The Problem with Selling on Handmade at Amazon
The Etsy platform has long existed in a state of inherent tension: the sellers who depend so heavily upon it are often quick to criticize it as well. Etsy was roundly celebrated as it labored to create an unprecedented market opportunity for makes and product designers, effectively launching a retail rebellion of the very best kind. From its humble beginnings as a scrappy startup way back in 2005, Etsy has evolved into a juggernaut, racking up close to $2billion in sales in 2014 and almost single-handedly launching the “maker revolution.”
But a series of missteps and growing pains left many sellers with a less-than-savory taste in their mouths. Etsy sellers have struggled with:
- An ever-evolving definition of “handmade”
- A perceived lack of commitment to protecting their intellectual property
- A recent flood of mass-produced products from overseas
- A corporate IPO, which introduced public shareholder interest into the mix
So while Etsy pioneered this space, improving market accessibility for makers and artists over the course of the last decade, the relationship has soured for many of Etsy’s most ardent supporters. Sensing a potentially lucrative opening, Amazon launched a new “Handmade at Amazon” platform designed to compete head-to-head with Etsy. Amazon wisely put together an attractive package for Etsy sellers and entered the fray with a public launch in October of 2015.
For the past four months, I’ve fielded the question “Should I sell on Amazon Handmade?” on a weekly basis as my clients explore all of their distribution opportunities. And my answer has been a firm and consistent “no” from day one.
The debate surrounding Handmade at Amazon continues to rage and thoughtful articles have detailed Amazon’s less-than-intuitive user interface and the company’s penchant for using the sales data of its own sellers to drive them out of business. While that possibility is deeply troubling, Amazon fans have remained steadfast in their faith in the platform, asserting that the exploitation of sales data of the handmade contingent is speculative at this juncture. Touché.
From my vantage point as a business strategist for makers and product designers, there are a host of more fundamental problems with the Handmade at Amazon platform. I urge every maker who’s striving to build a sustainable business to proceed with extreme caution. Why?
Amazon is a dictatorial platform that exerts almost total control over the sales process, stripping sellers of virtually all autonomy. And it’s hella expensive, too.
AMAZON IS AN EXPENSIVE PLATFORM UPON WHICH TO SELL
Let’s start with the money discussion, because a clear distillation of the Amazon fee structure will likely dissuade many makers from sowing deep seeds into the platform. When compared to Etsy, Amazon Handmade takes a larger bite of the apple in virtually every scenario. A quick side-by-side comparison is revealing…
HANDMADE AT AMAZON
- No listing fees
- $40 Professional Selling Plan, paid monthly
- Transaction fee of either 12% or $.50, whichever is greater
- Transaction fees are applied to shipping charges as well
As a launch incentive for Handmade at Amazon, the $40 “Professional Selling Plan” fee is being waived through August 1, 2016.
- Listing fee of $.20 per item
- 3.5% transaction fee
- 3% payment processing fee
- Transaction fees aren’t applied to shipping costs
- No monthly fee
The fee disparity will deepen when Amazon Handmade begins collecting their $40 monthly fee in the fall of 2016.
It’s worth noting, too, than Etsy releases funds immediately, while Amazon holds funds until the order ships. For makers who are shipping premade items, this point of difference is likely insignificant. But for the artists working on custom commissions, this is a critical differentiation that will impact the cash flow of the business.
AMAZON’S NOT AFRAID TO STRONG-ARM YOUR PRICING STRUCTURE
Amazon is well attuned to their power and the company isn’t timid about applying pricing pressure to those who play in its sandbox. In August of 2015, Amazon dispatched an email missive to an entrepreneur in my circle, effectively announcing that…
“We have identified that based on the current cost of some of your products, we are not able to sustainably offer them to our customers despite our highly efficient, high volume retail model.”
Mind you, the email was received after 4 successful years of selling via Amazon. Brand managers hadn’t noted slacking sales, so the trigger for the communication is unclear. Regardless, Amazon offered the brand “suggested” new pricing which equated to a 15% reduction. The seller was given one week to decide from among three options:
- Accept the pricing presented, authorizing Amazon to implement it immediately.
- Accept some of the new pricing “suggestions.” For products which weren’t accepted at the suggested price point, Amazon may elect to drop them altogether.
- The seller could manually update the pricing themselves. Amazon noted that if the seller was “unable to give us the costs we’ve requested,” then the products may be dropped from the platform.
Let that sink in for a moment: Amazon dictated the prices of an independent brand. Not the price Amazon would pay for the product, but the price they’d allow an independent retailer to charge the customer. Danger, Will Robinson!
AMAZON IS REVERED AS HOME OF THE CHEAP + READILY AVAILABLE
The sale of commodities forms Amazon’s very core… it’s the premise upon which the company was built and it embodies the concept for which Amazon has become famous: cheap prices, fast delivery, and access to an infinite stream of products. But that very premise is antithetical to the handmade movement.
Commodities are products that can easily be substituted for one another. They’re items for which a demand exists, but there’s no qualitative difference across a marketplace. For example: the scrubber sponges you grab because they’re on sale at the grocery store and the plant food you select because it’s the first one that catches your eye during a quick run to the nursery. The purchasing patterns of commodity buyers are triggered by two things: price and availability.
