Amazon has announced it is investing $15 billion on tools this year to help small businesses sell more of their products through Amazon's platform. The move is a clear message that Amazon wants to own the marketplace for small businesses that sell online, or at least the part it doesn't already dominate.
It would be hard to argue that isn't good news if you're a small-business owner who sells on Amazon. For example, the company introduced an optional pricing management tool that is certainly helpful for small businesses who want to let Amazon determine the pricing of their products based on its business intelligence. In that case, Amazon will set the price of your items based on what it believes will result in the most sales.
A set of new tools.
Amazon is highlighting a suite of new tools it has created for small businesses, which includes the following:
- Fulfillment tools that provide additional insights into your inventory when you use the "Fulfilled by Amazon" service, and offers additional benefits like one-day delivery.
- Access to third-party tools that help sellers with pricing, advertising, and inventory management.
- "Sold by Amazon," which is a free, opt-in service that automates and optimizes prices based on Amazon's algorithm without sellers having to do anything.
- Business reports and analytics tools that generate customized reports and business analytics like purchasing trends.
Who's in control?
At the same time, there's something worth considering: these same tools have the effect of making the platform even more sticky for small businesses. The idea is that Amazon wants to basically facilitate all of your e-commerce transactions.
That could be good, but the easier it is to run your business on Amazon, the harder it is to leave.
Which brings up an interesting question-- do you really want to build a business on someone else's platform? What about when that platform makes changes that make it harder to run your business, or if it changes the rules?
What do you do when that platform starts to compete against you, or forces you to charge a certain price or suffer its wrath?
Everything has a cost.
Even though the pricing tools guarantee the business receives a minimum amount for a product, regardless of what price it sells for, this can still have a real impact on the perception your customers have of both your products and your brand, especially if you are trying to position yourself in a premium position.
You have to ask yourself whether it's worth it to gain access to hundreds of millions of consumers.
That's not as easy a question as it might seem. The upside is obvious -- you can sell your product to consumers you'd likely never be able to access on your own. But the tradeoff is control. As in, you're giving up control of your business.
For example, the company's Fulfilled by Amazon program offers sellers lower storage fees and increased eligibility for free one-day delivery, which drives sales, but only if those sellers maintain inventory levels set by Amazon.
Count the cost carefully.
Look, I'm on record in favor of much of what Amazon has done for small businesses. In fact, you can argue Amazon saved the retail industry by forcing it to change and adapt in ways it wasn't likely to do on its own.
I'm also on record arguing that putting all of your eggs in one basket -- even one the size of Amazon -- is a dangerous bet. It's at least worth carefully considering the cost, both in real dollars and in the opportunity to run your business the way you want.
Amazon has faced criticism over reportedly using sales information from its marketplace to then offer its own brand of competing products. And sellers have complained that as Amazon continues to raise fees and costs associated with selling, it can be harder to compete unless you pay for advertising -- with Amazon.
Still, you have to give Amazon credit. It is clearly committed to building a platform that makes it easy for small businesses to get up and running online. If that's you, your job is to count the cost and make the most informed decision about what makes sense for your business.
That answer will be different for every business, but at a minimum, it's still pretty incredible that you get you to make it in the first place.