eCommerce marketplaces will be dead for 3rd-party sellers. And those days are not far away. Yes, you read the statement perfectly.
Amazon is kind of a money-making machine on its own and not for 3rd-party sellers. Major e-commerce platforms like Amazon, eBay, Walmart, and Etsy take a substantial portion of your earnings through various fees. These fees range from sales percentages to subscriptions. Amazon promotes its gigantic customer base and encourages you to fish in murky waters. The marketplace provides a stage for showcasing your products and generating sales.
However, It doesn’t mean that you just run the PPC while you launch a product or for a few cycles to generate traffic, impressions, and conversion. You need to run the PPC advertisement for a longer period, even until you sell the item on the marketplace. Because, once you stop the PPC campaign, your sales will be down heavily.
Initially, the imposed fees looked reasonable. Upon closer examination, it becomes evident that sellers give away most of their profit margins. Sellers find themselves left alone with very minimal returns.
So now as an Amazon seller, you have to make a decision: will you work for Amazon and give them all of your hard-earned money, or will you build your own business where you have full control and nobody can destroy your business?
In this comprehensive blog, we have come up with concrete facts to defend our statement. We will explain how you could build your own business with better control, freedom, and profit margin that will help you grow your business to the next level.
So let’s dive deep into the discussion about Personal website is better than the Marketplace.
In this guide, we will cover:
- Marketplace fee explains
- Account Suspension
- No Control Over Your Business
- Customer Data and Insights
- Social Media Marketing
- Competitiveness
What you are Earring, Marketplaces are Taking Most
When it comes to marketplaces they typically charge various fees from sales percentages to subscriptions – with some hidden charges as well. Actually, the charges are typically high. But In the blink of an eye, it might sound low. If I give you an example you will understand clearly – how they are making you fool by showing their vast customer base and services.
Let’s say – You are selling this item (B08P31CC4J)- “Hemp Cream” at £23.97 on Amazon.
Here, you see, in the last month from 1st December 2023 to December 31st, 2023, the total number of order items is 2801.
On average, marketplaces like Amazon charge a 15 to 25% referral fee per unit sold based on the category.
Let’s say – for this particular item, the referral fee is 15%. This means, Amazon takes around £3.6 per unit sold. So in December, it charged around 2801 x £3.6/per unit = £10,083
Moreover, as we are using FBA for this item – we need to provide the following fees
- Fulfillment Fees
- Storage Fees
- Long-Term Storage Fees
- Removal Fees
- Unplanned Service Fees
- Returns Processing Fees
Here we can see from the FBA Dashboard –
From 1st December 2023 to 31st December 2023 – we can see that the total FBA fee is – £24,505.62 So, for 1 item it’s around £3. So for 2801 units, Amazon is taking £8,403 approximately.
Now, let’s calculate the storage fees for this item. So, according to Amazon, during January – September, when it’s the non-peak time, we need to pay £0.78.
During the peak time, which is October – December we need to pay £1.10 total monthly storage fee per cubic foot for standard-size items.
As we are calculating for December, so Let’s say we have sent 3000 units – if we send 27 units per carton and 1 cubic foot for each carton then it would consume around 111 cubic feet. So we need to pay around £122 for a month.
Not only that, now let’s check out the PPC cost:
As you can see here, we have spent around £5400 for PPC in the previous month.
So, we need to pay around £24000 per month for this product.
Not only that, we didn’t count monthly subscription fees of Amazon, and other fees like Long-Term Storage Fees, Removal Fees, Unplanned Service Fees, Returns Processing Fees, and many more hidden fees.
We have earned around £67,000 for this item in December. After deducting the COGS, Shipping costs, employees’ salaries, and other additional costs, and calculating at the lowest, the amount will be around £27,000, which means Amazon is taking around 89% of the profit.
Moreover, after all these expenses, we sometimes have to run extra PPC campaigns or offer promotional discounts to sustain sales. So at the end of the day, we don’t get the profit we hoped for before starting selling on Amazon.
But, if you do business on your website – You don’t need to pay any sales commissions, subscription fees, etc. Yes! You just need to pay for the shipping services. But you can get a huge profit margin by selling on your website.
On Amazon, a profit margin of around 13% is considered challenging to achieve for new sellers. Even seasoned sellers often struggle to reach a 10% profit margin.
Because, after all the fees and subscriptions associated with Amazon and PPC advertising, businesses are unable to make much more profit due to Amazon’s built-in system. So whatever sellers are earning, most of it is going to Amazon’s pocket.
If you sell through your website. The absence of sales commissions means you can consider the entire earnings for yourself. In this case, you would just deal with some minimal costs associated with shipping services.
You would have to deal with some initial investments for the domain, hosting, and development. But the amount of investment you would spend here is pretty much lower than the overall charges imposed by different marketplaces.
