How to Sell
Over Half of U.S. Brands Leverage Amazon for Sales and Customer Acquisition
In a rapidly transforming retail landscape, more than fifty percent of U.S. brands have turned to Amazon as a pivotal platform for sales and customer acquisition. This trend underscores the marketplace's significant role in shaping contemporary retail strategies and underscores Amazon’s expansive influence in the e-commerce sector.
Amazon as a Key Player in Customer Acquisition
The majority of brands view Amazon not only as a sales channel but also as an essential tool for acquiring new customers. This is particularly crucial in an era where customer acquisition is a primary concern for many small and medium-sized businesses (SMBs). Indeed, 60% of SMBs report challenges with attracting new customers, highlighting the strategic importance of Amazon in overcoming these difficulties.
In addition to its role in customer acquisition, Amazon also serves as a defensive mechanism against unauthorized resellers. By maintaining a direct presence on the platform, brands can better manage their product listings and ensure that customers receive authentic products, thereby safeguarding their brand integrity and consumer trust.
Revenue Generation and Market Expansion
Amazon's impact on brand revenue is profound, with over half of the online revenue for these brands being driven by the platform. This substantial contribution to their bottom line is a compelling reason why 81% of brands that sell directly on Amazon express a desire to expand their presence on the site.
The COVID-19 pandemic further amplified the reliance on Amazon, with 42% more brands choosing to sell on the platform post-pandemic. This shift reflects a broader trend towards online marketplaces as brick-and-mortar sales experienced significant disruptions during the health crisis. For many brands, Amazon has become a critical component of their sales strategy, offering both a reliable revenue stream and a vast customer base.
Advertising Efficacy and Challenges
Despite its benefits, selling on Amazon is not without challenges. One of the primary concerns for brands is the lower margins often associated with selling on the platform. While 52% of brands choose Amazon for its potential to increase sales volume, 45% have noted the downside of tighter profit margins.
Advertising on Amazon presents another set of challenges. While most brands report a fourfold return on investment from Amazon advertising, there is a significant portion, 40% of SMBs, who find these ads ineffective. A lack of expertise is a contributing factor, with 23.7% citing insufficient know-how as a barrier to effective advertising. Interestingly, 68.4% of SMBs are not currently running ads on Amazon, although 27% plan to invest in paid search over the next five years, indicating a potential shift in strategy as brands seek to optimize their presence on the platform.
Sales Distribution Across Channels
Brands are navigating a complex landscape of sales channels with varying degrees of reliance on Amazon. A notable 26.6% of brands report a balanced sales distribution between their own websites and marketplaces. Meanwhile, 22.7% observe a split where 75% of their sales come from their own sites and 25% from marketplaces. Conversely, 21.3% of brands experience the opposite, with 25% of sales on their own sites and 75% on marketplaces, demonstrating Amazon's dominant role in their sales strategy.
For some brands, marketplaces are the sole source of sales, with 12.3% reporting all sales through these channels. In contrast, a smaller segment, 8.3%, relies entirely on their own sites for sales. These statistics illustrate the diverse strategies brands employ to harness the potential of both direct and marketplace-driven sales, with Amazon playing a critical role for many.
The insights are bolstered by a comprehensive study conducted by NetElixir via Google Consumer Surveys, which provides a detailed look at the evolving dynamics of e-commerce and the pivotal role Amazon plays in it. As brands continue to adapt to the digital marketplace, Amazon's influence is likely to grow, shaping the future of retail in the United States and beyond.