Amazon: Partner or Competitor?

By Ron Kustek

Your small business may be considering selling your products through Amazon. After all, they are the world’s No. 1 online retailer and 3rd largest retailer — closing in on Walmart. Amazon is regularly in the news — from their purchase of Whole Foods in August of 2017, to their purchase of PillPak Online Pharmacy in July of 2018.

With their very visible bidding-war campaign to select the city for their 2nd headquarters, it’s hard not to be aware of their aggressiveness. But before you consider a partnership with Amazon, there may be a few things worthy of your consideration.

If you have a local store where you support the local community, your supportive customers may end up finding your products for sale on Amazon, and then potentially shop less frequently at your physical location. It’s likely that your current storefront also employs a number of people who depend on the sales from your business for their livelihood.

As so many people use Amazon for their online purchases, you may end up trading out a portion of sales from your local physical store when selling online through Amazon. If there are shipping or product quality issues, your local customers may choose to bring the product back to your store to address the problem, and it will be up to you to determine if Amazon may have caused the damage to your item if they used faulty handling or packaging in their shipping.

But it goes a bit further than that. You see, Amazon is a data-driven company, and the wealth of information they have about the person who buys your product online is likely better information about your customer than you have. Amazon can cross-reference every purchase that person makes, and be able to generate a profile of that customer, all for the benefit of Amazon.

If another seller on Amazon sells a similar product for less than you do, then Amazon will likely promote that seller’s item to the customer, so that the customer feels they are getting a better deal on a similar product, all thanks to their friends at Amazon who are looking out for them by providing the lowest cost options available.

And have you heard about Amazon’s 4-star store they opened in New York this past September? It’s a 4,000 sq. ft. mini-variety store featuring products chosen by Amazon, and only those that have obtained a minimum 4-star rating on Amazon. Products range from kitchen appliances to books, gifts, toys, and of course, Alexa enabled devices.

Oh yes, there are also products from Amazon Basics. Remember we said that Amazon is a data-driven company? Well Amazon Basics are all Amazon-branded products ‘made’ by Amazon and only sold by Amazon. So, if your company created and sold a coffee press on Amazon that people loved, it’s likely that Amazon analyzed all your reviews, including the improvements that customers may have wanted — and then created a coffee press of their own, with the improvements — in order to have their brand and product sell better than yours — both in the store and on the Amazon website!

It’s also likely they are able to sell their ‘Amazon Basics’ coffee press for less than you can make and ship it to an Amazon warehouse — and also likely their “Amazon Basics” item also includes Alexa as an added feature!

Amazon is an amazing online sales platform that expands your online distribution opportunities — as well as being everyone’s competitor. Amazon is a great business that benefits Amazon — even if in the short-run they are able to help you expand the sales of your business.

It can be a worthwhile ‘partner’ — but be sure you are working with experts who know how Amazon operates, so that you don’t find yourself fully dependent upon their company for the existence of yours.

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Ron Kustek a business instructor at Cabrillo College.