Growth Strategies and Sales Channels Outside of Amazon (And Whether You Should Use Them or Not)January 17, 2018 in Blog
We all know that Amazon is THE place to sell. I have steadily seen my Amazon sales go from around 25% in 2013 to all the way up to 90% today. However, there remain a lot of powerful sales channels outside of Amazon. Some of these channels, such as your own website, can be used simply to support your conversion rates on Amazon. Others, like Walmart, are simply a bet on future growth. And finally, there are a number of niche dependent sales channels like Etsy, Houzz and even eBay Motors, which can result in very strong sales if your product assortment matches those channels’ target market.
In this article I give a summary of the most important sales channels outside of Amazon to help you diversify your sales and give some basic guidance on whether you should be using these sales channels or not.
The other sales channels we’re going to cover in this article are as follows:
- Your own website, specifically your Shopify store
- Other Amazon marketplaces, including Amazon.ca, Amazon.co.uk, Amazon.de, Amazon.jp
- eBay and eBay Motors
- Craigslist and Local
The big question you need to ask yourself before you explore other sales channels is whether or not you even should explore other sales channels. The alternative is, of course, focusing strictly on Amazon. Mike and I had an interesting debate on the podcast last year about this very topic, Should You Go All in on Amazon or Not?
I previously ran a business that went from having Amazon account for 30% of our sales in 2013 to 67% in 2016. My current business will likely have Amazon account for over 90% of my sales for the foreseeable future. I cannot imagine many ecommerce niches where Amazon will not be at least 50% of their sales and, in most cases, over 70% of sales.
The problem with pursuing other sales channels is that they will extract a disproportionate amount of your time. Managing/growing Amazon sales and product development should almost always be your key tasks and you want to be certain that launching another sales channel that will only move the needle a small amount will not take much of your time away from these activities. If you’ve maximized your Amazon sales and product development or you have a staff member that can profitably manage these other sales channels then expansion makes sense. In all other cases, it should be carefully considered.
Your Own Website
Who should be selling here? Everyone, especially Amazon sellers.
Everyone needs to have their own website. Even if you’re an Amazon-only seller you need a website for one reason: it establishes credibility for your brand and will help your conversion rate on Amazon. Most of us have probably heard that Amazon now surpasses Google as the place people begin their product searches on. However, even when consumers have found what they’re looking for on Amazon, 70% of them will still look on other ecommerce sites before purchasing. So if somebody is on my Bryanto Garlic Press Amazon listing, there’s a good chance they’re going to go and search Google for Bryanto Garlic Press and you want your website to come up when they do this. Having a snazzy website will do one of two things: it will either re-affirm the customer’s intent to buy your product on Amazon or they will buy directly on your website.
I have run websites on multiple platforms, including OS Commerce and Magento. There is no doubt, in my mind, that the best platform for the vast majority of sellers is Shopify (and they’re Canadian so they have to be good!). You can setup a very professional looking ecommerce store for $40/month in a couple of hours. The alternative to opening a shopify store, if you really want to do things on the cheap, would be to setup a simple WordPress site which you could host for well under $5 a month.
Other Amazon Market Places (i.e. Amazon.ca, Amazon.co.uk)
Who should be selling here? Those looking for the biggest sales boost albeit for the most work.
The sales channels that arguably have the highest probability of earning the highest growth for your ecommerce company are other Amazon marketplaces, specifically Amazon.ca, Amazon.co.uk and Amazon.de. We have excellent guides on selling in Europe and selling in Canada which you should check out if you’re serious about getting started here. Very roughly speaking, Amazon.ca can reasonably expect to give a 10% boost to your sales. Germany and the UK can both give similar growth numbers.
International Amazon marketplaces are very much unique sales channels. Organic rankings happen largely independently of one another, seller feedback is kept separate (which often means any policy violation suspensions happen independently), and ASIN metrics are kept separate for the most part (which again means any ASIN suspensions happen independently).
The downside with selling in international marketplaces, which is also why they’re still lucrative, is that it’s probably the most difficult growth channel of all those listed here. You can list an item on eBay or Houzz within a couple of hours but selling in Canada or Europe is going to take you days, if not weeks.
All of the Amazon marketplaces charge similar referral fees as Amazon.com (15% of sales on average). FBA fees vary widely, often significantly higher than Amazon.com which is something you want to take into consideration in your pricing.
Who should be selling here? Those selling general consumer goods looking for small single digit growth but looking to the future.
Walmart doesn’t reveal what its ecommerce sales are but analysts estimate Walmart’s ecommerce sales to be about 3% of their revenues, which would put their ecommerce revenues at a minimum of $15 billion. In comparison, this would be about double eBay’s revenues but just 12% of Amazon’s revenues. Walmart is not as reliant on third party sellers and so third party sellers may only make up a small percentage of this already relatively small number.
Anecdotally, I hear a lot of ecommerce sellers reporting that Walmart is becoming more and more significant, but I’ve yet to talk to a single seller who has Walmart making up more than 10% of their sales. The real reason to start selling on Walmart is betting on the future. Walmart’s ecommerce sales continue to grow at nearly 40%. They also recently bought Jet.com and other high profile ecommerce sites and there’s solid reason to believe their ecommerce sales will only continue to grow.
Walmart’s referral fees vary even more than Amazon’s depending on the category but average out to around 15%.
eBay and eBay Motors
Who should be selling here? Any with products that can be sold on eBay Motors, cheap commodity type electronics.
eBay? What is this, 1999?
