Small Businesses Should Be Thankful for Amazon.com The online giant is anything but a small business killer.
By Gene Marks Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
"Without Amazon, we wouldn't be here."
Those were the words of Robert Wang, the creator of the Instant Pot, a retail phenomenon that, according to this piece in the New York Times, has "upended the home-cooking industry." The Instant Pot is a kitchen gadget that's used by its devotees to perform virtually every kitchen task imaginable from sautéing to pressure cooking, steaming and "even making yogurt and cheesecakes."
The device, which is mostly available for less than $100, has doubled its sales every year since 2011 and has spawned a legion of devoted fans. Wang, an Ontario based engineer, deserves most of the credit for the product's success. But he's quick to give credit to another unlikely source: Amazon.com.
From its earliest days, Wang took advantage of the internet giant's shipping program, called Fulfillment by Amazon, in which Amazon warehouses, ships products and handles the paperwork for its resellers in exchange for a fee. At one point, the New York Times report notes, more than "90 percent" of the Instant Pot's sales came through Amazon.
Yes, thank goodness for Amazon.
Related: Should You Start a 'Merch by Amazon' Business?
For years I've heard complaints from merchants, both large and small, who blame Amazon for the destruction of brick-and-mortar retail as we once knew it. Amazon is the reason why malls are becoming deserted and thousands of shops have closed! Amazon is the bully that destroys small business and disrupts communities! Amazon is the foe that is out to end Main Street shopping as we know it! Down with Amazon, the killer of small business!
To all of this I say: baloney. As we enter the final leg of our holiday season, the fact is that millions of small business owners owe their livelihoods to Amazon. We shouldn't be accusing the giant online reseller of killing small business. We should be thanking the company for saving small business.
Related: Here's How Amazon is Making Their Fulfillment Businesses More Valuable
Just look at the numbers. Amazon has millions of third-party resellers, the large majority of which are small companies. Based on the most recent data available, resellers using services like Fulfillment by Amazon can reach customers in 185 countries. They sold more than 28 million items during 2016's Cyber Monday alone. According to the research site Statistica, Amazon's third party sellers accounted for more than 50 percent of the company's sales during the third quarter of 2017, generating close to $23 billion in revenues.
Thank goodness for Amazon.
Who are these resellers? Small businesses like Wang's. Custom shirt-makers. Purveyors of coffee and unique foods. Sports equipment manufacturers, crafts people and artists. Amazon has created opportunities for millions of small merchants that have taken to the internet to find customers worldwide. Amazon Business Services has created a B2B marketplace that's used by millions of other companies.
How many of these businesses would've succeeded as brick-and-mortar shops just 20 years ago? For every local hardware shop that's put out of business because of Amazon, there are multiples more succeeding by selling or making connections or even hosting their own websites – on or through the site. The smartest ones, by the way, are those that take advantage of multiple channels and combine a brick-and-mortar operation with an online presence.
Sure, selling on Amazon has its challenges. The company takes a significant cut of a seller's profits both for sales and on shipping services if utilized. They are known to be draconian about sellers who get bad reviews or who fall behind in responding to customers' complaints. They "encourage" participation in sales promotions that are oftentimes not super-profitable, if at all. I'm told that the company has a reputation of quickly suspending accounts when customer or regulatory concerns are raised, forcing some businesses to endure a bureaucratic reinstatement process that sometimes leads to closure. Like any distributor, Amazon favors and gives preferential listings to bigger sellers that move more products.
Related: Guide to Starting a Fulfillment by Amazon Business
Selling on Amazon is hard. It's a very competitive place. The clients I know who have succeeded on the platform usually devote a significant amount of time and resources to properly listing their products, understanding the nuances of the company's fulfillment and other services, participating in campaigns that have questionable profitability, analyzing reams of data that the service spits out in order to make adjustments to its prices and branding and working hard to live up to Amazon's stringent customer service guidelines.
Like everything in life, you get out of it what you put into it. Amazon, for those like Wang and millions of others who make the effort, can be really, really worth it.
So congratulations to Robert Wang, congratulations to all the successful Amazon resellers and thank goodness for you, Amazon, for providing a worldwide marketplace that enables so many entrepreneurs to profit.