Moreover, there would be no other ongoing expense than website maintenance.
You can avoid this cost if you have minimal coding expertise. Platforms like Shopify, WooCommerce, BigCommerce, etc. are offering user-friendly and cost-effective solutions for building personal websites.
Account Suspensions
At times, online marketplaces face allegations of unfair or questionable practices. Claims are often made that marketplaces detected unusual activity. Breached the platform’s terms resulting in the permanent suspension of sellers’ accounts.
This action includes withholding funds without offering clear explanations. This aggressive act leaves sellers with financial setbacks and harm to their reputations. Obtaining information on the suspension is even more challenging which makes the situation even worse.
Let us share a scamming story-
We have worked with a client Mr. David. Mainly we handled the eBay account of his business.
When we started working with him, he was struggling with his business to generate expected sales. He had high-quality products with very competitive prices, even lower than competitors. We inspected everything and worked on the areas where we could improve overall.
After spending a few months, we were able to increase the sales a bit. But, gradually sales were increasing every month. After 1 year, we were able to hit 50000K in sales. And the Next year – it was 7 digits – more than 1 million dollars.
Mr. David was very satisfied with the sales performance and everything was going smoothly. Suddenly, we noticed that we were not able to log in to the eBay account.
Instantly we informed him and checked from his end if everything was okay or not. After, checking from his side, he mentioned to us that eBay had permanently suspended his account due to the policy violation issues.
The news was overwhelming. Because at that time there were around more than 3lacs in the account.
And we knew the account would not be back. Because it was not the first time we experienced it. We have also faced these issues with other accounts.
But we were shocked due to the amount. If marketplaces suspended any account there was a 0.5% chance to get back the account and withdraw the money.
So, Mr. Devid didn’t just lose money, he lost his 5 years of hard-earned business and brand.
You might be thinking, we are just telling a fictional story. Believe us, we are the witness to this type of scam from a well-reputed marketplace.
Again we assure you that- if you want to see the real-time data or case study, please contact us or email at info@ecomclips.com. We will be in touch with you as soon as possible.
On the other hand, if you want to have better control over everything – building your website for the business is going to be the perfect solution. With a personal website, everything is in your hands, from security to transaction. You don’t need to follow any guidelines, or systematic privacy policy that the marketplace has. Unless you have shared the credentials – there is no chance of losing the account and money.
Losing Control Over Business
Having a personal website offers several advantages and a higher level of control compared to selling exclusively on online marketplaces.
You have complete control over your brand’s presentation. You can design the website to align with your brand identity and showcase your unique value propositions. It also provides greater customization and flexibility in terms of design, layout, and functionality. You can tailor the user experience to meet the specific needs of your target audience and adjust it as your business evolves.
Most importantly, You will get direct access to customer data and can build relationships with your audience. This direct communication allows you to gather feedback, respond to inquiries, and implement customer-centric strategies.
Apart from this – you have the freedom to set your pricing strategy without being bound by the pricing structures imposed by third-party marketplaces. This can be especially beneficial if you want to implement dynamic pricing or offer exclusive promotions to your customers.
You can design, customize, brand presentation, and set prices in your way, communicate with your customers, and run promotions as you want.
On the other hand, within an online marketplace, your business operates within a predefined framework. You need to follow the guidelines of particular marketplaces.
For example, Amazon controls the pricing strategy with a feature box or buy box. It is a prominent purchasing option that appears on a product detail page with the product’s price, shipping information, and the “Add to Cart” or “Buy Now” button.
You have to set your pricing strategy to maintain Amazon policies. If you increase or decrease your price way more than your competitors, you will lose the feature box. Without the feature box, customers will show less interest in purchasing from you.
On eBay, you can’t update a title in more than 80 characters. This means the marketplace predefines the character limit for the title, and you need to deal with it.
Imagine,
You are selling a Phone Cover that is compatible with Samsung Galaxy S10, S9, S8, S7, Galaxy Note Edge, Note 9, Note 8, Note 5, and Galaxy Note 8.0
For this item, you want to add all the compatible devices in the title, but the marketplace will not allow you to add all of them if you exceed the character limits.
You know very well that the title is the 1st thing that shows up on the marketplace when customers search the marketplace. If you cannot add all of them, how will customers understand and buy your products?
In the end, you can say – your store’s overall look and feel are subject to the design standards set by the market that limit your control over how it looks.
Customer Data and Insights
There are several crucial factors to consider while developing a brand. Customer insights are one of them. You must consider consumer data and insights while developing a marketing strategy. You can determine which strategies will appeal to your target customer group.
On your website, you will have direct access to customer data. You can foster relationships with your audience. The direct line of communication lets you collect feedback and gain valuable insights into customer preferences and purchase decisions.
