What Does Amazon Mean for the Future of Small Business?

When our company decided to start using Amazon as another sales channel, their marketplace turned out to be a nice new way to reach more customers. But it hasn’t come without issue.

Because Amazon is so massive (making up more than 10 percent of all e-commerce sales), it is a natural way to reach a new customer base. Even better, moving some items to their “fulfilled by Amazon” channel allows us to capture their “Prime” customers, which equates to an even further boost in sales.

However, a few times now, we’ve had a hot selling product on Amazon, only to suddenly find ourselves drastically overstocked. A quick investigation showed that Amazon had started offering the same product themselves—at a price we could not compete with, even though we purchase direct from the manufacturer.

When this first occurred, I was a bit upset that Amazon might be using the sales data from their marketplace to cherry-pick products. From their perspective, why not bring good sellers in-house and make a better margin? I thought, “Shame on them … for being smart.”

If this was the case, what would be the long-term effects? Would Amazon continue to use this data to the point where it completely dominates e-commerce? Would the resulting aftermath leave businesses with only the poor-selling products that fall below the Amazon radar? Would this hamper the ability for a small e-commerce business to grow? What would be the collective reaction of small businesses?

I think it would create a demand for a competitor, and a viable one would invariably emerge.

For Amazon to prevent this, they would need to embrace their marketplace sellers as actual customers and not act as simply a sales-channel provider. This would mean, though, that they would need to forgo short-term gains from bringing products in-house and instead channel that energy into finding more ways to market and support their sellers. This would be a bold move by Amazon, and one that would help solidify their already dominant position. And it would be a move much welcomed by their seller community.

I am curious to see how it all unfolds in the future. In the meantime, just in case, I’ve broken ground on a manufacturing company. This way, when Amazon does go direct to the manufacturer to get the best pricing, that manufacturer will be me.

Wharton Magazine - Background

Type to Search

See all results