Amazon has an undeniable allure for online retailers. Its massive customer base and powerful search algorithm seem like a dream come true. However, beneath the surface of this seemingly perfect platform lies a complex web of challenges that can significantly impact your long-term growth and profitability for your eCommerce store. So, if you already have an owned domain, here’s why you shouldn’t sell on Amazon to supplement sales.

The cannibalisation conundrum

One of the most significant risks of selling on Amazon is the potential for cannibalisation. This occurs when your Amazon sales directly impact the sales on your own website. As a result, you may end up paying Amazon fees to sell products that you could have sold directly to customers at a higher profit margin.

Selling on Amazon can lead to cannibalisation of sales to your direct store. When your Amazon product outranks your own website’s listings, customers may click this instead of your direct store listing, even if they would have found it organically. This means even if they’re Googling your own brand term. Even if they’re not outranking you, but just appearing on the same SERP, consumers will often chose to shop via Amazon rather than direct due to ease of purchase and eradication of shipping costs that small online “e-tailers” can’t afford to facilitate directly. This often leads to reduced direct store traffic.

Here’s an example, searching for Barry M Kohl Eyeliner. While Barry M outrank Amazon when it comes to these Google Shopping ads, the listings themselves make it clear that you will pay a steeper price in delivery than when you purchase via Amazon.

While some digital websites may consider the “Halo effect” of Amazon, bringing new consumers who would never have purchased otherwise into consideration – we find, from real-world investigations in the UK market, the impact of cannibalisation much stronger and detrimental to long-term growth overall than the positive impacts of Amazon attracting new customers in many cases – especially if your product is quite a unique one and not a part of an overly crowded market!

Still don’t believe me? Here’s just one example from one of our US-based clients and how their online store revenue was affected when they started selling on Amazon, going from generating over $100k per month on their online store to just $30k when Amazon + Amazon ads were fully rolled out. This is evidence of cannibalisation. Not to mention, with meetings with our Amazon rep, we found the majority of our sales were generated through branded search. So, even if our ads were still working to influence sales to occur, we weren’t getting positive feedback in data (no purchases reported) as Amazon owns the data, not use.

What’s more, if you check out our shop overlap rate on branded searches, you’ll find this shop overlaps with Amazon 91% of the time (for branded searches!)

The hidden costs of Amazon

While Amazon offers a vast marketplace, it comes with a hefty price tag. The platform charges a variety of fees, including referral fees, fulfilment fees, and advertising fees. These fees can quickly erode your profit margins, especially if you’re selling low-margin products.

Moreover, Amazon’s fee structure can be complex and ever-changing. The company frequently introduces new fees or increases existing ones, making it difficult for sellers to accurately predict their costs.

If you’re interested in finding out what these fees are exactly, ShopKeeper released a list of all 208 Amazon fees (and counting).. (yes, they said TWO HUNDRED AND EIGHT). You can find out more about Amazon’s fees in their article here.

The loss of customer data

One of the most valuable assets of any online retailer is customer data. By selling on Amazon, you’re essentially handing over your customer data to the platform. This means that you lose control over how this data is used and how you can leverage it to build stronger customer relationships.

Customer data is crucial for targeted advertising and personalised marketing campaigns. By losing access to this data, you may struggle to effectively reach your target audience on other platforms like TikTok, Meta, and Pinterest.

As previously mentioned for our US client, many of their Amazon purchases were driven via branded search which can indicate that ads were still working to deliver intrigue in the product. However, our Meta ads were not showing these “purchases” as we do not own this data – Amazon does. This starts sending false negatives to Meta’s algorithms. It thinks users are not converting and, as such, our targeting becomes a little more erratic and the account ultimately goes into Learning Limited. As an advertiser, losing crucial purchase journey data is an incredible loss when it comes to scaling the performance of ads. So, even if sales don’t dip, your ads platforms may start becoming less and less effective,  and will report a much lower ROAS as you no longer collect all purchase data.

The impact on long-term growth

The long-term implications of selling on Amazon are significant. By relying on the platform for a significant portion of your sales, you may become overly dependent on Amazon’s policies and practices. This can limit your ability to innovate, differentiate your brand, and build a loyal customer base.

Furthermore, Amazon’s dominance in the e-commerce market can make it difficult for smaller retailers to compete. The platform’s vast resources and economies of scale allow it to offer lower prices and faster shipping times, making it challenging for smaller businesses to keep up.

A smarter approach to e-commerce

Instead of relying on Amazon, online retailers should focus on building their own direct-to-consumer channels. This involves investing in a strong online store, optimising your website for search engines, and leveraging social media and email marketing to connect with customers directly.

By building a strong direct-to-consumer presence, you can retain control over your brand, customer data, and pricing. You can also develop deeper relationships with your customers, leading to increased loyalty and repeat business.

While Amazon may seem like an attractive option for online retailers, it’s important to weigh the potential benefits against the significant risks. By understanding the challenges associated with selling on Amazon, you can make informed decisions about your e-commerce strategy and focus on building a sustainable and profitable business.