[legutierr]

This explanation makes the most sense to me, but there is something that you are leaving out. Not only is Amazon a marketplace, but it is THE marketplace. Amazon has an effective monopoly on small-seller logistics and marketplace services in the United States (and many other places), soup-to-nuts.

If you are anything other than a massive corporation, any manufacturer that chooses not to sell through Amazon and utilize all or most of its services (marketplace listing, payments, warehousing, delivery) will be at a massive cost disadvantage and will not be able to compete with other sellers that do choose to participate with Amazon.

And more significantly, perhaps, if you don't sell through Amazon's marketplace, you are often unable to compete with Amazon itself.

[awillen]

This just isn't really true. It depends on what type of product you're selling, but there are a huge number of independent ecommerce stores that do extremely well.

I sell dog treat mix (coopersdogtreats.com) - I do much better both in terms of margins and overall sales on my own website (with traffic coming primarily via paid FB ads) than on Amazon.

That's not even including other huge marketplaces like walmart.com, Chewy, Etsy, etc.

Amazon doesn't have a monopoly on small-seller logistics - I'm about to move all of my logistics over to a 3PL, and there are plenty that will cost-effectively work with startups (ShipBob, Shipmonk, etc. - just Google "ecommerce 3PL" and you'll see what I mean).

How much Amazon plays into your business obviously depends on the category, but the idea that it's impossible to compete in ecommerce unless you're on Amazon is an easily disproven myth.

[mountainb]

What people kind of miss is that outside of FBA it's the actual logistics companies that are handling the logistics for all merchant fulfilled Amazon sales. The normal logistics companies are also handling a ton of the work involved with getting goods to FBA. There are lots of 3PL solutions that can deliver FBA style performance at a lower cost to the seller. There are other advantages to not using Amazon as a seller or just using Amazon as one additional channel among multiple ones.

[dv_dt]

I've seen at least one other comment saying this, and not that I don't believe you, but can you name several companies that do that and come within say 150% of Amazon? Last time I really dug into this was years ago and nothing was really close then, maybe it's better now?

My other question to comments : > What are the Amazon level logistics and delivery service that is available to a smaller retailer? I see some nascent choices but they really aren’t that close.

[awillen]

I've priced out several and all are within 150%. Shipbob is the closest at 10-20% more expensive than FBA, but depending on your product it may actually be more cost effective. I need them to pick and pack several items, since I sell my stuff individually as well as in kits (boxes of multiple items, which are vastly more popular than people buying individual items), and they include most of the cost of building out those kits in their shipping fees.

[legutierr]

I'm happy to read what you are saying, and stand corrected.

I wonder, though. Do you think your experience is typical?

Am I wrong to think that your product is more niche and premium than the most products that are sold via the Amazon marketplace? Do you think that you might get more repeat business than most products sold on Amazon?

It's been a while since I've looked into pricing for FB ads, but my sense is that a product with more narrow margins and less potential for repeat business could find it difficult to attract customers via advertising without increasing prices beyond what could be found on Amazon for competing products.

[awillen]

I think Amazon's too big and broad to describe any experience as typical, but there are certainly differences in the type of business.

You are 100% right that my products are niche and premium, and that definitely makes a difference. But on the other hand, if you're a startup selling a commodity product, you're in a bad position for a whole lot of reasons other than Amazon.

From an advertising standpoint, you're right - I have the advantage of selling a product that has a high repeat rate, and that's helpful. On the other hand, my AOV is fairly low and my margins are okay but not extraordinary.

I think that the points you're raising here are what matter - not Amazon. If you're in a business that is one of: high AOV, high margin, subscription/frequent repeat customers then you're okay. If you're in a low margin, commodity business and you aren't operating at a huge scale, you're not in a great spot.

Ultimately, I think the actual value added by Amazon for startups is trust - I know that if I order from them, your product will arrive on time, and if there's an issue it'll get fixed ASAP. All of the other stuff, like two-day shipping and customer-friendly return policies, is doable off of Amazon. Even trust is achievable in other ways, though - my company was featured in an Associated Press article that was broadly syndicated, and when I slapped "AS SEEN ON USA TODAY, FOX, KTLA AND MORE" on the top of every product page and the top of my FB ads, it made a huge difference immediately.

And actually now that I've typed that I'll add one more thing in Amazon's favor - ease of use. If you don't know a lot about ecommerce, it's pretty easy to get set up and ship them product. It's also easy to advertise, simply because their advertising is much, much simpler than Facebook. There's no copy and limited ability to use creative outside of your product images, so you don't have to constantly test stuff. While my sales on Amazon aren't high margin, they're also extremely low effort.

[rossjudson]

I'm curious about how you would compare Amazon vs your own site. Things like Amazon's buyer-friendly return policy comes to mind...which clearly come at a cost for sellers (and buyers, fairly directly).

[awillen]

I have a very small number of returns on Amazon, since my product can't be used and then returned.

Amazon isn't terrible, but it has two big problems for me. First, margins are lower because I'm not only paying them a cut of every sale, I'm also paying for Amazon advertising. Second, I don't have a relationship with the buyer, which is the real killer. I do really well with repeat sales via email, and those are where the real margin is since I'm not paying to acquire those users again. On my site, I can afford to break even (or even lose a little money) on the first sale, where I must make money on each sale on Amazon.

I will say the one big difference between my product and many on Amazon is that it's not something that you seek out - very few people are searching for "dog treat mix" on Amazon (or Google/Bing/etc.). Amazon does have some types of advertising that work well for targeting other luxury dog goods, but my volume is going to be limited there. Facebook advertising works better for me, because I can target people by demographics and explain the product in an ad.

To that point, it may be important to be on Amazon if you're in a commodity business. On the other hand, it sucks to be in a commodity business for so many other reasons that I hardly think it's reasonable to pin the blame on Amazon for the difficulties there.

The one thing I will say about Amazon vs. Shopify that surprised me is that Amazon's support tends to be quite competent (at least if you call them - you get nothing but canned responses via email), while Shopify's is just terrible. They can help with basic issues using the software, but when it comes to real problems, like bugs in reporting (or more recently in my case, a bug where they undercharged a customer), they just say they'll get back to you and never do unless you are incredibly aggressive about hounding them.

[rossjudson]

Sorry I missed your detailed reply -- very interesting.

[jtsiskin]

I think Shopify’s massive success means this likely isn’t this extreme