Amazon has become the largest retailer in the United States, with $89 billion (billion with a B!) in sales collected from 294 million users in 2014. And why do we patronize Amazon so faithfully? Because virtually every product under the sun is conveniently located in one centralized spot, available at our fingertips 24 hours a day at an uber-competitive price. Even better? We can have anything our hearts’ desire on our doorstep within 48 hours. As a shopper, there’s a lot to love!
But as a brand, the love affair is increasinly tepid. In contrast to commodities, brands create differentiated products that are highly desired by their ideal customers. Brand customers have some degree of loyalty, seeking out specific goods in the marketplace. These customers are less likely to substitute products based on price and availability. And they’re precisely the kind of shoppers that handmade artisans need to sustain their business.
By pitching your wares via Amazon, you risk commoditizing your brand. And I don’t believe this is an obscure risk… in fact, I believe that makers who sell through Amazon inevitably erode brand value. The value buyers of Amazon want things fast and cheap (which means their patience is usually in short supply) and they’ll shop next month based on price and availability (which means they’re not inclined to build loyalty to a specific brand). If another seller with a similar item sets up shop on Amazon at a lower price, then your buyers are likely to defect en masse. And if you step off of the Amazon platform, then you immediately decrease the availability of your wares and the Amazon customer isn’t likely to follow you.
In short: Amazon buyers likely aren’t your audience. And you likely wouldn’t want them to be. Please know that I’m not anti-Amazon! The almost predictable delivery of Amazon Prime packages to my doorstep is a sign of how often I patronize the platform. But I use it for quick + easy + cheap deliveries of my daughter’s vegan protein bars and the latest business book I want to digest. If fast + cheap + accessible ism’t the kind of customer you ultimately want to attract to your brand, then I’d think twice about crawling into bed with Amazon.
A few other important caveats to note: prestige products have no place on Amazon because they’re run contrary to the sales model that Amazon has so carefully constructed. And as someone who helps makers build wholesale strategies, I can imagine few things which are less attractive to the independent shop buyer than knowing that your wares are available 24 hours a day via America’s largest discount retailer. Crawl inside the mind of a buyer for a few moments and meditate on that through their eyes.
AMAZON OWNS THE CUSTOMER + TRANSACTION
In essence, Amazon is a closed eco-system and makers are positioned as dropshippers of their own products. The progression of evolving an Amazon customer into a brand customer is a completely passive process over which Amazon sellers have no control.
When selling on Amazon, you…
- Can’t include a link back to your site
- Can’t include any promotional materials in your shipment
- Can’t harvest the customer email address to add to your newsletter list
- Can’t contact the customer outside the Amazon
In essence, the customer belongs to Amazon. Any attempt to establish a relationship with that customer outside of Amazon is sufficient grounds for termination of your Amazon selling privileges.
Etsy policies are friendlier to the seller, at least in comparison to Amazon. While Etsy discourages “fee avoidance”, the platform doesn’t forbid you from linking directly to a website that lives outside of Etsy. And you’re free to tuck anything you like into the actual order.
From Etsy’s Seller Policies page>> “You may receive a buyer’s email address or other information as a result of entering into a transaction with that buyer. This information may only be used for Etsy-related communications or for Etsy-facilitated transactions. You may not use this information for unsolicited commercial messages or unauthorized transactions. Without the buyer’s explicit consent, you may not add any Etsy member to your email or physical mailing list or store or misuse any payment information.”
In contrast, Amazon maintains a restrictive set of parameters surrounding the buyers/seller interaction >> “Any attempt to circumvent the established Amazon sales process or to divert Amazon users to another website or sales process is prohibited. Specifically, any advertisements, marketing messages (special offers) or “calls to action” that lead, prompt, or encourage Amazon users to leave the Amazon website are prohibited. Prohibited activities include the following:
• The use of email intended to divert customers away from the Amazon sales process.
• The inclusion of hyperlinks, URLs or web addresses within any seller generated confirmation email messages or any product/listing description fields that are intended to divert customers away from the Amazon sales process.
In fact, Amazon sellers never even see the email addresses of their buyers…
“Buyers and sellers may communicate with one another via the Buyer-Seller Messaging Service, which assigns unique Amazon-generated email addresses to both parties. Sellers are prohibited from providing or soliciting direct, non-Amazon-generated email addresses on the Amazon website or in correspondence through the Buyer-Seller Messaging Service.”
When selling directly through Etsy, you enjoy an opportunity to include promotional materials that fortify the relationship and entice customers to visit your own independent, ecommerce site. When selling on Amazon, however, Amazon controls the process from beginning to end, and sellers are forbidden from including any materials which might potentially “divert” the Amazon-owned customer.
Per the Amazon’s Sellers Guide >> “Now that you’ve read your Amazon.com seller agreement and associated policies and guidelines, we want to give you additional information that is key to selling successfully on Amazon. Things to Avoid: Including any marketing or promotional materials with packing materials.”
