When it comes to selling products, our clients’ fall into one of two categories: 1) they have an existing online store and want to explore selling on Amazon or eBay, or 2) they currently sell on Amazon, eBay, et al, and want to build a system to manage the products and orders generated, while also offering their products on a branded storefront.While many SMB merchants are fearful of Amazon’s footprint in the world of eCommerce, which elicits the common reaction, “how can I possible compete with Amazon?”, I look at the ability to sell in multiple channels a very good development in our industry. With some relatively minor effort, a merchant can leverage the reach and power of Amazon, eBay and others to extend sales efforts. Such “multi-channel” merchants are not competing against Amazon, they’re competing with Amazon.
This post is the fourth in a new series by eCommerce expert, Bret Williams. If mastered, selling across multiple channels can be an exciting way of growing your business.
Building a Multi-Channel StrategyWith the low cost and increased sophistication of today’s SMB eCommerce technologies, it makes perfect sense for emerging merchants to consider selling on many different channels. With the proper technology, planning and training, a merchant can fairly easily:
- Sell products on their store, Amazon, eBay, Facebook and many others.
- Have all orders come into a single order management “hub” that communicates with each channel.
- Extend the value of their brand to a broader audience.
- Online store. Your BigCommerce, Shopify, Magento, SquareSpace, et al website where you sell your products. If you offer more than one line of products (e.g. handbags and shoes), you can even create multiple online stores for each line.
- Amazon. Selling your products on Amazon by either pushing products that only you sell (or sell as a unique bundle or package) or creating an alternative offer for an existing product. Some merchants also build online stores simply to offer products sold on Amazon, but fulfilled by other vendors!
- eBay. The “grand-daddy” of online, community marketplaces. A great venue for selling used, open box or slightly damaged items that cannot be sold as “new.” We used eBay for our first store to sell products returned by customers who changed their minds about the purchase, but who had opened the box. We were usually able to sell the item at a price sufficient to cover our wholesale costs.
- Facebook. Many merchants don’t realize they can create a Facebook “Store” on their company Facebook page. Yes, you can. With some platforms, you can even offer products and solicit sales through Facebook Messenger.
- Pinterest. Posts with Pinterest “Buy Buttons” are an inexpensive way of showcasing products while providing a click-through purchasing experience.
- Buy Buttons. If you have a blog site or you have others willing to promote your products, most platforms allow you to create small code snippets that will place a “Buy Now” button on a web page.
- Google Shopping Ads. Not so many years ago, you could feed your products to Google and they would appear on search results solely on the basis of relevancy. Today, however, you have to bid on placements just as you do for their pay-per-click ads. However, relevant products most often appear at the very top of search results and can bring a good deal of visibility to your offerings.
- Brick-and-Mortar Store. Yes, indeed, a physical store should be considered a selling channel. Whether you have a traditional retail store or you use “pop-up” stores to sell at events and during certain seasons (e.g. Halloween store), you can leverage point-of-sale (POS) systems that tie directly into your eCommerce system to coordinate orders, inventory and shipping.
- Shopping Aggregation Sites. While Amazon may technically fall into this category, sites such as WalMart, Sears, Jet and others allow outside merchants to list products on their sites.
ACTION STEPMake an initial list of the channels you feel you’d like to use for your selling efforts. Try to imagine your personas created in the previous installment utilizing these channels for shopping with you.
Strive for a 360° SystemI’ve said it before — but it’s worth revisiting — that one of the biggest mistakes merchants make is to adopt an eCommerce technology before they do the proper planning to map out their entire strategy. It’s so easy to latch onto what appears to be the least expensive, shiniest toy in the box, only to find later that integrating various channels, fulfillment and shipping, marketing, etc. becomes extremely cumbersome and/or expensive. Plan your selling strategy before you select your technologies. That’s why Technology is the last installment in this series. Until you complete your planning, picking a technology is no better than choosing straws; the odds of getting it right the first time is very slim! Multi-channel selling is as complicated in terms of technology as it is advantageous for building sales. Each channel has its own unique requirements, including, but not limited to:
- Product information. Amazon and Google Shopping have some of the most stringent requirements on product information. You have to have UPC, ASIN or other unique identifiers for your products that match the same identifier used by other merchants selling the same products. In addition, there are stringent rules on content, weight, size and other attributes.
