Today’s online shopper gravitates toward sites that offer selection, value and convenience. With more than 200 million products in all kinds of categories, and a Prime subscription that guarantees order deliveries in two days or less — Amazon has set the bar high for what’s expected in e-commerce.
Consumers aren’t the only ones benefiting from Amazon’s approach. The ChannelAdvisor 2015 Online Retail Survey found that third-party merchants selling on Amazon are seeing strong results. When comparing online marketplaces, more than 70 percent of U.S. respondents said Amazon generates the greatest sales volume for their products.
How are third-party retailers generating so much ROI from Amazon?
Fulfillment by Amazon (FBA)
Using FBA allows your products to be available to Amazon Prime members (which is a huge revenue opportunity considering the rate at which Prime is growing). Amazon has made large investments in expanding its fulfillment network in recent years as a strategy to ship items to consumers faster. This network includes million-square-foot warehouses for storing products as well as smaller sortation centers to sort pre-packaged products into ZIP codes and deliver them to post offices.
More than half of the 2015 Online Retail survey respondents said they are using FBA as a way to streamline logistics and reach Amazon Prime subscribers. Of the respondents not currently using FBA, 22 percent said they plan to in the near future.
Advertising on Amazon
In addition to the third-party marketplace, retailers are leveraging digital marketing programs offered by Amazon as well. Advertising your products on Amazon allows you to increase your exposure on the site and potentially increase your sales in a very competitive and crowded selling environment.
When asked what digital marketing channel provides the most ROI for their companies, 35 percent of respondents listed Amazon’s advertising programs, such as Sponsored Products and Product Ads, as the top channel. However, Amazon recently said it will no longer offer Product Ads after October 31 as the company is testing a new advertising format called Amazon Text Ads. It will be interesting to see if retailers continue to see the same ROI with the new format.
We’re still in the early stages of electronic payments, and PayPal is still the preferred method among consumers. PayPal was listed by survey respondents as the most popular payment method used by their consumers after debit or credit cards. However, among the other options (which included Google Wallet, Apple Pay and others), Amazon Payments appears to be the largest threat.
After debit or credit cards, 15 percent of respondents said Amazon Payments is the most popular method used by their consumers (second only to PayPal). Can Amazon catch PayPal in the battle of payment options? Only time will tell.
The 2015 Online Retail revealed great insight about Amazon, social media, fulfillment and more. For a full recap of the results, please visit http://bit.ly/2015OnlineRetailSurvey.
Gina DeFrank is Product Manager for Marketplaces and Webstores at ChannelAdvisor, responsible for research and product direction for e-commerce destinations such as Amazon, Sears, Big Commerce and Shopify. She works closely with the marketplaces, retailers, and ChannelAdvisor teams to keep up to date with channel developments and to optimize existing features for ChannelAdvisor customers.