Note: This bit of guidance was originally posted by Amazon behind a password-protected area that’s exclusively accessible by their sellers. The version I linked above is a direct quote on a publicly-accessible Amazon seller’s forum, but the content is identical and the guideline comes directly from Amazon.
That policy binds the hands of Amazon sellers and leaves the ball firmly in the customer’s court. There’s no prompting or incentive for any single customer to track down your site, which is the typical catalyst for converting a customer who found you via a third-party platform into a customer whom you “own.”
AMAZON OFFERS NO HIGHER “HANDMADE” STANDARD
Etsy’s definition of handmade has been a persistent sticking point over the last several years, ruffling more than a few feathers. The “handmade” concept has been iterated in several ways by Etsy executives, and this is the latest incarnation >>
“Handmade items are items that are made by you, the seller, or are designed by you and made with the help of an approved outside manufacturer who complies with our ethical manufacturing policies. If you sell in the Handmade category, you must be able to demonstrate that your items comply with our Handmade Policy. You agree that:
• All handmade items are made or designed by you. If you work with an outside manufacturer to make items that you have designed, you must apply for outside manufacturing and choose ethical manufacturing partners.
• You accurately describe every person involved in the making of an item in your shop in your About page.
• You are using your own photographs– not stock photos, artistic renderings, or photos used by other sellers or sites. Read more about using appropriate photographs in this Help article.
Sellers have long been frustrated with the ever-evolving definition of the word “handmade” offered by Etsy, but Amazon’s definition of handmade does nothing to “put teeth” into the concept.
“All products available in your Handmade at Amazon store must be made entirely by hand, hand-altered, or hand assembled (not from a kit). Products must be handmade by you (the artisan), by one of your employees (if your company has 20 or fewer employees), or a member of your collective with less than 100 people. Mass-produced products or products handmade by a different artisan are not eligible to sell in Handmade.”
Unfortunately, Amazon’s entry into the handmade world hasn’t helped shore up the definition so many of us seek. It’s interesting to note that the much ballyhooed Three Bird Nest fiasco could easily exist on Handmade at Amazon too, so long as the buttons are lovingly stitched one-by-one onto the fresh-off-the-Chinese boat headbands and assuming that the company constrains its growth to twenty employees or less.
NO HISTORY OF SUPPORTING THE HANDMADE COMMUNITY
While many sellers have become disenchanted with Etsy as it’s grown, there’s little debate over the amount of seller support that Etsy offers makers and product designers. There are a myriad of support systems in place at Etsy designed to help entrepreneurs get their sea legs beneath them and build more successful businesses.
Some of those support systems include:
- The Etsy Seller handbook: a collection of 300+ articles on everything from product photography to brand development
- Etsy Labs: a “creative community space” in Brooklyn that plays host to craft and business development workshops
- The Etsy Wholesale Blog: weekly profiles of maker-centric boutiques accompanied by posts filled with strategies designed to fortify your wholesale program
- Etsy Street Teams: communities of supportive makers centered around common product categories or geographical locations
Etsy’s outstanding educational support has spoiled us and Amazon hasn’t risen to the occasion. Their seller support is anemic at best. In the final equation, Etsy has raised a generation of savvy makers that Amazon can now monetize. While that’s a brilliant business move on Amazon’s behalf, the maker community isn’t any better for it. Amazon’s roots aren’t in the handmade movement, and I believe they’ve jumped on the bandwagon simply because Etsy has proven the financial viability of supporting makers and artists. I fear that handmade sellers are little more than dollars signs to Amazon.
A WORD OF CAUTION
I encourage my clients to invest the bulk of their time and energy in building the only platform over which they ultimately enjoy complete control: their own ecommerce site. Depending on any third party platform (Amazon, Etsy, Facebook, Instagram, et al) is a risky strategy that leaves you in a place of vulnerability.
Each of those entities is a publicly-traded company with a primary responsibility to return profit to its shareholders. Their ultimate loyalty belongs to their shareholders, rather than their users.
Further, because we exert no real control over those platforms, we leave ourselves at their mercy. One round of bad press, one algorithm update, or one policy change could spell disaster. The platform could implode or their customers could revolt en masse. The Powers That Be could simply change the rules and decide that we no longer fit their model, banishing us from the sandbox altogether. If those scenarios feel like obscure or abstract concepts then you either haven’t been playing in these waters for long or you haven’t been paying attention. I say that in love, but I can’t conjure a kinder or more accurate way of expressing that.
In order to build a smart, sustainable creative business, I recommend:
- Building your own ecommerce site as “home base”
- Amassing a carefully targeted list of email addresses from those interested in your products
- Sending regular newsletters, brimming with value, to that customer base to fortify the relationships
- Attracting new customers through intentional, high quality social media content, and thoughtful collaborations
- Investing at least twice as much energy in your own platform as you invest in third party platforms
Have you taken Handmade at Amazon out for a spin? Are you an established Amazon seller who predates the Handmade at Amazon platform? Have you been mulling over the decision to set up shop with America’s largest retailer? If so, I’d love to hear your thoughts!
What has your Amazon experience been like?
What attracts you to the platform?
What fears or uncertainties surround your decision to sell via Amazon?