Lessons from a mature Amazon market

Chloë Thomas

14th Dec 2016

Rumour has it that at some point in 2017 Amazon will launch a fuller offering in Australia, what that looks like we don’t know. Will it just be an expansion into further categories? Will they include a Marketplace and FBA offering?

Based on Amazon’s past behaviour in other countries you can be certain that:

• Notice will only be given if it’s in Amazon’s interest
• Roll out of programs and technology that is tried and tested in other markets will be big and fast
• They will change customer expectations of service levels for the whole e-commerce industry

In 2002, I got my first job in marketing, and Amazon launched their marketplace in the UK. I’ve spent the last 14 years working in a market where Amazon has had an increasing impact. Within one year of launching in the UK Amazon had already expanded into music as well as books, and the developments kept coming:

• 2002 the marketplace launched
• 2003 free shipping over £39
• 2009 free shipping drops to £0
• 2011 Checkout by Amazon launches (where you can use Amazon’s checkout on your own website)
• 2014 Sunday deliveries, and Prime instant video, and stacks of Kindle / Kindle Fire improvements as well as lots of Pickup Locations

I would bet that rollout will be a lot faster in Australia, given all that Amazon has already built, tested and optimised elsewhere.

My focus is always on the impact on the online-only or bricks-and-clicks retailer, I am not a marketplace specialist. Many of those I work with, though, do sell on marketplaces, including Amazon. I work with marketplace sellers who are growing their direct sales business to their own website to lower their reliance on Amazon, as well as a lot of e-commerce retailers who use Amazon and other marketplaces to grow turnover, build brand awareness and test overseas markets.

So what advice can I give you?

Amazon is not the enemy

For many years in the UK, the e-commerce and retail world thought of Amazon as a threat. ‘How do we fight Amazon?’ was often a question in a conference panel, or the subject of endless articles.

Thankfully, that’s no longer the point of view that retailers take. Yes, Amazon can be a real thorn in your side, but the only way to counter that is to be better at your own business. If you offer a better service to the customer, they will buy from you rather than Amazon.

Thinking of Amazon as the enemy isn’t going to help you. Think of them rather as the competitor who keeps you on your toes.

An Amazon customer is an Amazon customer

Saying that, a customer who buys on Amazon is a customer who buys on Amazon. Do not think that getting your products listed on Amazon is a genius way to grow your customer database. It isn’t.

Amazon own the contact details of the customers who buy from them, you don’t. And there are strict restrictions on how you can market again to those customers.

Also, a customer thinks of themselves as an Amazon customer – it’s their go-to resource for e-commerce purchasing. You’re not easily going to change that mindset.

However, it is a platform that can make more people aware of your brand and your products, which will have a positive impact on your business. It will also increase your turnover.

It can be particularly effective if you only list some of your inventory, so only 10 per cent of your flavours are available on Amazon.

Selling on Amazon is a new skillset

If Amazon open up the marketplace in Australia, and you decide to list your products, you’re going to have spend some time learning how to do that.

There’s a whole new algorithm to get used to, lots of different software systems available to help you list your products as well as manage the orders, and another customer service system to master.

Plus, a slew of Amazon product listing rules to be obeyed.

As with any new skillset, it will divert you and your team from the day-to-day. Be careful not to lose track of the day-to-day.

Even if you choose not to play on Amazon, it will affect you

Amazon will create a big enough customer base that it will change customers’ perceptions of what’s acceptable in e-commerce.

Delivery

Perceptions will change on website experience and ease of use, but mainly on delivery.

The good news is that generally what Amazon puts in place is based on their experience of what customers want. It’s all about getting the customer to buy more and buy more frequently.

However, faster, cheaper, more convenient delivery is complicated, and can be expensive to put in place.

New e-commerce buyers

Due to its size and status as a household name, Amazon does a great job of bringing new e-commerce buyers into the fold. They grow the size of the market for all of us.

Expect online consumers to grow in numbers, and become more savvy at buying online.

The more savvy they become, the more you need to focus on customer service and customer experience.

Getting in bed with Amazon: The Marketplace & FBA

The Marketplace is the part of Amazon that enables people to list their own products for sale. In the UK, there are many businesses where all or 80-plus per cent of their sales come through this channel. A lot of retailers use it to add some turnover to their direct-to-customer sales.

You can either fulfil the orders yourself, or sign up to FBA (Fulfilled by Amazon) and let them do it for you.

If you’re considering focusing your business on selling on the Amazon marketplace, be careful. Amazon has all the power, they can (and often do) turn off your account the minute they become aware you may have done something ‘bad’.

It could be that a competitor has told them that your product descriptions are illegal, or that one too many customers has complained about your customer service levels. The turn-off comes before the investigation, and it often takes weeks to get reinstated. You have been warned, it’s a risky business.

Cross-border on the Marketplace

The biggest development on Amazon this year has been the pan-EU FBA model. It enables Amazon FBA Marketplace sellers in any Amazon European territory to flick a switch and start selling on all of the European Amazon sites.

This has had a major impact on sales for those who have taken advantage of it. Amazon have now taken it to the level by managing where your stock sits, so you don’t have to work out how many units should be in Germany vs France vs the UK. They do it for you, making it a very easy way to sell overseas.

There’s talk of this being extended to cover the US as well to get more European sellers selling into the US, so I wouldn’t be surprised if at some point within the first year of trading in Australia they enable European sellers (if not US sellers) to sell into Australia.

After all, the challenge with any marketplace is both getting the product and getting the customers. This would get them a lot of product on day one.