Thursday, December 28, 2017

The Amazon Dilemma

To Amazon or Not to Amazon, that is the question facing virtually every on-line retailer today.  Amazon is such a retailing powerhouse that it's estimated they control nearly 40% of all on-line sales.  Even for companies like Gem of the Day, that are actually older on-line entities than Amazon, the reality of Amazon's credibility and traffic delivering power makes it virtually impossible to ignore.

Many people don't realize that a huge amount of Amazon's website offerings are actually offered, warehoused and shipped by other, independent, retailers.  The retailer must be pre-approved by Amazon to then list products on the Amazon website.  The advantages to the retailer are obvious: visibility, traffic, credibility, customer confidence, advertising and infrastructure, including credit card processing,  are all provided by Amazon.

But here's the dilemma: Amazon charges substantially for the privilege of listing product on their website.  For jewelry and watches the charge can be as high as 15% to 20% of the offering price.  If the retailer sells the same item on his or her own website, the costs are significantly less.  But so are the sales!!

Retailers we've talked with tell us Amazon will deliver ten times the sales on any given item when compared to the company's own website.  Other retailers tell us it can be 100 times the sales.

Can the retailer find room in their margin to overcome the Amazon commission?  Are the additional sales worth the reduced  margins?

It should be noted that some watch brands, especially some better Swiss brands absolutely PROHIBIT Authorized Dealers from selling their watches on Amazon.  If and when you find those brands on Amazon they will be "gray market" or transhipped watches and the manufacturer will not honor the warranty.