It comes as no surprise that small businesses face tough competition in an online marketplace that’s dominated by retailing leviathan Amazon.
Few have the financial means to go head-to-head with Amazon, but enterprising retailers can at least acquire some of its commercial clout by becoming third-party sellers under the Amazon umbrella. For small operators this means gaining access to a level of internet reach that would be impossible to achieve in any other way. But there is a price to be paid.
The rise and rise of the internet giant
Obviously, the arrangement isn’t an act of altruism on the part of Amazon boss Jeff Bezos; rather, it’s a carefully calculated move to propel the company to greater heights. In fact, with the majority of goods for sale on Amazon now being provided by third parties, it’s a tactic which has helped it to become one of the world’s most visited websites.
Thanks to third-party products, Amazon can supply almost every need and has become the go-to name for online shoppers all over the world. But is the equation even more one-sided than sellers know: is Amazon actually using the data it collects not just to improve customer service, but to out-perform the small businesses that use the platform? In looking for a leg-up in the digital marketplace, are independents merely grist to the mill in Amazon’s quest for absolute dominance?
Under the EU microscope
It’s a question that’s prompted the EU’s Competition Commissioner Margrethe Vestager to launch a preliminary investigation into Amazon’s data collection and usage.
The company hasn’t yet been formally accused of any wrongdoing, but third-party sellers are currently being consulted about their dealings with Amazon, after which the EC will publish its findings. It’s worth bearing in mind that Google was under investigation for several years before a fine was handed down for promoting its online shopping comparison service over that of its rivals.
From clicks to bricks
That said, with Amazon occupying an increasingly unassailable position, it’s hard to see how even the most punitive of fines could hamper its progress.
Bezos has just announced that the company is set to open an actual bricks-and-mortar store in New York, selling a range of high performing products from its website, including toys and household goods. The shop will be known as Amazon 4-star and will offer customers the opportunity to interact with best-selling items like Kindle e-readers and Echo speakers.
It’s not Amazon’s first foray into high street retailing. The company bought Whole Foods Market in a $13.7 billion deal last year and is also continuing its roll-out of Amazon Go, where customers simply take the items they want and are billed automatically.
Can small businesses profit from Amazon in the long term?
For small businesses looking to create a market, Amazon can offer exposure to a wider audience. But, ultra-competitive pricing from international sellers can end up in a race to the bottom as everyone tries to make it into the coveted ‘buy box’. Traditionally, retailers have relied on building a loyal customer base by entering into ongoing communication; by selling on Amazon, that relationship is ceded to the platform, which can leave sellers without the ability to form a relationship with their customers.
If you have something truly unique to sell or are confident of competing successfully on price, Amazon can be a game-changer. For those with more precarious margins, the outlook is less promising.
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Posted on September 28, 2018 | Amazon