While many SMB merchants are fearful of Amazon’s footprint in the world of ecommerce, which elicits the common reaction, “how can I possible compete with Amazon?”, I look at the ability to sell in multiple channels a very good development in our industry. With some relatively minor effort, a merchant can leverage the reach and power of Amazon, eBay and others to extend sales efforts. Such “multi-channel” merchants are not competing against Amazon, they’re competing with Amazon.
Building a Multi-Channel Strategy
With the low cost and increased sophistication of today’s SMB ecommerce technologies, it makes perfect sense for emerging merchants to consider selling on many different channels. With the proper technology, planning and training, a merchant can fairly easily:
- Sell products on their store, Amazon, eBay, Facebook and many others.
- Have all orders come into a single order management “hub” that communicates with each channel.
- Extend the value of their brand to a broader audience.
One key to creating a multi-channel mindset is to consider your online store as a channel. As a merchant, you have the option of selling in whatever venue you wish. Each should be considered one channel:
- Online store. Your BigCommerce, Shopify, Magento, SquareSpace, et al website where you sell your products. If you offer more than one line of products (e.g. handbags and shoes), you can even create multiple online stores for each line.
- Amazon. Selling your products on Amazon by either pushing products that only you sell (or sell as a unique bundle or package) or creating an alternative offer for an existing product. Some merchants also build online stores simply to offer products sold on Amazon, but fulfilled by other vendors!
- eBay. The “grand-daddy” of online, community marketplaces. A great venue for selling used, open box or slightly damaged items that cannot be sold as “new.” We used eBay for our first store to sell products returned by customers who changed their minds about the purchase, but who had opened the box. We were usually able to sell the item at a price sufficient to cover our wholesale costs.
- Facebook. Many merchants don’t realize they can create a Facebook “Store” on their company Facebook page. Yes, you can. With some platforms, you can even offer products and solicit sales through Facebook Messenger.
- Pinterest. Posts with Pinterest “Buy Buttons” are an inexpensive way of showcasing products while providing a click-through purchasing experience.
- Buy Buttons. If you have a blog site or you have others willing to promote your products, most platforms allow you to create small code snippets that will place a “Buy Now” button on a web page.
- Google Shopping Ads. Not so many years ago, you could feed your products to Google and they would appear on search results solely on the basis of relevancy. Today, however, you have to bid on placements just as you do for their pay-per-click ads. However, relevant products most often appear at the very top of search results and can bring a good deal of visibility to your offerings.
- Brick-and-Mortar Store. Yes, indeed, a physical store should be considered a selling channel. Whether you have a traditional retail store or you use “pop-up” stores to sell at events and during certain seasons (e.g. Halloween store), you can leverage point-of-sale (POS) systems that tie directly into your ecommerce system to coordinate orders, inventory and shipping.
- Shopping Aggregation Sites. While Amazon may technically fall into this category, sites such as WalMart, Sears, Jet and others allow outside merchants to list products on their sites.
Each channel has its own requirements, considerations and pros/cons. They don’t all present viable options to all merchants, either. It’s up to you — and your consultants — to determine which are applicable to your offering.
Make an initial list of the channels you feel you’d like to use for your selling efforts. Try to imagine your personas created in the previous installment utilizing these channels for shopping with you.
Strive for a 360° System
I’ve said it before — but it’s worth revisiting — that one of the biggest mistakes merchants make is to adopt an ecommerce technology before they do the proper planning to map out their entire strategy. It’s so easy to latch onto what appears to be the least expensive, shiniest toy in the box, only to find later that integrating various channels, fulfillment and shipping, marketing, etc. becomes extremely cumbersome and/or expensive. Plan your selling strategy before you select your technologies. That’s why Technology is the last installment in this series. Until you complete your planning, picking a technology is no better than choosing straws; the odds of getting it right the first time is very slim!
Multi-channel selling is as complicated in terms of technology as it is advantageous for building sales. Each channel has its own unique requirements, including, but not limited to:
- Product information. Amazon and Google Shopping have some of the most stringent requirements on product information. You have to have UPC, ASIN or other unique identifiers for your products that match the same identifier used by other merchants selling the same products. In addition, there are stringent rules on content, weight, size and other attributes.
