If you are selling online, I am sure this question has crossed your mind. Amazon can be a great channel to quickly expand your business, but it comes at a cost.
There is no on-size-fits-all answer to this question. The situation for every brand is different and the percentage of sales that should come from its own eCommerce site will also differ. Here, I cover how Direct-to-Customer (DTC) brands should think about this question vs. established brands.
The bottom line is that, if you can afford it, you should have as much sales as possible on your own eCommerce website. You can give a differentiated brand experience to your customers instead of being lost in a grid of seemingly similar products.
For Direct to Customer Brands
Direct to Customer brands, or DTC, should aim for 100% sales on your own eCommerce website. In my opinion, there is no point calling yourself a DTC brand if you are getting most of your sales from Amazon. The very thesis of DTC brands is to have a direct relationship with customers, which allows them to leverage data and build a closer relationship with the customer.
If you are not at 100%, don’t worry. Upwards of 60-70% sales on your site is still a great place to be at. But, as a DTC brand, you must never relinquish the quest of chipping away at this problem constantly.
For Established, Popular Brands
By “established,” I mean if your brand is widely recognized and probably found in every major retail store nationwide.
To decide a healthy eCommerce split for such a brand, one must think of the category and how customers perceive it. Is it a commoditized category where most customers weigh price more and brands are interchangeable, such as toilet paper or toothbrushes? Or, do you play in a category that’s more unique? Customers are very brand sensitive for certain products – especially luxury items, such as smartphones or bags.
For commoditized categories: 10% to 20% share of eCommerce on your own website is healthy.
For unique categories: 30% to 40% on your own website is healthy; you should aim for even 50%.
It is probably difficult to slot every category in one of these two specifications. I would encourage you to think of this as a continuum. Is your brand more towards the commoditized side or towards the unique side? Based on where you lie on this spectrum, you should build your expectation of eCommerce split.
Here is a common trap that you might fall into. Suppose you are more on the commoditized side and you are doing 40% on your website. This might be a reason to introspect rather than to celebrate; it is possible that your brand is not doing well enough selling on Amazon and other eCommerce channels.
For Startup Brands
If you are starting a new brand, how should you approach sales split? Well, the logic of categories still applies, but I would urge that the first 1,000 sales of your product happen on your website. I am a firm believer in the 1,000 true fans theory by Kevin Kelly. More importantly, it is vital that you to own the relationship with these first 1,000 customers so that you can listen to them carefully and iterate fast on making your product better.
Amazon LaunchPad & Giveaways
Having said that, Amazon’s Launchpad program is also a great way to launch your products. Since it can be daunting and an extremely uphill task to build a base of initial customers, you can go where the buyers are. Amazon’s LaunchPad features new innovative products within a special section by the same name on their store. It is a great place for experimental buyers to discover new products.
Another proven mechanism within Amazon is giveaways which allows sellers to give away their products for free or at high discounts in return for the expectation of an honest review. This also is a good way to garner some initial sales and feedback to improve quickly on your product.
Ideally, going from 1,000 to 10,000 sales, you should still target 70% of the sales to happen from your own website as this is the most crucial part of your journey to build a strong brand. This phase will help you cement your marketing practices so that you are able to acquire customers profitably. I have seen many brands ignore this stage only to realize many years later that their cost of customer acquisition (or CoCA) is too high. Inversely, I have also seen brands that nail CoCA at this point and then scale very fast as every dollar they spend in marketing creates more money that can be put into more marketing.
Advantages of Majority Sales on your Website
Scaling sales on your website is certainly harder than on Amazon, which today has become the de-facto product search engine for most of the world. In the long run though, there is a lot of upside to building your eCommerce website channel.
You Own the Customer
Amazon does not share customer emails and phone numbers with sellers and its policies prohibit sellers from directly approaching buyers and retaining personally identifiable information beyond a few days in their systems. You are not even allowed to slip a next purchase discount coupon into the package. By contrast, when a customer buys on your own website, you have complete freedom to remarket them and convert them into repeat buyers.
