Is selling on amazon profitable vs selling on your site? Nope ! Here is why…

amazon.co.uk sell page profitable sell on amazon

I strongly believe in the opportunities created by the internet to democratize access for new arrivals on the market and encourage competition. It is, without doubt, much easier to sell a product today than in the days before the World Wide Web.

Pre-internet, it was vital to find a physical reseller to generate turnover and you often had to accept unfavorable sale conditions e.g. high commissions and/or high volumes. With internet here to stay, you can now sell your products directly via your own website at the price and volumes you choose! We are finally free from the former constraints and in control of everything from production to distribution and customer relations.

This is why it’s such a shame when entrepreneurs “get rid” of their stock on Amazon or another marketplace, or even in shops. For me, this means sellers aren’t making the most of the freedom offered by the internet, and are indirectly destroying the value of their business.

amazon.co.uk sell page profitable sell on amazon
amazon.co.uk seller page

With no investment in the brand, as all the potential budget goes on Amazon’s commission, and no contact with customers (or opportunities to develop loyalty), what will your start-up be worth when you come to sell it?

On the other hand, what if you started investing a little more in your own website?

To convince you how important it is to invest in your website, I’ve created a practical example over 3 years to show you when the ROI from your website would exceed shop or Amazon sales.

Case study: hypothesis and figures for minimum marketing budget

The minimum you need to sell online is an e-commerce website optimized for SEO. With a simple structure and single product, a WordPress-style website, support from a freelance webmaster, graphic designer and SEO consultant, you’re ready to sell!

Minimum Marketing Budget required
Minimum Marketing Budget

The aim is to establish solid bases for future expansion with minimum investment for the first 3 years and a mini advertising budget to test different paid tools like AdWords and display, as well as quantify acquisition costs. This test period also enables you to prioritize advertising expenses based on conversion rates once additional funds have been raised.

The investments in the first 3 years focus on creating and designing your website and optimizing it for SEO.

As you can see, the monthly spend is higher for SEO. If you hire me as your SEO consultant, I’ll help you implement the strategy (including site structure and content creation), deliver meaningful reporting and action plans, and test SEA and Display – find out more.

The rest (social media, PR, emailing, text content, photos etc) should be taken care of by the startup founders, unless you’re able to top up the budget. This will obviously depend on the resources available internally.

Year 1 will be the most costly (42K), as you have to finance the website, the graphic design, and the SEO strategy and implementation. But this decreases in years 2 & 3 (27k per year) with just maintenance and follow up costs. Basically, in this hypothetical example, you’d need to invest at least 110K over 3 years to give yourself a chance of success.

3-year comparison: direct sales vs. Amazon and shop

The hypothetical sales used here are on the conservative side based on 5 sales per day in year 1, 10 per day in year 2 and 15 per day in year 3.

The first column represents direct sales via a website, the second an online distributer like Amazon (15% commission) and the third a physical shop (30% commission).

Direct online sales become more profitable than Amazon and retail from year 2: 82,500€ profit for direct sales vs. 82,125€ for Amazon and 54,750€ for retail. And, the gap just keeps on getting bigger as your sales increase!

3 years projection and amazon profitablity
3 years projection

As well as making more profit quickly, your business will also be able to develop its branding, client base and product ranges.

When sold, the startup will be worth a lot more based on the value of the site itself (traffic and links), the brand (notoriety) and the customer base (Customer Life time value). Each process and investment creates real value.

Why not sell on your site to develop your brand and on Amazon to drive volumes?

Is this such a good idea?

In terms of SEO, your site will be in direct competition with the Amazon pages for your keywords. With more authority than your site, Amazon will rank ahead of you on the results page preventing you from selling via your own site.

What’s more, if customers have a choice, they’ll most likely order on Amazon where they already have an account. Each client you give to Amazon is one less client for you…

Not sure where to start? Contact me to work out the best strategy for you!

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