- Image sizes and composition. Amazon, for instance, wants all products photographed against a white background. This may or may not be in harmony with the branding design scheme for your store. Each channel also has different image size and shape requirements.
- Order processing. Some channels take the customers’ orders and payments (e.g. Amazon, eBay), while others pass the customer through to your online store for completing the purchase (e.g. Google Shopping Ads, Pinterest). Facebook allows you to do either you prefer.
- Shipping costs and configurations. Again, the way you represent and collect shipping from customers varies widely between the channels, as well.
- Customer service. If a customer has an issue or needs to return an item, you need to know which channels handle these issues and which do not. Even those that act as the front line for your customers will have requirements on how quickly you respond to issues they forward to you for resolution.
- Make a list of a few of your products that you feel have the greatest sales potential (if you’re already selling online, use your top-selling products). Search Amazon, eBay, Facebook and Google Shopping. Find matches to your current products or, if you’re manufacturing your own products, competitor’s products that closely match yours.
- Create a spreadsheet to record the current prices offered by others selling on those channels.
Selling on ChannelsFirst — and this may be difficult to immediately absorb — you do not have to sell all your products on all channels. The truth is that it doesn’t always make sense to sell everything everywhere. But, it can make sense to sell everything on some channels and some products on all channels. Let’s dive into that concept now.
Pricing for ProfitOn many channels there are costs related to selling. These are costs beyond your wholesale cost and are usually based on a percentage or fee per order. These fees may include any of the following:
- Commission. Often referred to as a transaction or referral fee, the amount is a percentage of the sales price.
- Shipping & Handling. Relevant to Amazon if you use Fulfillment By Amazon. We cover this more in the next installment on Fulfillment.
- Pay-per-click. A fee you pay whenever someone clicks on your product to then purchase it on your website.
- Membership fees. Usually a monthly fee paid for the privilege of selling on a channel.
- Shopify. 0.5-2.0% transaction fee based on your plan. Plus you will have payment gateway fees (for taking credit cards, PayPal, etc.). Source.
- Amazon. Referral fees range from 6% to 45% depending on product category. Plus membership fees of $39.99/month (professional plan). Source.
- eBay. Transaction fees of 3-10%. An insertion fee may be applied as well. Source.
- Walmart. Commissions of 8% to 15% based on product category. Source.
- Prepare a spreadsheet with the following columns: Product Name, Retail Price, Wholesale Price, Gross Profit, On-site Sale, Amazon, eBay, Walmart.
- Enter a product you wish to analyze. Use a Retail Price based on what you think you would have to use in order to be competitive across all channels (you can, if you wish, break this down into a “per-channel” evaluation if you feel you will offer different prices for each channel).
- For each product you analyze, calculate the Gross Profit as the Retail Price minus the Wholesale Price.
- For “On-site Sale,” enter a formula to calculate the costs based on a nominal 2.9% processing fee (or enter the actual average processing fee if you know it) and any transaction fee charged by the platform (e.g. Shopify).
- Set up formulas to calculate the cost of each channel based on the percentages applicable to the product categories you’re selling.
- Compare the costs of selling on each channel. If any have costs that are greater than your Gross Profit, then you would lose money selling on that channel at the retail price you anticipate.
- You can’t sell your products on one or more channels and still make an acceptable profit.
- You can sell some of your products at a profit, but others would lose money.
- You can sell all of your products at a profit.
Selling Loss-LeadersLet’s say you have a widget you want to sell on Amazon, but with the rough numbers, you would lose 5% on every sale if you offer your widget at a price similar to other widget sellers. You could still offer your widget by:
- Adding additional accessories or add-ons and building, in essence, a new product. You would have to secure a new UPC code for this bundle, but by adding accessories and raising the price, you could attract buyers who feel that by paying a bit more than your competitors, they will get more for their money.
- If your widget is an item that is most often purchased with related accessories, and you can make margin on the accessories, then it might be worth selling the widget.
- Only sell the item on your store, but use Amazon’s advertising and other paid services to promote your store and your products to the Amazon audience.