Black Friday was another testament to the growth of online retailing. While holiday sales in brick and mortar stores seem to have peaked, online sites continue to expand with Black Friday and Cyber Monday. This would appear to be another nail in the coffin of small retail businesses, already struggling in many locations. Amazon, however, is both a competitor and an opportunity to many independent suppliers. By offering access to their shoppers and even pallet shipping to their fulfilment centres, Amazon might be the key to the survival of small retail and manufacturing. With Amazon’s sales increasing up to 28%, Amazon’s success could have an enormous impact on retail and wholesale businesses around the world.
The major retailers have all the advantages: name recognition, the ability to keep prices lower thanks to their volume and purchasing power, prime locations, and national (and often, international) marketing support. This has made it difficult, if not impossible, for many small retailers and manufacturers to compete. Even if an independent company has the wherewithal to produce a great sales website, it can be next to impossible to attract enough sales traffic to be profitable beyond the home business level. Concerns about online scams and the security of personal information can make customers even more likely to stick with well-known, major retailers.
Where does this leave smaller businesses? Many of these retailers have carved out a niche for themselves through a high-visibility storefront location, a combination of word-of-mouth and social media, or through special interest sites and events. These can be great options for smaller operations in specialized markets but for companies that need more volume to remain a viable enterprise, options have become limited.
Small companies might not be able to rank high enough in search engine results to be seen by potential customers searching online. Convincing customers to actually visit the company’s website after seeing their listing can be even harder. Amazon can eliminate or, at least, reduce that problem. Suddenly, new, potential customers are able to find the retailer’s items through filtering through Amazon’s search options. In fact, Amazon’s pull on potential customers is so great, Google has reported that Amazon is their biggest rival for those searching for items online.
For businesses selling items that are likely to result in repeat purchases, selling through Amazon is a way for customers to get to know the company and products and compare them to other items for sale. This could allow name-recognition and positive online product reviews to develop. Later customers might decide to shop directly rather than going through Amazon.
Amazon, while providing fierce competition, is also providing this important outlet for small businesses in this situation. Amazon is not the only company to add products from other sellers to their online store. The difference with Amazon has been their willingness to fulfil orders for smaller businesses. This approach has tremendously expanded the reach of small companies.
Mean and Lean
For most small businesses, providing customer support 24/7 is simply not an option. Amazon can provide that expense and infrastructure, which is far more cost-efficient on a larger scale. Even being able to offer customer support in a broad range of languages could have huge impact on customers’ ability and willingness to place orders. Rather than staffing a shipping department or having employees try to juggle shipping and other duties, sellers can send entire pallets of their products to an Amazon fulfilment centre. This greatly reduces shipping costs. It is probably an even greater savings in in the manpower it would take to package, label, and track numerous shipments to individual customers.
Advantages to Major Retailers
For now, Walmart seems content to limit their items for sale and outcompete small suppliers. At the same, its competitors are looking into the opportunities offered by partnerships with small businesses. Some online retailers like Sears now offer access customers access to products from other sellers through their “Marketplace” listings. This expands the variety of products Sears is able to offer. This makes it more likely for Sears to be able to attract and retain customers without incurring significantly more operational costs.
The Amazon model offers advantages that some of the other online partnerships don’t. The sheer size of Amazon across a huge variety of products attracts an extremely larger number of potential customers. Amazon also has the flexibility of fulfilling the order through their distribution centres or allowing sellers to handle their own shipping. For orders fulfilled by Amazon, the customers can take advantage of free shipping for those with a Prime Membership or free shipping for other customers when spending a minimum amount. This makes it easier to buy inexpensive items from a small supplier without incurring shipping costs. This provides sales opportunities that would otherwise not exist for those suppliers.
Independent retail sites like eBay and Etsy still offer other opportunities for smaller retailers. Etsy continues to be an outlet for individuals and small companies to sell. arts, crafts, and other less mainstream items. The influence of auction site eBay appears to be waning but the company has broadened their site to also include non-auction sales and is launching plans to act as a retailer as a way to attract more customers.
Although only time will tell how the Amazon partnership will change the future of small business. For now, it appears to be one of the few bright lights for small companies in an increasingly competitive retail market. As more small businesses become savvy in maximizing the benefits from Amazon’s customer base and wholesale shipping and fulfilment options, we may see more of the major online retailers expanding their partnerships, as well.