“Diversification is protection against ignorance. It makes little sense if you know what you are doing.” – Warren Buffett
Unfortunately, this quote does not hold true for marketplace sellers. Marketplaces are amazingly powerful platforms to grow your online retail business, but you need to be careful not to get lulled into a state of marketplace myopia.
The average seller’s sales mix looks a lot like this:
And a pie chart of the amount of time spent on each of the above channels would look strikingly similar. What happens when your account or listings could be suspended?
Your sales mix can and should look more like this (actual seller):
Or this (actual seller):
Ideally, closer to this:
Offer A Non-FBA Fulfillment Capability For All Of Your SKUs
If you want to be successful off-Amazon, you need to build a cost-effective fulfillment capability that doesn’t rely on Amazon. Channels including Walmart and eBay penalize sellers for using FBA for a very simple reason; they don’t want their customers receiving Amazon-branded packaging. These channels also consider Amazon Logistics tracking invalid, which makes it difficult to maintain service level performance required to win the buy box, rank highly in search results, and maintain selling privileges.
We recommend focusing on your core strengths – merchandising, product development, branding and customer service – and contracting with a 3rd Party Logistics (“3PL”) provider of warehousing and fulfillment services. There are countless 3PLs, be sure to select one that meets the following service level standards:
- Offers same day shipping.
- Ships all orders within 1 business day.
- Reaches 95%+ of the US population via ground within 2 days.
- Packages marketplace orders in compliance with each channel (i.e. packing slip, un-branded).
- Packages your webstore orders in a manner that promotes repeat purchasing (i.e. personalized thank you insert).
- Integrates with 3rd party software and directly with your sales channels in an on-demand manner.
- Offers transparent, simple, cost effective pricing that accommodates your entire catalog.
Many sellers think 3PL pricing is on the expensive side, and many 3PLs are rather expensive. These 3PLs have been carefully vetted as cost effective, high quality options.
Apply To Sell On Walmart Marketplace
Walmart’s marketplace is gaining steam and you can still be early to the fast-growing channel. We believe Walmart is the highest value non-Amazon marketplace channel by a wide margin. Make sure your pricing is at parity with your Amazon prices, or else Walmart will unpublish your listings. Apply to sell on Walmart Marketplace.
Develop Your Own Retail Site
Few things are more exhilarating than growing your own customer base and building your own retail channel. This overview will help you get there:
- Ideation. Imagine a retail experience that’s focused and memorable. At the very least, make sure your design is clean, pages load fast and conversion rates are constantly scrutinized.
- Creation. Choose a shopping cart, we recommend either BigCommerce or Shopify. Work with an established ecommerce web design firm that is specialized with the shopping cart you have selected.
- Growth. Experiment with customer acquisition strategies. By measuring customer acquisition costs (CAC) and Customer Lifetime Value (CLV), you will be able to prioritize profitable investment in growth.
Google Shopping will likely be the cornerstone of your growth. Each month there are 43 billion total visits to Google in the United States. Google Shopping is not much different than a marketplace, spending 15% of your revenue on ads is roughly equivalent to paying 15% commission to Amazon — we call this Effective Commission. The key is to implement a Google Shopping campaign that hits your target effective commission consistently.
- Service. Think about your business as a franchise, make sure your customers have a consistent and reliable experience each and every time.
- Engage Frequently & Relevantly. People who shop your website are your customers. Get back in touch with them in a relevant manner and don’t let the relationship go stale. Remind them that you exist, frequently.
Email is easiest but your team shouldn’t be afraid to call up a random sampling of your customers to thank them for purchasing from your site, and ask them for any feedback to improve the experience. Not only will you get great feedback to iterate on, you’ll also end up with loyal customers who may just tell their friends about your site since that type of outreach is remarkable.
Differentiate Your Product Listings Across Each Channel
Product data needs to be tailored for each channel. If you reuse titles and descriptions, Google will prioritize indexation of the most popular website – typically Amazon – and decrease the Page Rank of the other channels where the same exact text is used. Learn more about customer personas for each channel.
Measure The Amount Of Time Spent On Each Channel
Sellers spend most of their time on Amazon because that’s where they’re generating revenue. This positive feedback loop plows the majority of resources into one channel while other high value channels become neglected or completely ignored. Pay attention to how your team allocates time to each channel. Focused effort plus time equals success on deserving channels.
Growing your multichannel business is not easy, but it is rewarding. Following these recommendations will get you started on your way to a diversified, defensible retail business.
About The Author
Daniel Sperling-Horowitz is the President of Zentail, a Y Combinator backed ecommerce software company. Zentail’s ecommerce platform makes it easy to diversify, grow and manage your sales on Amazon, Walmart, eBay, Jet, Google Shopping and a growing selection of high value channels.