With all of these opportunities, it is easier to build a loyal customer base and promote brand awareness. You can address inquiries and implement customer-focused strategies. You can utilize customer data to tailor offerings and marketing messages, enhancing satisfaction, increasing engagement, and boosting conversion rates.
However, customer details are not shared with sellers in marketplaces. You will rely on marketplace funneling to monitor awareness and conversion. Limited access to customer insights outside the platform poses challenges for implementing personalized marketing strategies.
It is kind of impossible to build a loyal customer base through marketplaces. Just because the marketplace shows your items in front of some customers, they are purchasing them now. After some time, when they buy again, it can’t be said that your product will be shown to those customers again. They would end up buying from other sellers.
Yes, you would have sales as well, but it is tough to keep repetitive customers. If you look at the market, all well-renowned and established brands have their website in the first place.
Social Media Marketing
In the ever-changing landscape of technological advancements, social media platforms are set to become the most influential in the world of e-commerce. After a few years, marketplace trends will not be the same, and social media will grab the places.
Marketplaces place restrictions on the excessive use of social media platforms for marketing purposes. Heavy use of external social media platforms could divert valuable ad dollars away from these marketplaces.
A personal website provides a different perspective. There are no restrictions on utilizing social media for marketing purposes. Whether it’s Facebook, Messenger, TikTok, Instagram, YouTube, or others, you have the freedom to leverage any platform for your marketing needs.
Let’s consider the vast user bases of popular platforms – TikTok boasts 1.1 billion monthly active users, Facebook has 3.03 billion, YouTube follows closely with 2.49 billion, and Instagram has 2.4 billion active users.
You can imagine the scenario now. Conducting business solely through marketplaces means missing out on connecting with approximately 9 billion online users globally. This is a substantial opportunity to showcase your products to a massive audience.
Beyond just marketing, an additional revenue stream is available through live streaming. Let’s imagine, you have a TikTok or Facebook account where you engage in live streaming.
Image – If you have a TikTok or Facebook account where you are doing live streaming. People are watching your video – not only your specific followers but also other users. So, at a certain amount of video watched by the users, you will earn money from the platform.
If you hire a well-known TikToker or influencer who has a huge fan base or followers for livestreaming your products – imagine how much traffic you get from there and at the same time you will earn money from the platform.
That money you can utilize for your business like product sourcing.
Extensive Competitiveness
Usually, the marketplace may seem like a convenient way to kickstart your online selling business. But you need to be competitive.
Like – your products will be shown directly with competitors’ products. In essence, you will need to exert additional effort to stand out from your competitors. Also, you need to compete with the marketplace’s own Brands.
Not only that – you need to compete for ranking your products. If your product is not able to secure a higher ranking, we will not get the sales.
Another important thing is – that your product price should be competitive according to the marketplace pricing policy.
For example – at Walmart, if your product price is too low or too high compared to competitors, the marketplace will unpublish your item. This means you are not able to sell this item unless your product price becomes competitive according to the marketplace. Ultimately – you are losing sales.
But, on a personal website, you will never face this type of issue. You can keep the price according to your marketing strategy, profit margins, and marketing positions. You can showcase your other products in the same details page.
Yes! Price competition may exist but is often more within the seller’s control.
Let us show you the final example –
When we started working for this store “Welding for Less” the total website sales were 110K, and the total traffic was 46k.
It’s really good and moderately established.
Upon our analysis, we understand that it’s tough to increase sales and traffic. Not only tough but also challenging as well.
So, we took the challenges and started to implement our strategy. Now, you can see at the end of the year – the sales were $165k, and the total website traffic was 61K
Final Thoughts
Drawing from our insights and expertise, we forecast a future where websites and social media will surpass traditional marketplaces. This trend is being driven by the growing popularity of user-friendly and cost-effective platforms like Shopify, Magento, BigCommerce, and WooCommerce, as well as the widespread use of TikTok, Facebook, and Instagram.
Sellers who currently operate on marketplaces are transitioning towards these versatile platforms. Recognizing that the future of commerce lies in having your website. It is high time you try to establish your brand through your website. Although building trust and a loyal customer base takes time, the effort pays off for long-term viability. Leveraging social media makes connecting with customers more accessible than ever.
We hope you get a clear idea of the overall aspect. If you are new to selling on a Website, struggling to manage and generate expected sales, or thinking to start selling on a Website, we are here to help you. Please contact us at this email at info@ecmomclips or call us directly via phone for detailed discussions and planning.
Not only sales, we have also worked on the overall website look and fixed technical issues.
We have more than 12 years of experience in Website building to management. We have a vast knowledge of Website SEO, technical issue-solving, Ranking commercial and Transactional Keywords, content marketing, and many more.
We have also helped sellers with Google ads management and social media marketing. If you need help building your website or want to sell through a Website from scratch, feel free to contact us at info@ecomclips.com