In 2020 e-commerce experienced incredible growth as consumers turned from shopping in-store to online. By the end of the year, 74% of buyers considered most shopping would remain online. The trends confirm that 2021 holds vast potential for e-commerce. The reason why companies are enthusiastic about doing business on Amazon is apparent: Amazon allows to reach millions of shoppers. According to Amazon's report, in 2019, the company globally delivered 3.5 billion packages. And, by 2021, Amazon intends to deliver 80% of its parcels.
How to pick a proper business model for Amazon?
Amazon offers two models: Vendor or Seller. Which model is the best for a Swiss company? There is no single solution. Both models bring advantages and disadvantages. The choice of the model is determined by the products and the companies' ability to manage B2C transactions or only B2B. The deciding criteria for the relevant model are product, management models, stock and sale price.
Edoardo Vaghi from Witailer.com clarifies: "As for the Vendor channel, Amazon selects its suppliers based on the products. The expected volumes determine this choice: the top sellers of each category are getting offers from Amazon. If the company can manage only B2B relationships, it should discuss directly with Amazon a potential business relationship. It will allow selling the products directly on the European Amazon domains".
Frank Holzweißig from Rotho Kunststoff AG says that ideally, a swiss producer should join both models on Amazons Marketplace in parallel. The advantage of the Vendor channel is the lower complexity related to managing a B2B relationship: Amazon handles the stock level and takes care of the orders of the end customers. The disadvantage is that Amazon will decide which products to buy from the supplier, excluding products not consider worthy and selling them to the end customer by their price. Seller's advantage is that you can give visibility to all products, not only those with higher rotations but also determine your selling price. However, organizational complexity grows as stock levels, and customer orders must be managed.
How to meet the Amazon requirements?
Amazons Seller-Model has a list of challenging requirements for Vendors Manufacturers, and on the opposite, the conditions for Amazons Vendor-Model are challenging for Retailers. According to Frank Holzweißig, it is caused by the internal infrastructure, either grown and optimized for B2B-business or the more granular Endconsumer-Business. Customer Service and Logistic are sticking points, which need to be mastered.
Edoardo Vaghi says that to start selling throughout Europe on Amazon, the company needs to have a VAT in at least one European country where the products are stored. "The advantage of Amazon Logistics is that there are no minimum quantities to ship. Sellers can decide whether to use the Amazon Logistics Service (also known as FBA), which allows them to store products in the Amazon warehouse network and use its logistics for shipping to the end customer. Or they can keep the stock at their warehouses and proceed independently to ship the orders to the end customers", - explains Vaghi.
The advantage of Amazon's Logistics is that it makes Prime-eligible offers, marked by Prime banner – synonymous with security, speed and reliability for Amazon customers. Amazon confirms that "78% of sellers who chose Amazon Logistics generate an increase in sales.
"Recently, several external logistics services have begun to provide "Prime-like" services. That is, complying with a series of stringent requirements imposed by Amazon to ensure its customers can still benefit from the Prime banner, despite not being Amazon Logistics" – ads Edoardo Vaghi.
How to start selling products on Amazon?
Choosing what to sell is undoubtedly the crucial settlement. After the demand, price and profitability determination comes the technical step:
• Fulfilment of the online shop
• Importing product data
• Creating product photos
• Promoting items
• Ensuring customer service
Managing technical issues is one of the most complex tasks to do. The high level of execution brings long-term success. According to Frank Holzweißig, Amazon Vendors and Sellers should develop all the marketing skills in-house. "Amazon SEO and Amazon SEA via Amazon's Advertising Platform – are the essential tools to master. Even if a company prefers to outsource services, understanding the platform's requirements is important to identify a competent partner. Any service can be outsourced. There are several agencies that help manufacturers start operations on Amazon and offers an Amazon cost-saving Full Service for Swiss producers who are on a low e-commerce maturity-level" - says Frank Holzweißig.
Edoardo Vaghi agrees with Frank Holzweißig and confirms that sales through the Seller channel can be managed in-house. However, the correct approach to the channel and the best usage of different services (advertising, for example) can be particularly complex if handled in house. "There are several partners that support the management of the channel: not only on the operational level but also providing well-defined strategic support, to take the full advantage of Amazon's tools to increase sales", – says Edoardo Vaghi.
What are the benefits of using Fulfilment by Amazon?
Amazon Fulfilment (FBA) has its advantages and disadvantages. FBA is challenging for online sellers. Many moving parts should be considered, and inefficiencies can lead to high costs and problems like shipping to the wrong address. Frank Holzweißig says that fulfilment by Amazon is an unbeatable Logistic service for many products. "Especially small goods can be provided on the highest service level. On the other side, it is not that attractive for goods with a bigger package volume. There are many advantages, particularly the possibility to distribute goods Europe-wide, without worrying for a logistic infrastructure" – underlines Frank Holzweißig.
Understanding the restricted products
Generally, on Amazon, companies can sell almost any type of product. Each product category has its specificities and rules. The requirements for some of them are strict and complex; particular actions are needed before starting to sell. Edoardo Vaghi says that Amazon provides a clear list of prohibited products within its platform. "All products with batteries or containing hazardous substances must be reported. Different categories or trademarks, easily subjected to counterfeiting or copyright infringement, may not be saleable by anyone." – explains Edoardo Vaghi.
How to pick the proper business partner for Amazon?
If you have a product and a strategy, the right partner can help achieve the goals more promptly and efficiently. For example, collaboration with logistic companies and marketing agencies can increase sales on Amazon.