Amazon and Small Business

Mike Grill // July 10, 2017

On June 30th, David Hughes, GRAYBOX’s Director of Strategy, gave a presentation on the “State of eCommerce” about the IRCE conference he recently attended. Although there were some pretty striking stats and pieces of information, one item has been pinging around in my head for the last couple weeks: Amazon sales grew by $25 Billion, while Walmart internet sales were $15 Billion!

 

Amazon: The eCommerce Frontier for Small Business

Amazon started off selling books in 1994. Books! They outlasted about 98% of all of the tech companies that arose in the dot com boom in the late 90s. They have changed the way people shop. Remember when 3 or 4 weeks seemed like a short time to wait when you ordered something online? Now if something doesn’t show up within 2 days – not even 2 business days – I’m on the phone with customer support. Sometimes I need a pound of cheese powder, and I need it darn near immediately. Not only that, now I can get my cheese powder on a subscription basis so that I don’t have to worry about the hassle of going online and clicking a button every month. Oh, and if I didn’t want to subscribe to my monthly pound of cheese powder, but I still needed to save myself the hassle of going online, I could probably get a button to put near where I stock my cheese powder so that I can just push that instead. And it shows up at your doorstep!

 

No wonder Amazon is growing so fast. They started off, like Netflix would years later, getting into the long tail keyword items like text books and other, more obscure books. They built a massive network and base around these books and quickly moved into selling more popular books. This long tail scheme has proven extremely viable – again, Netflix – and has helped sustain and drive Amazon to become the largest eCommerce site ever. They have effectively shifted the supply chain to under their umbrella: if you want to sell online, you can easily have your own store, but if you want to reach more people, it makes sense to also sell on Amazon.

 

$25 Billion Growth in 2016

We aren’t even talking about overall sales numbers here. Basically, Amazon grew enough in sales to cover buying Whole Foods with a $10 Billion cushion. That is insane. Walmart has been trying to close the gap (HA!) by buying etaliers like jet.com and shoes.com as well as bids to buy Bonobo’s and a few other fashion retailers, but who knows if these will actually pay off? They haven’t before and when the gap between total internet sales and your competitors growth is $10 Billion, you probably aren’t going to close that gap simply by mirroring what your competitor did ten years ago. It might be possible for Walmart to make up some of that ground by featuring more and more brands in their physical spaces, but it is hard to imagine a retail store that can even come close to offering what Amazon offers.

 

Amazon and Small Business

So what, exactly does this mean for a small business? Well, you can stick to your guns and go it alone. It still works to have your own eCommerce site independent of Amazon. This has plenty of benefits in that you control profit margins, inventory, shipping, customer service, and everything else that you would control with a traditional retail space. However, there are other options and there still exists the ability to control much of this while still selling on Amazon. Companies, like our sister company, Run AMZ, help customers increase their profits while selling on Amazon and maintaining control of their brand, store, inventory, and products without having to sell wholesale to Amazon.
Jumping onto Amazon’s bandwagon might not seem like the most appealing option, but with the right team behind your small business, it can be a massive win. Got any questions about how Amazon can work for small businesses? Contact us, or our friends at Run AMZ!

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