June 8, 2012, 9:31 AM

IRCE 2012 Report: Selling on Amazon is not for everyone

Retailers should consider many factors before listing their products on web marketplaces.

Stefany Moore

Associate Director of Research

Lead Photo

Richard Sexton

Selling on Amazon.com Inc.’s marketplace has an obvious appeal for retailers, as they can list their products in front of Amazon’s massive audience of around 90 million monthly unique visitors. But there are negatives too, says Carolina Rustica founder Richard Sexton. He said retailers will have only limited information about consumers who buy on Amazon’s marketplace, there are fees and integration costs associated with listing products there and, in the end, retailers may end up competing with Amazon itself in their product category.

In a session designed for small retailers at the Internet Retailer Conference & Exhibition 2012 in Chicago, Sexton suggested retailers look carefully into a number of factors before they make the move to sell on third-party marketplaces like the one operated by Amazon, No. 1 in Internet Retailer’s Top 500 Guide .

Because Amazon’s customers are used to receiving their orders quickly, retailers should make sure they can ship orders the same day, or in one or two days at the most. “Customer expectations are set by the marketplace itself,” Sexton said. “If you’re on Amazon buying a book, you want it in three days. But if you’re buying furniture from us, three days won’t happen. The customer doesn’t care whether it’s coming from you or from Amazon, they still want it in three days.”

Customers also expect free returns and no restocking fee, so if merchants do not offer these options, they may bring in fewer new customer or draw negative reviews.

Marketplaces may be a good fit for retailers that sell products they sell exclusively, as they won’t need to get into a price bidding war with other sellers those products. For example, Carolina Rustica, No. 684 in the Internet Retailer Second 500 Guide, only sells its own line of branded furniture on Amazon, Sexton said.

A similar suggestion was echoed in a later session by John Lawson, CEO of 3rdPowerOutlet.com, which sells hats, bandanas, shoelaces and other accessories. He had several types of shoelaces for sale on Amazon.com for months, but was tired of having to lower his price to compete with other sellers for the Buy box, where Amazon features marketplace sellers with the best prices for each product.

“Now I have the laces made, call them NYC Laces and no one else can compete with me on the product,” he said. “That’s definitely the way that you set yourself apart because it locks everybody else outside of our SKU.”

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