Steering Profits Beyond Amazon: A Strategy for Success
The Shift Towards Diversification
When discussing e-commerce, it's impossible to ignore Amazon's dominance. However, the dynamics are changing, and other marketplaces and retailers are gaining momentum. While Amazon still holds a significant market share, other players like Walmart, Home Depot, Best Buy, and Target are increasing their percentage of the overall market.
“…we are seeing other marketplaces and other retailers picking up momentum with Walmart and Home Depot and Best Buy and Target while they're increasing their percentage of the overall market share, those are still very small relative to Amazon, but we are seeing a shift.” - Leszek Lekstan, Co-Founder, PointStory
In recent years, we have witnessed a shift in agencies and brand owners looking beyond Amazon. This shift can be attributed to several factors. Firstly, the increasing fees associated with selling on Amazon have impacted profitability. Fees have risen from 40% to 50% of revenue generated on Amazon in just five years. Additionally, advertising on Amazon has become non-optional and more expensive, further impacting profitability.
Secondly, other marketplaces and retailers are investing in their capabilities, catching up to Amazon in terms of advertising and targeting capabilities. While Amazon still leads the pack, these competitors are improving and offering opportunities to reach new audiences. This combination of rising fees on Amazon and the improving capabilities of other platforms has led to a growing interest in diversification.
Realizing Profits Outside Amazon: A Client Example
To illustrate the potential for growth and profitability outside Amazon, Leszek shared one of his clients as an example. He worked with a pizza oven company that initially sold only on eBay. By integrating them across multiple retailers and e-tailers, they’ve expanded their presence to over 40 integrations with around 20 different platforms. Remarkably, within a year, their revenue increased by 12 times without any media spend. This growth was driven solely by their presence on these other marketplaces.
“And we were able to integrate them across initially around 20 different, retailers and etailers. And then ultimately over 40 different integrations that we would put in place. And there are multiple things that I think are worth noting.” - Leszek Lekstan, Co-Founder, PointStory
Furthermore, their SEO and online presence improved significantly, leading to increased credibility and exposure. This exposure even caught the attention of the Ellen Show, resulting in a giveaway and further business growth. This example highlights the power of listing products on multiple platforms and the potential for exponential growth.
The Role of Advertising in Other Marketplaces
While advertising is crucial for success on Amazon, it also plays a significant role in other marketplaces. Although these platforms may not offer the same level of sophistication as Amazon, they can still be highly effective due to lower competition. For instance, running Ads on Home Depot through PromoteIQ typically incurs a minimum cost per click (CPC) of $1. This low CPC, combined with higher-priced products, can lead to attractive returns on Ad spend.
“So, you know, while you can get good traction organically, running Ads on these platforms really helps accelerate, and I think the momentum right now is really good because we're still seeing very limited competition and by applying some best practices from the world of advertising can really make a difference with, relatively low Ad spend. ” - Leszek Lekstan, Co-Founder, PointStory
Leszek and the team have seen remarkable results with clients who have embraced advertising on other platforms. For example, a home decor client experienced a 200% increase in total sales within 30 days of running Ads. This growth translated to a 170% increase in average daily sales. These success stories demonstrate the impact of advertising on overall business performance and the potential for strong returns on Ad spend.
Success Factors for Expanding to Other Marketplaces
Expanding to other marketplaces requires careful consideration and preparation. Here are some key success factors to keep in mind:
Inventory: Ensure you have ample inventory to fulfill the increased demand. Monitor inventory levels closely and replenish as needed to avoid losing momentum.
Price Point: Products with a wholesale price above $20 or $25 tend to perform better due to favourable economics. Consider the profitability of your products at different price points.
Media Commitment: Have a media plan in place for at least six months to support growth and market share acquisition. Be prepared to invest in advertising to accelerate your success.
By addressing these success factors, you can position yourself for growth and profitability on other marketplaces.
The Business Case for Diversification
Diversifying your clients' presence beyond Amazon offers several compelling benefits:
Growing Market Share: By listing products on multiple platforms, you can reach audiences actively seeking your products. This exposure can lead to increased market share and brand recognition.
Improved SEO: Having a presence across various retailers and e-tailers can significantly boost your SEO. This increased visibility can drive organic traffic and enhance your online presence.
Risk Management: Diversifying your clients' sales channels reduces the risk of relying solely on Amazon. By spreading your eggs across multiple baskets, you safeguard against potential disruptions or changes in Amazon's policies.
Lower Competition: While other marketplaces are growing, they still offer lower competition compared to Amazon. This presents an opportunity to gain a competitive advantage and achieve better results with relatively low ad spend.
Improving Capabilities: Other marketplaces are continuously improving their advertising and targeting capabilities. Although they may not match Amazon's level of sophistication, they offer a favourable environment for advertisers to leverage their expertise and achieve strong results.
Expanding your clients' profits outside the Amazon ecosystem is a strategic move that can lead to significant growth and profitability. By diversifying their presence across multiple marketplaces, you can tap into new audiences, improve SEO, manage risk, and leverage lower competition. Advertising on these platforms, while not as advanced as Amazon, can still yield impressive results due to the favourable economics and limited competition. To navigate this landscape effectively, consider partnering with MerchantSpring, a multi-marketplace omnichannel analytics platform that can provide valuable insights and support your expansion efforts. Embrace the opportunities beyond Amazon and unlock the full potential of your clients' businesses.