The Case for Diversification: The Importance of a Multi-Marketplace Ecommerce Strategy
If you’ve been following Amazon news like VL OMNI does, there have been many signs that major changes are afoot. We first came across rumblings of dissatisfaction with Amazon first-hand from Amazon sellers years ago. Since then there have been ongoing issues of counterfeit goods on the platform, complaints of fraud and trickery, and a mass culling of merchants from the marketplace. These represent some serious concerns for Merchants — concerns that are deeply rooted in the structure of Amazon. But have no doubt, Amazon is on the path to strategically change fundamental aspects of its business model. Just today, news has broken that
“Amazon didn’t renegotiate annual terms with many smaller vendors this spring”, reducing the number of small mom-and-pop suppliers. This kind of change often comes out of nowhere and scares Merchants. Those selling on the marketplace will have to continue to be vigilant in how they intersect and meet Amazon’s conditions for staying in good standing.
Experts will say Amazon often acts like a nation-state, acting unilaterally and without external consequence. Merchants are more often than not caught off guard by Amazon’s pivots. Because Amazon is a core part of the fabric of commerce today, there are some important lessons Merchants should consider when building out their sales channel strategy. It’s clear: Merchants on Amazon should strongly consider having a multi-channel strategy that allows for agility more than ever before.
Why? We break our rationale down in the following sections. Keep reading to learn how you, as an Amazon Seller, can stay on top of the Amazon game while building your business.
Lesson One: You need Amazon more than Amazon needs you
The first lesson is that Amazon is a business in and of itself, and an extremely successful one at that. There are very few moves that Amazon can make that will negatively impact them or their bottom line. (Amazon, in fact, makes most of their money not from their ecommerce platform.) Merchants shouldn’t think of Amazon as their business partner but as the gatekeeper holding all the keys to your profit if your business chooses Amazon as its sole sales channel. The hard truth is that Amazon does not need its merchants as much as some merchants need Amazon.
As any Seller will tell you, Amazon is a notoriously difficult platform to be successful on. The marketplace has layers of nuances and it takes deep, strategic and technical strategy to reach and stay on top. Ever-evolving Amazon looks to cut inefficiencies and maximize profitability wherever it can. For example, according to Digiday, hybrid selling – the practice of brands selling on both Vendor Central and Seller Central — has been eliminated, forcing high-growth brands to choose a side. There’s also further speculation that Vendor and Seller Central will be merged into a uniform platform called “Vendor One” in the near future. Of course, Amazon will never share this information publicly or with its Sellers until it’s already implemented. Whether or not this becomes true tomorrow or in 10 years, it’s absolutely clear that Merchants need to keep in mind that Amazon is out for themselves first and foremost.
Lesson Two: Amazon is out to build their retail business over yours
The second lesson is that Amazon is carefully developing their own in-house brands — yet another point of pressure for external Merchants looking to compete on the platform. Those like VL OMNI who are watching Amazon closely have noted Amazon’s recent flurry in acquiring brands for their own private Amazon label. Currently, Amazon owns 139 private label brands and 435 exclusive brands. Amazon will continue to buy up brands it deems profitable, giving itself and not its Sellers the greatest advantage. Amazon has not provided an explanation of some of these acquisitions, but there has been a very public temporary pause in onboarding even more brands following a major outcry from its Sellers.
Lesson Three: It’s all about the customer
We come to the third and probably most important lesson: Amazon’s real drive is to satisfy the consumer, full stop — even at the expense of their Merchants on the platform. Drawing together all three lessons, there’s one very clear conclusion and the ultimate lesson that all Merchants, regardless of their channels, should take to heart: Channel diversification is a strategic impetus.
It’s now fairly clear to those already selling on Amazon that there is considerable importance in reducing singular dependence on Amazon’s marketplace as a business’ only sales channel. Those brands on Amazon who have built their entire business on — and only on — Amazon’s platform no longer feel completely secure in their future on the platform.
Now more than ever, Merchants need to strategically diversify their sales channels to create a sustainable, multi-marketplace strategy so that your business isn’t at the mercy of a single channel’s whims. Take into account what a sudden drop off a platform looks like to your customers’ experiences. Can your loyal customers only find your brand on only one sales channel? What happens if they can no longer find you on that channel? Great customer experiences stem from ample, varied and convenient purchase points that have the right systems and technology in place to unify the customer experience no matter where your customers buy from.
The Power of Technology and a Strategic Multichannel Selling Strategy
Strategic data integration allows you to change your business strategy — including sales channels — with agility. When platform changes crop up unexpectedly, Merchants on the VL OMNI platform can easily pivot their channel mix and sales channel strategy quickly and cost-effectively.
Although selling through multiple sales channels sounds like an incredible amount of work, agile integrations and a deep technical strategy are the foundations for easier expansion. Eliminating data entry, streamlining processes and strategically planning holistic business-wide workflows are the first advantages of great data integration. VL OMNI customers have additional benefits and flexibility with our platform, including being able to quickly duplicate workflows to easily add new channels, technology, and trading partners.
VL OMNI empowers your business to handle all the data needed to make all sales channels work in harmony for your business while also allowing you to deliver on complex unified customer experience goals. VL OMNI also applies your business-specific rules directly to your data as it moves through our business rules engine, ensuring you can rest easy knowing your data is going where, when, and in the form that your business needs it in to hit the ground running day after day.
Ultimately, your business’ future success rests your ability to respond quickly to changes, expected or not. Channel diversification is something single-channel merchants should strongly consider as a strategic objective. If these lessons from Amazon teach us anything, it’s that those who are prepared, agile and diversified in their ecommerce and integrations strategy will better stand against anything Amazon can throw at them.