Amazon Marketplace vs. Own Online Shop: What Is Better for Entering the German Market?
When entrepreneurs start a small e-commerce business or already have done it, they often come to us with one central question: should I start to sell on the Amazon marketplace or should I build my own shop. This is, most of the time, a tricky question. Since every business is different, even two stores selling homemade pottery can be very different. For that reason, this article will show you some pros and cons related to this problem and give you some detailed information for your decision making.
Amazon marketplace - the place to be?
Amazon marketplace has two significant advantages for young businesses. First, it is relatively easy to set up in comparison to designing and launching an online shop. Nevertheless, it is still complicated as you have to do many more steps like confirm an email and chose a password, as we used to by most online services. The second advantage is even better. You are now on Amazon! The biggest online shop worldwide. A company that is determined to grow its market share and influence no matter the cost, literally subsidizing the growth of its online shop with its other business models. Being part of that constantly growing infrastructure gives you a potentially enormous customer base. Yes, you are one of the millions, but with a unique product, you can come on top in searches for millions of people.
Of course, this also has some trade-offs and problems. First, you are at the mercy of Amazon's goodwill. Amazon takes the liberty to take down your shop whenever they see fit, and getting information from Amazon why they did it is often hard to get. So Transparency is not the strength of the marketplace by a long shot. Setting up and maintaining on Amazon will be easy for almost everyone. But if they pull you from the store, it is devastating. This could potentially get better in the future since Amazon accidentally revealed that the marketplace generated 58 % of its trade value. But without retailer organization, this seems unlikely. Moreover, unfortunately, if your product is succesfull Amazon's analytics will recognize the high and growing sales and Amazon can also copy your product and sell it on their name - with a higher rank of course.
Your shop, your future?
Starting your own online shop has the opposite problems and advantages. Finding the right web development platform, finding and registering a catchy URL, building the website, and optimizing it for SEO, etc. is a big deal. Arguably most web development platforms got way more user-friendly in the last years, especially regarding shop integration. But to get the smaller details right, which often decides if your site is on Page 1 or 2 on Google, still requires time and more in-depth knowledge. But since there are fears competition between web development platforms, this is likely to improve further.
The biggest strength of amazon is also one reason for the most significant problem you will have. When you start, no one knows your shop. And because of the all in one solution Amazon offers and because of other "big" online stores, people are, for the most part, not in need to look for alternatives. Conducting SEO is essential but very likely not enough. Which means you need advertisement in some form or another. This is a subject for another couple of articles, but you definitely have to invest a considerable amount of money, no matter how unique or revolutionary your product is.
You are free (to make a better experience for your customers)
But with your own online shop, you are not dependent on the will of a huge company, even if there are still a lot of ways to fuck up. Another significant advantage with your site is that you can freely customize it to the need of your product and the wishes of the customers. Your products and website can create an organic unit. Add internal links, which guide the customer to throw your product palate. Let the customer sign an email newsletter or discount round. Just simple things like having matching color tones for your site and product can make a much better experience. Moreover, you can give them an additional value which will bind your customer way more directly to you than a place on the marketplace ever could. Integrate content marketing on your website with, for example,…. I don't know…. with a blog, maybe?
What is good business practice?
You probably have the impression now that Amazon is unfriendly near monopoly which does not care for its marketplace retailers BUT! …. yes it kind of is. However, Amazon can be an excellent tool for a young company. It is easy to get your product out into the world and collect some data on it. Do people like it? Can they find it? Is there a market for it? Etc. Starting on Amazon and then moving on to an own online shop is a good way for most companies (but not all). And growing big is mostly only possible (or advisable) if you leave Amazon. Having your business dependent on another company, which can cripple your business and your life achievement with just some rows of new code for the search engine or the misinterpretation from an overworked employee at the end of the world, is not a good business practice.
So start with Amazon as a test and then migrate with most of your customers to your shop. That is our general advice for most young e-commerce companies that want to start selling in Germany. Doing both? Possible, but in the long run, both online presence will suffer over this duality. Since you have to divide your attention and inevitably both will suffer under this split of resources.
What do Germans think about Amazon?
All good, but what about Germany? Is there something specific I need to know about the German market? Well, yes, Germans use Amazon quite a lot, but they also do not really like Amazon as a company. Forty-four % of Germans think the market position of Amazon is way too big and 88 % of this 44 % are buying less because of this reason. This figure will probably grow since Amazon gets terrible press in Germany, mostly concerning wages, treatment, and the rights of worker councils, which are lacking way behind their competitors. In addition to this, the American online giants are seen as very critical overall. That grew to the extent that 2/3 of the population thinks there should be a special digital tax on those digital companies. The European Union believes this way as well and is working on a bill. Amazon will slowly lose market share and probably get a bit more expensive in the future. This is not a game-changer, but a business with its own online shop will likely profit from this trend, especially since e-commerce will continue to rise. And now with the corona virus it will rise even faster! So get in the game now!
Elektro Journal (2019), Konsumentenstudie: Vertrauen in Amazon bröckelt…zumindest langsam, elektrojournal.at/elektrojournal/konsumentenstudie-vertrauen-amazon-broeckeltzumindest-langsam-187945
Hotz, Adrian / Fost, Markus (2017): Die "Amazonisierung" des Konsums - Game-Changer Amazon, at: · Schallmo, Daniel / Rusnjak, Andreas / Anzengruber, Johanna / Werani, Thomas / Jünger, Michael (2017): Digitale Transformation von Geschäftsmodellen: Grundlagen, Instrumente und Best Practices, Wiesbaden
Ingrid Lommer (2019), Marktplatz-Brutto-Umsatz von Amazon.de entspricht 10,25 Milliarden Euro, internetworld.de/e-commerce/amazon/marktplatz-brutto-umsatz-amazonde-entspricht-10-25-milliarden-euro-1718921.html
Simplicissimus (2020): Wie Amazon seine Konkurrenten zerstört, funk.net/channel/simplicissimus-12075/wie-amazon-seine-konkurrenz-zerstoert-1709198