Patriot Act with Hasan Minhaj on Netflix has made headlines previously due to being banned in Saudi Arabia. The comedian thanked the country’s government for making him go viral, but even when he is not picking fights with tyrannical nations he is still highlighting some important issues. In another episode, he brings to light the sly tactics used by Amazon to ensure they stay at the top.
The truth is that Amazon’s “similar item, lower price” suggestion poses a huge threat to small businesses marketing on their website. For example, just before a consumer buys a good, this suggestion tool kicks in offering a cheaper, Amazon produced version. Amazon has the data to know what products people are purchasing, and the capabilities to produce their own version and sell it at a lower price.
This has put many small businesses in a catch 21 position. If they don’t use Amazon, they lose out on a series revenue stream, but by using Amazon, they are potentially giving their product to a much larger and stronger competitor. To understand more about what can be done to avoid this problematic situation we spoke with Trilok Hebbur, Founder of Polymathic Guru, a marketing and advertising agency focused on helping e-commerce businesses skyrocket their growth.
Why selling on Amazon Shouldn’t be a long-term strategy?
Firstly, it’s getting really competitive selling on Amazon. To get users attention, sellers have started leveraging Amazon Ads and Amazon’s Ads business is also growing at record pace. It will only get more competitive going forward increasing the margins of Sellers. Secondly, Amazon is constantly expanding its while label business competing with its sellers. If it finds a winning product, it will introduce it own product and undercut the prize. It also suggests these products more aggressively to buyers. And finally, Amazon doesn’t share any end-user data with sellers. If a sellers account is banned from Amazon for whatever reason, then the seller doesn’t have any option of contacting his user base.
What should be a long term strategy?
Invest in building a brand and a community. Interacting directly with users, understanding their problems and providing the best solution is very important for this. In addition to this, invest in Organic traffic from SEO, Social channels, etc. And ultimately, increase CLTV (Customers Life Time Value). There are a tonne of things a e-com business can do to optimize their store. You can find a detailed list here.
Disclosure: This article includes a client of an Espacio portfolio company