It is not enough to create a feed or product list on Amazon; very often, it is necessary to activate the advertisement section. Therefore, advertising expenses are added to sales commissions.
If we want to compare similarities between Google and Amazon we often notice that Google is ahead when it comes to the CPC, but Amazon plays with a large advantage in the conversion rate. Therefore, we can get equivalent, or much better advertising COS on Amazon than on our website.
However, if we integrate the commissions on sales, it will be more difficult to achieve identical profitability between the leading marketplace and the purchase of traffic on our website.
Therefore, two factors must be taken into account to make the right decision:
1. Use the platforms according to their advantages
In fact, it is not a matter of creating ads for the entire Amazon catalogue (as is the case with Google Shopping). Some products turn out to be more profitable on your website, while others will be more cost-effective on Amazon through the “Fulfillment by Amazon” program. Also, pricing management may differ between platforms depending on the competition (fight for Buy Box).
Therefore, the total COS (including marketing and sales commissions) can join together both solutions.
2. Properly integrating the benefits of diversification
Positioning all or part of our product range on marketplaces does not only respond to a growth objective. Other strategic advantages have to be taken into account:
- Reducing dependence on a single ecosystem where the arrival of a new competitor could cause severe disruption.
- Keeping up with the markets and in particular, Amazon, whose annual growth is outrageous and much stronger than e-commerce in general.
- Giving a bonus to the returns on investments on Google. In fact, we observe that multiplying the points of contact improves the performance of each tool.
Therefore, we should not determine the profitability of an item without taking into account the big picture and find the perfect combination of operational marketing to get the best of both worlds.
Please contact me if you would like to further discuss the subject.
Jerome Keloghlanian, Founder of Ikom – Labelium Group