- Image sizes and composition. Amazon, for instance, wants all products photographed against a white background. This may or may not be in harmony with the branding design scheme for your store. Each channel also has different image size and shape requirements.
- Order processing. Some channels take the customers’ orders and payments (e.g. Amazon, eBay), while others pass the customer through to your online store for completing the purchase (e.g. Google Shopping Ads, Pinterest). Facebook allows you to do either you prefer.
- Shipping costs and configurations. Again, the way you represent and collect shipping from customers varies widely between the channels, as well.
- Customer service. If a customer has an issue or needs to return an item, you need to know which channels handle these issues and which do not. Even those that act as the front line for your customers will have requirements on how quickly you respond to issues they forward to you for resolution.
It’s easy to see the complications of managing multiple channel relationships. As a small-to-medium sized ecommerce business, you may feel you don’t have sufficient internal resources to handle all this.
The good news is that today’s SMB ecommerce platforms can relieve you of much of this complication by providing strong integrations with your selling channels. For example, Shopify has a free, native integration with Amazon. You’ll still have to secure UPC/ASIN numbers for your products (there is a convenient look up tool in the Shopify integration for identifying matching products on Amazon) and you will, of course, have to set up your selling account with Amazon. However, Shopify will push your product information and availability to Amazon and keep it synced thereafter. Orders generated by Amazon customers will automatically come into the Shopify backend where they can be fulfilled just like an order made on the Shopify store frontend.
This is the level of integration you want for all your channels: to have the channel interaction manageable through one platform. I call this the 360° Approach to ecommerce. By this, I mean that all daily operational activities related to sales can be handled within one platform.
Unfortunately, a fully 360° system does not yet exist for SMB ecommerce — at least not one that is affordable for these types of merchants. However, you can get pretty darned close! In my Technology installment, I’ll talk more about how we achieve a manageable system among the most common ecommerce platforms.
For now, however, it’s key to understand that you do not have to fear multi-channel marketing, given the complex requirements of the various channels.
- Make a list of a few of your products that you feel have the greatest sales potential (if you’re already selling online, use your top-selling products). Search Amazon, eBay, Facebook and Google Shopping. Find matches to your current products or, if you’re manufacturing your own products, competitor’s products that closely match yours.
- Create a spreadsheet to record the current prices offered by others selling on those channels.
This exercise will be useful in helping you determine profitability of selling on various channels.
Selling on Channels
First — and this may be difficult to immediately absorb — you do not have to sell all your products on all channels. The truth is that it doesn’t always make sense to sell everything everywhere. But, it can make sense to sell everything on some channels and some products on all channels. Let’s dive into that concept now.
Pricing for Profit
On many channels there are costs related to selling. These are costs beyond your wholesale cost and are usually based on a percentage or fee per order. These fees may include any of the following:
- Commission. Often referred to as a transaction or referral fee, the amount is a percentage of the sales price.
- Shipping & Handling. Relevant to Amazon if you use Fulfillment By Amazon. We cover this more in the next installment on Fulfillment.
- Pay-per-click. A fee you pay whenever someone clicks on your product to then purchase it on your website.
- Membership fees. Usually a monthly fee paid for the privilege of selling on a channel.
The range of fees for some of the various channels are:
- Shopify. 0.5-2.0% transaction fee based on your plan. Plus you will have payment gateway fees (for taking credit cards, PayPal, etc.). Source.
- Amazon. Referral fees range from 6% to 45% depending on product category. Plus membership fees of $39.99/month (professional plan). Source.
- eBay. Transaction fees of 3-10%. An insertion fee may be applied as well. Source.
- Walmart. Commissions of 8% to 15% based on product category. Source.
With channels on which the sale is made (i.e. not on your own store site), you do not have payment processing fees to pay. Therefore, to compare apples-to-apples, you must take into account processing fees when calculating profitability.
- Prepare a spreadsheet with the following columns: Product Name, Retail Price, Wholesale Price, Gross Profit, On-site Sale, Amazon, eBay, Walmart.
