Why moving your products to Amazon isn’t the (only) solution

Amazon has ALL of your customers’ data. All of it.

They know your pricing, profit, and sales volume. They know where your customers buy from, who they are personally, and what else they buy.

And they’re starting to use that extensive knowledge for their own personal gain.

Former Amazon employee, Rachel Greer, recently explained that…

“Amazon has the ability to track both what people are buying as well as what they search for and can’t find, giving the e-retailer a huge edge on smaller sellers.”

Amazon is scaling their own private label, AmazonBasics, which looks eerily similar to some of the already bestselling products on their platform.

For example, Rain Design’s laptop stand has been one of their most successful products to date. It has been a bestseller on Amazon for a decade.

A bestseller that is, until AmazonBasics unveiled a similar laptop stand and cut into Rain Designs’ sales.

Harvey Tai, the general manager for Rain Design, told Fortune,

“There’s nothing we can do about it because they didn’t violate the patent.”

Instead, Amazon is sitting back collecting data. They’re spotting trends and predicting what customers will buy next.

What do you think will happen when your product(s) start gaining some traction? Amazon knows exactly how much money you’re making on their platform.

They’ll simply create their own version, just like the laptop stand above. Then, they’ll slash the price in half. They’ll add in their vaunted two-day shipping to begin eroding your market share.

And you’ll be left in the dust. You can’t compete with Amazon. Think this is just an isolated incident? Think again.

You can pick almost any product category off the top of your head right now. Do a quick search on Amazon, and you’ll see an AmazonBasics alternative to the previous Best Seller.

For example, they’re even dominating patio furniture with outdoor heaters. And they’re price matching the competition down to the cent.

In a race to the bottom, where everyone is competing on price, guess who wins?

Amazon has pursued volume sales since the beginning. There’s no one better at exploiting economies of scale – and picking up a few pennies on each product sold – because they can move millions of units a day.

Let’s do another search. Check out printer paper for your computer and here’s what you’ll see:

This one is interesting for a few reasons.

1. Once again, AmazonBasics is coming in lower priced.
2. But they’re also going to ship it in half the time of HP’s version.

So guess which one you’re going to buy? There’s no question.

At this rate, it’s not a matter of if, but when Amazon is going to enter your space. Just ask Walmart. What’s the first thing Amazon is doing with the newly acquired Whole Foods? Slashing prices.

Not recklessly, but intelligently. For example, Amazon has been one of the leaders in dynamic pricing for years. They test and iterate pricing faster than anyone else.

Over Black Friday in 2013, Amazon changed pricing 2,840 times vs. Walmart’s 922, Target’s 354, and Best Buy’s 336.

(image source)

See who’s on the very bottom of that graph in green? Toys R Us. The same retailer who now, a few years on, just declared bankruptcy.

These things don’t happen overnight. They’ve been happening for years now. AmazonBasics actually dates back to 2009.

But now, almost ten years later, they’re finally expanding aggressively. And, unfortunately, you often have limited control in dealing with their discounting strategy unless you’re an established global brand.

You don’t have to give up entirely on Amazon. However, you don’t want to put all your eggs in their basket, either. (Unless you’re ok with those eggs being sold for a lower price with a faster shipping time.)

The only way to go toe-to-toe with them is to go beyond simply listing products. Treat it like a real-time auction where every small optimization counts. That means you’ll need to bring in expertise from your SEM people for ads/creatives with A/B testing.

Beyond that, you can also diversify your strategy around Amazon. While they may be the biggest player, the good news is that Amazon isn’t your only option out there.

In fact, teaming up with smaller niche marketplaces or taking alternative routes to securing loyal customers might be a better fit for your brand in the long term.

Here’s where to get started.