Today I want to tackle some important topics around eCommerce platforms for online businesses. As an eCommerce seller, it’s important to understand the stark differences in aligning yourself with various companies – from a general brand point of view and a cost-benefit analysis point of view. In choosing the right partner for your online business, I strongly believe it comes down to your business goals. In the article, I will discuss more of what I mean by that. Both Shopify and Amazon are good in their own ways, and both sides have strong advocates. You should ask yourself many questions before deciding which platform to work with.
Questions such as what are my overall costs? Am I getting enough ROI? What’s the customer service like? Do I feel valued and respected? Is this an equal relationship? What are the advantages and disadvantages? Today is the battle of the brands. So, let’s discuss Amazon vs Shopify.
Table of contents
1) What is Shopify?
2) What is Amazon FBA?
3) Shopify vs Amazon pros and cons
4) 3PL Costs
5) E-commerce seller Competition
6) Customer acquisition and transparency
7) Shopify vs Amazon: Which one should I use?
What is Shopify?
Shopify is the leading eCommerce platform for small and medium businesses. It is a cloud-based, multi-channel solution that includes tools for merchants to design, set up, and manage their stores. It allows you to make money without having to worry about things like hosting, SSL certificates and other technical matters. It is an excellent platform for new and experienced entrepreneurs. Shopify lets you focus on what you do best: selling your products!
Shopify is a complete, ready-to-use eCommerce for small businesses, selling anything from t-shirts to technology and anything at all in between. It’s simple and intuitive, allowing you to easily manage every aspect of your business, from inventory to customers.
Shopify does not offer third-party logistics (3pl) themselves; however, their app integrations allow you to connect online with a 3pl provider – like Selazar. This way, you can automate your eCommerce fulfilment while using Shopify as your online storefront.
What is Amazon FBA?
Amazon FBA (Fulfilment by Amazon) is a fulfilment service offered by Amazon, where sellers store their products at Amazon’s fulfilment centres and ship them to customers when purchased. Besides offering the online marketplace to sell products, they also provide the same functions of a 3pl – meaning they store, pick, pack and deliver. They also handle customer service and returns if necessary.
This large integration of warehousing and online services allows sellers to store their items in one or more of Amazon’s fulfilment centres. When an order is made online, all orders are shipped and delivered through Amazon – which can be very enticing. Amazon FBA product offerings are made up of over 50% of third-party sellers.
So, as you can see, Shopify is more about building a great website from scratch to sell your products – while offering third-party fulfilment services. Amazon is basically a one-stop shop marketplace that allows you to reach many people quickly – but no website.
Shopify vs Amazon pros and cons
For more clarity, below are the differences between Shopify and Amazon. Whether you’re a newbie or an established brand, you can easily see the advantages and disadvantages for your own business.
• Simple professional templates for building your online store
• 90-day free trial
• Free Shopify payments
• Access to numerous eCommerce tools and apps like eCommerce fulfilment
• You have complete control over your store and operations
• You must drive online traffic to your store yourself
• The more apps you need, the monthly cost may increase
• Need a self-promoting marketing budget
• Access to a worldwide audience immediately
• Can get set up relatively quickly
• Warehouse storage and product shipping automation
• Highly saturated marketplace
• Lots of selling fees and storage costs
• Price wars with competition
• Your seller score could affect your sales
• Lots of regulations and red tape
To summarise, business goals matter here. Your approach will vary if you’re looking to make a quick buck and offload some stock. If you’re building a long-term brand and want customers you can reach out to, resell to, and develop a relationship with, then that approach should be different.
To be fair here, you can see the many benefits of both companies. Amazon brings a lot of value to the marketplace. However, there are a few more technicalities that eCommerce sellers should be aware of.
Some of the strongest critics of Amazon FBA include complaints about fees. Obviously, in exchange for services, Amazon needs their own profit. After all, as an independent seller, you’re utilising their platform and fulfilment centres. However, how much is too much? This is where the numbers start to matter – and you need to pay attention.
Something that is not common with 3PLs is product profit sharing. Typical 3PLs charge you for storage fees, pick and pack services, and courier charges. Amazon, on top of those fees, also takes a small percentage of every sale you make for your products. Fees for your products can range from 15% to 40% before other charges.
Seller Subscription fees
To be an amazon seller, you have two options. You can sell as an individual or a professional. One charges a £.99 fee every time you make a sale (individual) – or pay a monthly subscription fee of £39.99.
Long-term FBA storage fees
Like any warehouse, you will have monthly storage fees. Many of them are comparable in price. What differs with Amazon is “long-term” storage fees as well. This acts like a penalty. If any of your products have sat in their fulfilment centre for 365 days or longer, you will be charged £6.90 per cubic foot of storage used or £.15 per unit, whichever is greater.
So, if you’re trying to grow your business and have multiple product offerings, you run the risk of a lot of charges.
Ecommerce seller Competition
One of eCommerce sellers’ greatest advantages is using Amazon to sell their products. After all, Amazon is the largest online marketplace for products. However, it’s important to be aware of some of the most common frustrations and downfalls for many FBA sellers.
Price wars Amazon (Getting priced out!)
Price wars are very common on Amazon. Many eCommerce sellers assume that by putting products on Amazon, they will get a multitude of sales. It should be automated and easy with so many potential customers, right? Some of the more seasoned sellers know it’s not. This is because the competition is rife on Amazon.
Many brands carry the same products with the same quality because they’re from the same manufacturer, whether at home or abroad. Avid sellers are used to this on Amazon. They have perfected the systems, the manufacturing, the relationships, and the price points. They have done it for so long and have made so much profit that they can drop their prices and essentially eliminate you from the competition. It can be a large uphill climb for someone who is just trying to get started. It’s the classic story of the big box brand crushing the little box brand.
Copycat branding by Amazon with third-party retail brands
Copycat branding is common everywhere in the world. What it means is that a business or entity will deliberately mimic a brand to compete with it directly. Established grocery stores do this all the time. They will create their own food products and make the branding similar to third-party products they sell on the shelves! Some wonder how it’s even legal – so do I. Unfortunately, this is the same situation many Amazon sellers are finding themselves in.
Amazon looks at trends and will create its own products at significantly lower prices and expand its private-label brands. Many believe Amazon runs a systematic campaign of creating knockoff goods – though Amazon has vehemently denied this. Amazon runs their own private label company so that you could be competing with them.
Customer acquisition and transparency
Building a brand requires raving fans. Customers are attracted to products, but they’re also attracted to values. What does the brand stand for? Eco-friendly? Natural ingredients only? Social philanthropy, etc. When they buy your products and sign up to receive emails from you, you have the opportunity to remarket.
However, with selling through Amazon, you are never allowed to retarget customers. They don’t allow access to their customer database. So, though you may still be able to sell well with Amazon, you’re not nurturing that relationship. If you’re a brand trying to scale and develop a community, I wouldn’t recommend them.
Remember that 65% of business comes from existing customers, so you want repeat business if you have multiple product offerings. Repeat customers are a valuable asset.
Shopify vs Amazon: Which one should I use?
For the reasons above, I would recommend using Shopify and their 3PL services integration. Costs matter, but so does branding and having complete control over your internal operations. However, to be democratic, many sellers also choose to sell on multiple platforms. If you’re still on the fence, you could consider selling on both eCommerce platforms. Utilising several channels, your brand could do some testing and analytical due diligence – then decide what’s best overall after you get some first-hand experience. Hopefully, this article has given you some key insights on Shopify vs Amazon. Should you be interested in integrating your Shopify store with our 3pl services, contact us today for a free no, obligation discovery call.