until suddenly your sales drop. You do some investigation and discover that Amazon is selling a similar product, but at less. It’s a nightmare that’s come true for many Amazon third-party sellers.

There are forums full of horror stories. Unfortunate merchants are complaining that their small enterprise was disadvantaged because of Amazon’s practices.

It’s a massive risk, and it’s difficult to mitigate. The obvious solution is to build your ecommerce store. You get to own your data, you get to control the look-and-feel, and you get to sleep at night with some peace-of-mind that you’re not at risk. But building your ecommerce store is a pricey exercise. Marketing your product and making sure that people can find you in the clutter of the web will also cost you.

The real solution is to have a scaling strategy. Yes, Amazon’s platform is great when you’re starting out. But what you should be doing is ensuring that you have a target. Should you reach it, you can safely say “people want my product”.

From there, you need to start investing in your platform and your marketing. It’s a little easier when you know that people are buying what you’re selling. You don’t necessarily have to leave Amazon behind. Still, if the day comes that you find your product is cloned, your brand is already established, and you have a backup sales plan. More importantly, you’ll start owning your data, which means the insights you get are there to help you scale up.

Locally, you’re likely to be much ‘safer’ on a platform like Takealot. It doesn’t change anything, though: a scaling strategy is always a good idea and owning your data is more important than you think.

Data is one of the most crucial yet undervalued resources in the 21st century. Your data is worth more than gold, and you should treat it as such.

Craig Hannabus is strategy director at Rogerwilco. He has spent 11 years in the digital marketing industry. During his career, he’s gained exposure as a community manager, content writer, developer, and UX strategist, before embracing a new role in business strategy. Craig has worked on blue-chip brands including the likes of Standard Bank, Nedbank, General Motors, Nestle, Reckitt Benckiser and Caxton, to name a few.

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