- Enter a product you wish to analyze. Use a Retail Price based on what you think you would have to use in order to be competitive across all channels (you can, if you wish, break this down into a “per-channel” evaluation if you feel you will offer different prices for each channel).
- For each product you analyze, calculate the Gross Profit as the Retail Price minus the Wholesale Price.
- For “On-site Sale,” enter a formula to calculate the costs based on a nominal 2.9% processing fee (or enter the actual average processing fee if you know it) and any transaction fee charged by the platform (e.g. Shopify).
- Set up formulas to calculate the cost of each channel based on the percentages applicable to the product categories you’re selling.
- Compare the costs of selling on each channel. If any have costs that are greater than your Gross Profit, then you would lose money selling on that channel at the retail price you anticipate.
Based on the analysis you do, you will come to one of the following conclusions:
- You can’t sell your products on one or more channels and still make an acceptable profit.
- You can sell some of your products at a profit, but others would lose money.
- You can sell all of your products at a profit.
If you have products to sell, but can’t make the numbers work on a channel, don’t necessarily lose hope. There are a number of strategies to consider that will allow you to still tap into the huge markets these channels command, and help you earn the profit levels you want.
Let’s say you have a widget you want to sell on Amazon, but with the rough numbers, you would lose 5% on every sale if you offer your widget at a price similar to other widget sellers. You could still offer your widget by:
- Adding additional accessories or add-ons and building, in essence, a new product. You would have to secure a new UPC code for this bundle, but by adding accessories and raising the price, you could attract buyers who feel that by paying a bit more than your competitors, they will get more for their money.
- If your widget is an item that is most often purchased with related accessories, and you can make margin on the accessories, then it might be worth selling the widget.
- Only sell the item on your store, but use Amazon’s advertising and other paid services to promote your store and your products to the Amazon audience.
Competing on Price
With eBay and Facebook, particularly, you have full control over prices and you can often use the same product marketing techniques we discussed in the Products installment to differentiate your offering from your competitors.
However, on Amazon — and, to some extent, Walmart and other aggregators — you will be pressured to be price competitive. I’ve seen Amazon continue to press one of our clients to continue lowering their prices. It got to the point that he could no longer sell on Amazon and still make any profit. Therefore, having an in-depth understanding of your pricing and costs is paramount if you want to sell profitably on Amazon (or any channel, for that matter). You do have to remember that these sites prosper by selling products. Since they also “standardize” the product presentations (you have little opportunity to promote your brand value), price becomes much more important in converting sales.
If you have a large catalog and thin margins when selling on Amazon, I do suggest you employ a dynamic re-pricing tool that will monitor Amazon prices and automatically adjust your prices based on competitor moves. These tools usually have rules you can set to make sure they don’t lower your prices below a level of profitability. Since Amazon pricing is incredibly dynamic (you won’t be the only merchant using a re-pricing tool), having the added assistance of a re-pricing system could truly improve your selling prospects.
Put Customer Service on Top
Whenever you sell on multiple channels, you do have to make a firm and total commitment to customer service. As far as the channels are concerned, the customer is always right regardless of the circumstances. These sites aggressively solicit reviews (as should you on your own site), and if customers don’t like you, you could quickly lose the privilege of selling on a channel. Be prepared to process channel-generated orders quickly and professionally. Respond to inquiries as soon as possible. And if you’re constructed your technology correctly, you should have records in your system for each order. Append notes to these orders and constantly monitor them to make sure they are fulfilled as soon as possible.
When to Sell on Channels
I’d really like to say you should started selling on other channels as soon as you launch your new ecommerce store. However, as you will find, you have lots of things to work on even after you launch. If you’re new to ecommerce, you really do need to get your own site humming along before taking on additional channels. Regardless of how good the software is for channel integration and management, you have to commit time and effort into doing it as good as possible. If you get dismissed from a channel, you might never get to sell your products there again. And if after a few weeks of selling on a channel, you find you’ve been losing money you didn’t expect, your entire business might be in jeopardy.
Take it one step at a time, and it should all work well for you. Within a few months, you could find that more of your sales are generated on other channels than your own online store.