28 / 04 / 2020

Jacob, Esau and Jeff (or How Selling on Amazon Is a Mistake of Biblical Proportions)

Greed. Aggression. Betrayal. Ancient themes all play out when the retail behemoth gets small businesses under contract and under thumb.

Carey Smith | Founding Contrarian

I’m not what you’d exactly call a religious person. But when entrepreneurs tell me they need to be on Amazon, I’m inclined to respond, “Why would you sell your birthright for a mess of pottage?” Some recognize the Old Testament reference and are taken aback; others guess that it sounds like a bad deal but aren’t sure how it applies to themselves and Amazon.

For anyone who either doesn’t know or doesn’t remember, the book of Genesis includes the story of one Jacob, son of Isaac, who outwitted his twin brother, Esau, into giving up something of great value (his powerful status as first-born by a few minutes) in exchange for short-term gratification — a meal or “mess” of pottage. Esau was hungry at the time and probably not thinking straight.

How that thousands-year-old story applies to the world of e-commerce is simple: Amazon, like Jacob, is focused solely on enriching itself at others’ expense, while hungry entrepreneurs, like Esau, are lured by the false luster of selling on Amazon, only to end up royally screwed.

A recent article by The New York Times’ Karen Weise chronicled how Amazon squeezes its so-called partners. More interesting even than the story itself were the comments, filled with first-person horror stories. Here’s an excerpt from one:

“That year, we sold $100k on Amazon, and my accountant called me in total surprise — the numbers he saw must have been wrong. It showed we only pocketed $2k. No, I informed him — that was correct. $2k after selling $100k?!? How is that possible? It’s because Amazon soaks you for fees for this and fees for that and fees on top of fees. And, oh yeah, you need to advertise on their site or they drop your position.”

But the exorbitant fees and strongarm tactics are just part of the problem. The way that Amazon beats down prices and quality, so that every differentiated product ultimately ends up a commodity, is a bigger concern. But what may be most damaging for entrepreneurs just starting out is that Amazon is the middleman to end all middlemen; it’s a virtually impenetrable barrier that separates a company from its customers at a time when a close relationship is absolutely vital in building brand loyalty. Not only does Amazon choke off communication, it retains all the customer data that’s invaluable for understanding your shoppers.

And adding insult(s) to injury, there’s virtually no control over feedback, either. One crazy or fraudulent review can do untold damage, and the seller has little recourse.

And if, against all odds, you somehow manage to gain a little traction, better not get too excited, because Amazon’s bloodhounds have already sniffed opportunity. In no time, you’ll find yourself competing against a cheaper supplier, and your hard-earned brand magic will vanish into thin air.

Meanwhile, Jeff Bezos will have snapped up the latest, most palatial listing on the Mansion Global website…

So, no, I don’t think anyone needs to sell on Amazon, unless they’re really desperate for a mess of pottage, Fulfilled by Amazon, of course.