The Power of Amazon: Merchant Friend or Foe?

Emily VuittonEcommerce1 Comment

Amazon and Sellers

Amazon is a giant. Plain and simple. Not only does the marketplace jockey for online customers, but it duels with brick-and-mortar as well. If you’re looking for proof, look no further than the Internet Retailer 2016 Online Shopping Survey.

Late last month, 535 U.S. adult online shoppers were surveyed about their online shopping frequency, responsiveness to online marketing tactics, and the role online research and retailers play along their path to purchase. At the onset, the survey’s aim was to give a snapshot of the online shopping landscape as a whole. However, the results proved to display the power that Amazon possesses with consumers.

3 Jaw-Dropping Findings from Internet Retailer 2016 Online Shopping Survey

1. Amazon is a consumer go-to, even for traditionally brick-and-mortar purchases.

  • 94.5% of consumers who make purchases online twice or more a month say they are Amazon customers.
  • 54.8% of frequent shoppers say they made 51% or more of their online purchases over the last 12 months on Amazon.
  • 27.1% of consumers first visit Amazon to research low-consideration products, without immediately buying.

2. Free shipping is the rule, not the exception.

  • 59% of online shoppers either are Amazon Prime Members or have Amazon Prime Members in their household.
  • 48.6% of respondents say that if they get to the checkout process and see they haven’t met the free shipping threshold they put more product in their cart to do so.
  • 19.7% of respondents will leave a site and shop elsewhere if free shipping is not provided.

3. Amazon Prime Membership influences buyer behavior.

  • 39.3% of Prime members make Amazon their first stop to see what low-consideration products are available.
  • 31.1% of Prime members buy low-consideration products directly from Amazon, eliminating brick-and-mortar completely.

The Merchant’s Perspective

As a small or medium-sized e-tailer, selling your product online presents unique challenges and opportunities. One of the first decisions retailers are faced with is where to make their product available for purchase. Selling products through their own online store ensures complete control over the process and mitigates any percentage that would be withheld by an online marketplace.

But it comes with downsides, too. Managing shipping at anything greater than a small scale is no easy feat. Furthermore, getting people to your site to make a purchase presents even greater challenges. Those dichotomous examples just scratch the surface with this merchant conundrum.

Why Should Sellers Side With Amazon?

Tapping into Amazon’s lucrative Prime user base presents a huge opportunity for online merchants. When merchants hire Amazon to manage packaging and shipping with Fulfillment by Amazon (FBA), they’re able to tap into Prime consumers. Meaning that merchants have their products flagged as eligible for Prime shipping, while accessing Amazon’s volume shipping discounts.

For many merchants, using FBA and even spending more per shipment to use a plain box costs less than they would be charged directly by any shipping company. Beyond access to Amazon’s gigantic user base, merchants also enjoy Amazon’s highly effective product referrals and pass-through credibility and trust.

Why Should Sellers Steer Clear of Amazon?

Internet Retailer foreshadows that a “dangerous road” lays ahead for both brick and mortar and online merchants as they attempt to counteract Amazon’s influence and pull away from its customer base. With the benefits of Amazon clearly laid out and the obvious consumer preferences, why would merchants even consider traversing that treacherous path?

First and foremost: fees. Every item a merchant sells carries fees that ranges from $1 to 25 percent of the selling price. This is regardless of whether or not the merchant utilizes FBA. Beyond fees, merchants must also deal with a total lack of branding and subsequent brand loyalty from customers who purchase via Amazon. Consumers recognize and trust Amazon, not necessarily your specific brand. Furthermore, sellers are also unable to capture and remarket to a purchaser’s email address, seriously limiting marketing capabilities.

Amazon and Chargebacks

Selling through Amazon creates a unique chargeback environment for merchants. These nuances expand when Amazon Payments is brought into the fold. Essentially, the crux of Amazon’s chargeback process lies within the A-to-z Guarantee.

A-to-z Guarantee

Amazon guarantees purchases from the Amazon Marketplace and merchant sellers when a payment is made via Amazon.com or Amazon Payments is used for qualified purchases on third party websites. The Amazon A-to-z Guarantee reassures buyers that the condition of the item purchased and its timely delivery are guaranteed to be as promised.

The elements guaranteed by Amazon are not too dissimilar from those guaranteed by all card issuers. If the seller fails to deliver an item or the product is “materially different” than advertised, then the buyer is covered under the guarantee. If a customer files a chargeback, Amazon sends the merchant an email which they must respond to within 5 business days with the information requested. A quick response from the merchant is vital, as Amazon measures performance based partly on the “rate of successful A-to-z Guarantee claims made.” In other words, Amazon cares about a merchant’s chargeback ratio.

While the merchant-facing aspects of buyer disputes are relatively unremarkable, the purchaser-facing qualifications and processes are detailed and circumstantial. Amazon details those in its support collateral.

Should merchants hold tight to the old adage, “If you can’t beat ‘em, join ‘em”? Or instead work to pull Amazon customers into their own online store? Better yet, is there a middle-of-the-road approach that merchants can utilize to function alongside Amazon’s undeniable power with consumers? Time will tell and we’ll be watching with bated breath.




Download Chargebacks Reason Code Guide