It is easier and cheaper to retain a customer than to get a new one. This extends from the first point where if you own the customer relationship, then you can reach out to the same customer multiple times with related or renewed offerings in order to increase their Lifetime Value. So, while marketing your own site to drive traffic will be expensive at first, you can increase the ROI from that to a point where it is cheaper than paying commission on every sale in the long run.
Reduced Risk of Fakes, Copycats or Amazon Private Labels
There are ample stories of scam sellers hijacking your listings and copycats appearing on Amazon. The most shocking instance of this to me was when All Birds shoes were cloned by an Amazon private label. By selling on your own site, it’s not possible for fake sellers to hijack your product page.
More Price Elasticity by Customers
Even if a customer likes your product on Amazon or any other marketplace, they are bombarded on all corners of the page with similar products at a cheaper price. Quality is hard to communicate with a thumbnail. A customer on your website is experiencing your brand in the best way possible and are more likely to pay a premium without competitors on the same page.
A Chance to Deliver the Best Brand Experience
Amazon and other marketplaces give you limited opportunities to tell the story of your brand. There’s not much you can do in 5 images and 5 bullet points. If angles like sustainability, founder story, or use case demonstration are important for your brand, the customer will only have that full experience on your own website.
Maintain Business Continuity
There are enough horror stories where seemingly healthy, compliant and sizeable Amazon accounts were suspended overnight without much prior notice or warning. You want to be in a position where whatever little business you get, you should have some sense of control on its continuity. This is possible when you own the sales channel.
What Brands Must Ace to Avoid Amazon
Amazon has trained the average customer to expect a certain level of service from an eCommerce store. Your operations need to match that as close as possible to be successful.
Here are some areas that your team needs to ace:
Marketing Channels that Grow with your Brand
If you want to limit your Amazon exposure, you need to learn how to get your customers at a profitable CoCA (Cost of Customer Acquisition). Even if you ace two of the marketing channels listed below, it’s possible to set up your brand for growth.
Free Media (Social & PR): Enough has been said about the importance of having a great social media presence. Brands should try to be authentic in their communication on social media. They need to take a stand on the issues of the day, even at the risk of alienating some people.
Content Marketing: Start writing a blog on your website. Whether you are an eCommerce inventory software company or a boutique scarves brand, it pays to write articles on your own blog which speaks to your prospective customers and builds an audience. This is not only great for branding, but it is one of the most cost-effective means of building a constant flow of leads (buyers) to your website for months to come. Write once, reap forever. Our blog and other content on our website are the main source of customers for us at Browntape.
Paid Social Ads: Facebook’s advertising system has powerful AI. Once it sees enough sales going through its advertising system to your site, it can automatically find lookalike audiences and advertise to them. I recommend focusing on this early on for your first 100 sales. Then, it’s a question of doubling your daily budget until the ad spend is profitable.
Influencers: You should look for micro-celebrities on Instagram, TikTok and YouTube that talk to the audience that you are targeting. Try to build a relationship with them via comments. Many times, they will be happy to talk about your brand for some free samples. However, influencers with large followings might expect some money.
Affiliate Marketing: Amazon has a very large affiliate program where content creators write about buying guides that help customer zero-in on the right product for them. Amazon shares a cut of sales with them. I recommend searching for the top sites in your category that influence the buyers’ decision in your category and offering them an affiliate commission that’s double of what Amazon offers.
Fast fulfillment is one of key draws towards Amazon for consumers. 2-day delivery might not be possible for your brand, but you should aim for same-day or next-day dispatch and not penny-pinch on logistics. In fact, Amazon FBA is offered as a service for non-Amazon orders also in many countries.
Amazon has the perception of being the world’s most customer-centric company. However, the on-ground reality might be a bit different. You should look at their return policy carefully and create a no-questions-asked return policy if your business plan permits.
0% Amazon Might Not be Your Holy Grail
I never suggest brands to aim for 0% Amazon sales; you might make your pie smaller in pursuit of that goal. My recommendation always is to find the right balance between selling on Amazon and your own website. For many brands, that’s as much as 90% on Amazon, and that’s fine.
The bottom line is that your eCommerce website should be a significant enough channel that you are able to assign resources to it. Early on in your journey, that’s important.