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Diversify or Die?

It’s been a month since the changes Amazon announced last August to the Seller-Fulfilled Prime (SFP) program went into effect and for many sellers – the pain is real. I’ve spoken with sellers who have seen up to a 40% decline in sales due to their not being able to meet the faster deliver times and ship out on the weekends.

Just in case you’re not aware, Amazon changed the delivery requirements for SFP to make them match those available with FBA – Fulfilled by Amazon. On the surface the reason behind the move was good. No matter which merchant a customer buys from – Amazon, a third-party seller using FBA, or a third-party seller using SFP – the delivery promise should be the same. Under the hood, the word on the street is that the SFP program is on it’s way out.

The pain is more acute among etailers vs brands with their own unique products. eTailers are essentially resellers of others merchandise and they are always competing with others selling the same thing. Those who are using SFP are losing the buy box to sellers using FBA who can meet the Prime delivery promise.

If you’re selling on Amazon-only or anything-only – now is great time to reconsider your channel strategy. Multichannel is not a new thing among large businesses but it wasn’t as common in smaller ones.

Read on to learn more…

What is multichannel?

Multichannel is selling on multiple online sales channels. A sales channel is a single way of selling your products and they can be online like Amazon or offline like a physical retail store. Affiliate programs and independent sales reps are also sales channels.

Why consider a multichannel strategy for your online business?

Reduce Your Risk

Much like diversification is a good strategy in investing, it’s also good strategy for selling online. Financial analysts say the more diversified your investment portfolio is, the more likely it is that it will perform well over time. The reason behind this is to mitigate your risk. 

Each industry carries its’ own inherent risk. Retail stocks are subject to consumer sentiment and may fall in value as people become fearful and want to save instead of buy things.  Pharmaceutical stocks are subject to governmental regulation and class-action lawsuits impacting their value. Energy stocks are subject to environmental forces that impact production as we saw in Texas with the unprecedented snow and resulting power outages.

Investing in a variety of different industries lowers your overall risk because it’s unlikely that every stock will be impacted by the same thing at the same time.

This idea also applies to selling online.  Each sales channel has it’s own risk and it’s unlikely that all channels will be impacted at the same time. If a particular marketplace is experiencing technical issues, you can beef up your digital marketing to drive more traffic to your branded online store.  If one of your marketplaces changes their search algorithm so you’re no longer on the first page of the search results, you still have sales coming in from the other marketplaces where you sell.

Customers Prefer Different Channels

Customer choice still rules. Some of your customers prefer to be from large, established, convenient marketplaces while others love the uniqueness of your branded online store. Some customers prefer going into a physical store to touch, try on, or sample the product before making a purchase, while others love the personal interaction of having an independent sales rep they can go to ask questions or get recommendations.

When you limit your business to a single sales channel, you’re limiting yourself to only customers who prefer to purchase thru that channel.  Analyst are finding that the more channels a business uses, the greater the sales.

Review of Common Online Sales Channels

  • Marketplaces tend to allow you to connect with a lot of potential buyers but you have no control over how your products are presented, the online store experience, and most importantly you’re not in control of the customer relationship. Some marketplaces prohibit any direct customer contact so you lose the opportunity to really get to know your customers and build a brand community.
  • Selling on your own branded store gives you complete control of the customer relationship and the online store experience but the costs to let customers know about you and your products are much higher.
  • Traditional brick & mortar retail stores come with high overhead in terms of staff salaries, rent, and utilities. The benefit is that some customers will not purchase a product online that they have not seen, tried on, or sampled first.
  • Affiliate programs and independent sales reps are great ways to grow your brand awareness through influencers and others who are connected to your target customers. The downside is that access to those customers will cost you and impact your profit margin.

There are more channels you can sell on but I listed the most common for online businesses. If you need help deciding exactly which channels may be a good fit for your brand. Be sure to schedule a free consult using the “Let’s Talk” link on the menu.

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