You may be surprised to know that eBay still is a relevant sales channel for many niches. eBay is now only about 5% the size of Amazon (compared to nearly 10% five years ago). However, certain categories are strong on eBay, specifically eBay motors. I know a number of people running automotive based businesses (any vehicle parts, be it consumer vehicles, recreational vehicles, or industrial vehicles), myself now included in this list, and eBay Motors is still a very significant part of all of our businesses, albeit a very small fraction of Amazon.
For cheaper commodity type electronics, i.e. phone accessories, electrical components, etc. eBay is also very strong.
I also did a a longer article on why you need to be selling on eBay that has a lot of other useful information.
eBay charges a 10% referral fee plus PayPal fees (2-3%) plus your own fulfillment.
Who should be selling here? Anyone selling household products, especially decor.
Houzz has probably occupied a tab in your web browser at some point in your life, probably between a tab for Ikea and Pottery Barn. If you don’t sell household items, specifically decor, Houzz will probably never be anything more than inspiration for your next kitchen reno. But if you do sell household decor, Houzz should rival Amazon for a percentage of your sales.
Houzz is a private company and their revenue numbers are private. However, they report 40 million active monthly users and almost anyone in the home decor niche reports huge sales from Houzz. As an example, a friend working at a San Francisco venture funded home decor startup (with 7 figure monthly revenue) reports Houzz is nearly 40% of their sales. Another friend selling borders and wallpaper reports similar sales.
If you’re unfamiliar with Houzz, Houzz is a bit like a blend between Pinterest and Facebook. More or less, users post or browse photos of areas around the house (i.e. living rooms, kitchens, patios) for inspiration. Products in that photograph are tagged with the products presented in it or similar products are advertised.
Houzz typically takes a 20% commission on sales and sellers are responsible for shipping everything.
Who should be selling here? Anyone selling fashion products, handmade products, craft supplies.
To sell on Etsy you have to be selling handmade, vintage, or a craft supplies. This is going to eliminate the vast majority of private label sellers, however, Etsy is pretty liberal in their interpretation of “handmade”. If you search for wooden watches on Etsy, you’ll see that the vast majority have parts largely from China, if you don’t believe me. This liberal interpretation opens the doors to a lot of sellers. Handmade leather belts from China? Pretty much any jewelry made in your pick of cheap Asian country? All of these would likely be permissible for sale on Etsy. If you sell any craft supplies, whether or not there is even a hint of handmade, those are allowed as well.
Overall, Etsy has been struggling to find a balance between being profitable and sticking to it’s handmade roots. As one million dollar former Etsy seller described to me, “Etsy is doomed.”
Of all the sales channels, Etsy takes one of the smallest referral percentages: $0.20 per listing and 3.5% of sales.
Craigslist and Local
Who should sell here? High margin or high priced items.
This gets slightly outside of the boundaries of ecommerce but there are still a ton of people making a killing off of selling their products locally through websites like Craigslist, Kijiji, and other similar local classified and auction sites.
The big advantage to selling on Craigslist is that there is no cost; the downside is there is a heavy time cost. Subsequently, selling items locally favors items with high dollar margins. If you’re selling an item for $10, it doesn’t matter if you’re making 90% profit margin on it – you’re still only making $9 profit; However, if you’re selling an item for $250 that you have a cost of $100 on then the math starts to make more sense. Imagine the math on this hypothetical $250 item:
Amazon: $250 – $100 cost – $37.50 selling fee – ~$20 FBA Fee – ~$10 inbound FBA fee = $82.50 profit
Craigslist: $250 selling price – $100 cost = $150 profit
Your profit margin is nearly doubled.
For all of my brands, I’ve always sold thousands of dollars’ worth of products a year through Craigslist, not necessarily deliberately but rather because stock would always end up at my home or office (trade show leftovers, samples, returns, etc). However, I know multiple people who are deliberate with their local sales strategy and make mid-high five figure incomes selling exclusively locally.
Plus, Craigslist is free to sell on.
Wholesale and B2B
Who should sell here? Those with a strong differentiated brand.
For my previous company I chased the unicorn of wholesale sales for years. For some reason, in my head I always felt like my business wasn’t real if all of my sales came from ecommerce. I spent countless time pursuing this. I developed a wholesale section of our website, I developed product catalogs, and cold-called customers. At the end of the day, my company did no more than $10,000 in sales from B2B customers (out of nearly $2million).
The problem was that my company sold a largely undifferentiated product. For undifferentiated private label products, all of the major retailers work directly with factories in China or through large distributors. This left only small retail customers who would only purchase in very small quantities.
For those with a strongly differentiated product (this often means you have a patent) wholesale is a very credible path to pursue. It gives you an avenue to diversify away from ecommerce sales, which is always a good thing, and margins may be stronger. The downside is that managing wholesale B2B customers is almost like running an entirely separate business as it requires a whole different skill set.
Wholesale customers typically expect to receive a 50% discount off the retail price of an item.
That’s a summary of the other sales channels you should consider for your ecommerce business outside of Amazon.
There’s no doubt that for almost any ecommerce business, Amazon will be the bulk of the lemon for most people. Selling on other sales channels is, more or less, tantamount to trying to squeeze the lemon just a little bit harder for a few more sales. Those few more drops of revenue may or may not be worth the extra effort depending what stage your business is in.
Are you selling on any other sales channels outside of the ones I mentioned above? Do you have any questions about any of the sales channels I mentioned here? If so, comment below.