CEO and Founder of BlueTuskr, a full-service digital marketing company for e-commerce sellers, and host of The E-Comm Show podcast.
Although Amazon has distinguished itself as the No. 1 e-commerce site in the world, our digital marketing agency has observed an increasing number of e-commerce sellers leaving the marketplace. In response, we have been assisting these sellers in enhancing their Amazon businesses in the short term. Our aim is to help them mitigate the initial costs associated with diversifying away from the platform in the long term.
Perhaps the biggest reason for this passive exodus is that it has become increasingly cost-prohibitive to remain on Amazon. In addition, entrepreneurs longing to build up their brands have become disenchanted with the lengthy and arduous process of doing so on this increasingly competitive site.
Finally, many e-commerce sellers are learning that their online stores can make more money in the long run if they diversify to different sales channels instead of sticking with Amazon alone.
The Costs Of Selling On Amazon
Why are Amazon sellers leaving? As previously mentioned, arguably the biggest factor is the combination of notoriously costly fees that the company continues to raise for sellers. For example, the average fulfillment by Amazon (FBA) fee for a small 12-ounce package rose 33% in the past five years (from $2.41 in 2018 to $3.22 in 2023). The average FBA fee for a large 1-pound package rose nearly 50% (from $3.19 in 2018 to $4.75 in 2023)!
Another increased business cost for e-commerce sellers on Amazon is the platform’s average cost-per-click (CPC), which was as low as $0.75 back in May 2020, but is sitting at $0.91 as of May 2023 (a 21% increase). While this isn’t as bad as the CPC was back in December 2021 ($1.32, a 76% increase from May 2020), it shows how volatile the pricing for adverts on Amazon can become. And with 62% of surveyed Amazon sellers recording less than $25,000 in lifetime profits, these ever-increasing fees can make it too expensive for many e-commerce sellers to maintain a serious margin on Amazon.
Why Amazon Isn’t The Best For Building A Brand
Apart from being more expensive for sellers in general, Amazon is also not the best place for an up-and-coming e-commerce business looking to build its own brand. For example, because it is expensive to pay for the necessary advertising to get sales going on Amazon at the start of a seller’s journey, even hawking something as simple as a T-shirt can become a nightmare.
And if sellers want to branch out so they can build their own lifestyle brands, the road is even harder. Since Amazon is search-oriented, it’s incredibly difficult to create a unique brand that actually turns a profit without being drowned out by all the noise.
The cash value of this critique is that if you want to stand out with your own brand and build a group of loyal customers instead of just being another wholesaler, Amazon may not be your best bet.
The Attraction Of Diversification Away From Amazon
Creating an omnichannel selling strategy that moves your e-commerce venture primarily away from Amazon presents numerous benefits. For starters, businesses that develop consistent branding—including a solid social media following, distinctive brand values and a traffic-friendly website—often experience an increase in revenue.
In addition, building your customer database (such as a hefty email or subscriber list) rather than relying solely on a rotating array of Amazon buyers creates a tremendously valuable asset for your business, which will be factored into the valuation of your company when it comes time for your exit. The same goes for high traffic and conversion rates on your e-commerce website that you’ve built, your business’s SEO presence, and social media assets that will be attractive to anyone looking to buy your company.
You simply can’t expect these benefits if you do most of your selling on Amazon. If you want to avoid rising costs, develop a standout brand and make your online store big enough to be worth selling for top dollar, you need to diversify away from Amazon.
That doesn’t mean leaving the platform entirely, but it means putting your eggs in multiple baskets, including your online store, social media (such as Facebook Shops) and brick-and-mortar retail options. Doing so will create multichannel customers, which represent a higher lifetime value than single-channel shoppers (e.g., those who are only looking to buy on Amazon).
E-commerce sellers should focus on building companies that won’t be at the mercy of any one single platform’s rising fees and highly competitive atmosphere. Sellers must take control of their business and build brands that will last.
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