This article originally appeared on Medium.
I recently wrote an article about how Facebook could potentially take on Amazon in the eCommerce world. Facebook keeps introducing more and more tools that make the foundation for a good eCommerce experience. Just yesterday, they launched the desktop version of Messenger. Only a couple of weeks ago, Facebook gave consumers a way to directly connect with businesses on Messenger — including receiving transactional messages typically sent by email after purchasing.
All of this goes to something that has been marinating in my head over the past year or two — something that I’ve been reluctant to talk about until now.
Small eCommerce companies are going to be squashed unless they make changes NOW.
The Internet has been a way for the little guys to make a name for themselves. Small teams with low overhead can make a few million dollars without the startup drama and capital required to build a brick-and-mortar store.
It can look a little something like this:
- Use a free copy of Magento as your eCommerce system (pro versions give you more tools)
- Set up PayPal to accept payments (upgrade as your business grows)
- Find manufacturers that will ship products on demand directly to the customer (drop shipping), so you don’t have to keep stock, have warehouse space, or worry about shipping
This example is oversimplified. You have to have the right products, pricing, branding and especially marketing to get in front of customers — things that were much easier 10 years ago.
It’s getting harder and harder to compete with Amazon and, with mobile taking over, it will probably put many of the small eCommerce sites under.
- It’s almost impossible to beat Amazon on price. They have algorithms and people scanning the Internet to find the lowest prices on the products they sell and then they match or beat it. Unless you have a unique product that is not on Amazon and doesn’t have a close alternative, you’ll be hard pressed to compete on price.
- Mobile apps — Your mobile website is not as good as mobile apps from companies like Amazon and Zappos. Unless you’re very special, building your own mobile app is a waste of money:
- Users don’t want 500 eCommerce apps on their phones. They’ll pick 4 or 5 and those will be the ones they use when shopping.
- Most apps suck. I’m sorry, but it’s the truth. Only the very good, exceptionally expensive and constantly updated apps will win. You can’t afford it. Even if you can, see my previous point.
- It will soon be impossible to compete with Amazon on shipping. With warehouses popping up in metro areas all over the US and drone deliveries in the works, standard three-day shipping will seem like an eternity in our instant gratification society.
If you can’t beat ‘em, join ‘em
Let’s dig out of this web of negativity I have just woven. If you can’t beat Amazon, one option is to sell your stuff on Amazon.
Here are some of the pros and cons of working with the competition:
- Pro: Amazon has an eCommerce system and mobile app that you don’t have to build. I don’t recommend it, but theoretically, you no longer need an eCommerce site. You can focus those resources on perfecting your Amazon product feed
- Pro: Amazon takes care of the advertising
- Pro: Amazon processes the orders and pays the fees
- Pro: You can store your products in Amazon’s warehouses relieving you of the burden of shipping each individual order
- Con: Your customers are not your customers. You aren’t allowed to add your store’s branding to the packages — there’s little chance that they’ll even realize they bought from you. You don’t get their email address — say goodbye to being able to reengage past customers.
- Con: Competition — You compete with everyone else that is selling your products. Typically, the lowest price wins. If Amazon sees a product selling well, they’ll reach out to the manufacturer and try to buy it from them directly making it even more difficult to get the precious “buy box”.
- Con: All of your eggs in one fickle basket. Miss a couple of ship dates or have an error in your feed and you can lose your Amazon account. If the bulk of your sales come from Amazon, you toast.
Those cons are why the possibility of an eCommerce system from Facebook is so intriguing to me. I believe Facebook, like eBay, will allow businesses to keep their identity and customer information.
The competition will be there eventually, but early adopters will win. I also don’t think Facebook will get into the business of buying wholesale and selling their own products the way Amazon does.
I think you’ll still need to purchase ads on Facebook to drive traffic to your Facebook products, but not on the scale of operating a stand-alone eCommerce site.
I believe the future of small business eCommerce will look a little something like this:
- Maintain a simple eCommerce website for branding purposes
- The bulk of sales will come from selling through a mix of third-party systems (Amazon, Rakuten, eBay, Facebook. Wal-Mart, Sears). Don’t put your eggs in one basket
- The bulk of technology investment will go into maintaining the best product feeds for the third-party sites rather than in stand-alone eCommerce systems
I’ve been reluctant to share this, because websites have been so important to me throughout my career. I love having control. The thought of giving that up to another company pains me.
I’m not saying the stand-alone eCommerce website is dead … not even close.
What I am saying is, if you want to survive the next five years in eCommerce, NOW is the time to get your branding on point. You need to be on top of your social media and content marketing game to make sure your customers love you, recommend you, and think of you first when they’re ready to shop.
Your website needs to be smooth and frictionless. Don’t make them think, because you’ll drive them right back to Amazon.
Finally, start learning how to sell on those other systems and use them as another source of income.
We’re moving into a new era of eCommerce. Get ready!