Let’s run a scenario: You’re starting an e-commerce business today. You’ve sourced a killer product, given it a memorable name and a cute logo, and now you’re ready to send it out into the world. But where do you start?
(Wait, you haven’t found your product yet? This is important! But worry not, we've covered some tried-and-true techniques for choosing profitable products.
Amazon, eBay and Shopify are the top three online sales platforms today. Since eBay is a weird mishmash of rare collectibles, high-end cars, and niche “treasures”, we’ll focus on the other two.
Think of Shopify as the digital version of a brick-and-mortar store. You start with an empty shell. It’s up to you to make it work, make it pretty, and make sure people can find it. Its powerful platform comes with things like payment processing and inventory management baked in, while add-on apps can help with SEO, customer service, promotions, and a ton more. While all this functionality is exciting, every element will need to be set up and customized, tested, and managed.
If Shopify is like setting up a fancy boutique on Main Street, Amazon is like putting your product on the shelves at Walmart. Many of the headaches are taken care of — they own the building, store the inventory, and attract the customers — but you have to play by their rules. And you need to master the game to succeed.
Both Amazon and Shopify are helping business owners move billions of dollars of product. If you’re jumping into the e-commerce space today, they’re both good options. Very good. But very different. To see which is the best fit for your business, let’s dive into the pros and cons of each...
We have many years of e-commerce experience, and currently use both Shopify and Amazon (and have used many other platforms, too). We’ve built multiple brands that generate anywhere from a few thousand dollars a month to hundreds of thousands of dollars a month — on Amazon. That’s our strength.
It’s still early in our Shopify journey; we don’t know everything. We’ll do our best to give an unbiased opinion, but would love to hear from others who’ve had different experiences.
Let’s dive in!
After years of working with Amazon, every headache we’ve ever had is pretty much solved with Shopify. Of course, we also discovered significant new pain points we didn’t know existed.
Shopify gives you complete control of the buyer experience. Whether your brand is chic luxury or humorous whimsy, you’re free to create a website that conveys that personality to potential customers. And it’s not just the look and feel that you’re in charge of. Want to add a blog to your site? Done. Need to A/B test the ‘Add to Cart’ button color? Sure. Prefer to highlight the most positive product reviews? You can. Shopify lets you do whatever you want with your store — provided you have either the skills or budget to make it happen.
Let’s try a new metaphor: Shopify built the cockpit, but you fly the plane. As the pilot of your e-commerce store, you have access to all the charts and gauges you need. See what your site visitors are doing, how they behave, what they click on, and what they put in their cart. Then tweak, optimize and adjust as needed. It can be complex, but it’s a really cool way to create a better experience.
That’s not the only data you get. When customers provide a phone number or a birthdate or an email address, it’s yours. And you grow that database with every sale. You can follow up with a review request, offer special discounts during holidays, or even send a hand-written thank you note. This is huge, and may be Shopify’s greatest advantage over Amazon.
Your store is yours, and your store doesn’t give shelf space to rivals or show sponsored ads for competing products. Once traffic arrives in your Shopify store, you’re in control. Which is awesome.
A happy result of the previous point, Shopify stores have the potential for a higher average cart value (ACV). When Amazon customers add your product — we’ll call it Widget X — to their cart, Amazon shows them items that pair well with that purchase. Maybe batteries and a nice carrying case. But those suggestions aren’t your products. Because you own the shopping experience with Shopify, you can do the same, but with your own products. Boom, higher ACV.
Lastly in the pro-Shopify column, you can sell a thriving Shopify store and get a much higher multiple on earnings than a comparable Amazon store. And that’s because you own everything. The domain, the reputation, the brand, the customer database — on and on it goes. You own all of it. And it’s an asset the market will pay handsomely for.
Of course, all the ownership and freedom comes at a cost. Literally. It’s expensive to set up a Shopify store that looks professional and works as intended. If you go all-in and create a site that looks tailored to your brand (instead of using a generic-looking template), you could be hiring a designer, web developer, photographer, writer and more. That’s not easy. Or fast. Or cheap.
After you’ve invested all the time and money in getting your Shopify store looking perfect, you’re rewarded with a conversion rate that is ... not great. For a number of reasons we’ll get into shortly, it’s typically much, much lower than what you see on Amazon.
No surprises here: For many online shoppers, Amazon is the first stop, the default. If they’ve never heard of you, and maybe even if they have, diverting them to your Shopify store is going to be really tough. If and when they do show up, well, see above. They don’t trust you like they trust Amazon, and they’re not going to give you money as easily as they give it to Amazon. Hence the low conversion rates.
But let’s say you created a beautiful Shopify store and executed a genius marketing and PR strategy. And it worked. You have customers and they’re buying. Now you need to start shipping product. Because this isn’t Amazon, you don’t get to use Fulfillment By Amazon (FBA). It’s time to learn logistics. Your options are “simple”: figure out how to do it on your own, or bring in a third-party company to handle shipping for you. It’s not the worst thing, assuming you never find out how much easier life could be with FBA.
Switching to look at Amazon, you could almost invert the points above — the good is now bad, the bad is now good — though reality is a bit more nuanced, of course.
Here’s what you need to start selling on Amazon: Some decent product photos and sales copy. If you’re so inclined, you don’t even need to involve another person (though do make sure the photos are well lit and run your spellchecker). It’s easy. And fast. And cheap.
Fulfillment By Amazon is a modern-day miracle, and this isn’t even close to hyperbole. It’s truly astonishing. Here’s how it works: You send your products to Amazon. Congratulations, you now have (nearly) worldwide distribution. You’re shipping to people in two days, and you didn’t have to invest billions in infrastructure. Really, it’s amazing.
Imagine a big-box store packed with customers. Now imagine a pristine boutique with just one customer, and that lone customer walked in by accident and is pretending to browse because they feel bad.
Amazon is that big-box store, but supercharged, with over 100 million Amazon Prime customers in the US, plus millions and millions more non-Prime and international shoppers. It’s huge.
Listing your product on Amazon instantly boosts your trust score. And it only increases as you get reviews and people saying, “Yeah, this is an awesome product”. If shoppers don’t like something, no big deal, they send it back to Amazon. If something on Amazon tickles their BS detector, it’s perfectly fine to buy it anyway. They can always return it.
Now run that same scenario in Shopify. If the site gives off even this slightest whiff of impropriety, nobody is going to give them a credit card number. Nor would shoppers care to find out about the site’s return policy the hard way.
With Amazon as the go-between, your customers know their personal information is safe, and returns should be hassle-free. Removing these huge hurdles from the buying process is also another reason why Amazon’s conversion rate is so much higher.
Starting with just a product or two, you can start an e-commerce business today on Amazon. As your understanding of the marketplace develops and you get more skilled at driving traffic to your products, it’s easy to add new SKUs. You don’t have to worry about fulfillment or waiting for your web developer to make massive updates.
Another advantage to this approach is that it doesn’t look weird. You can pop a new product on Amazon without thinking too hard about how it fits alongside your other wares. On a standalone Shopify website, your product mix requires more planning.
Control, control, control. That was the big upside to Shopify. Not so with Amazon. You don’t own that customer. You don’t get customer information or shopper behavior data or even a shipping address.
What you do get is a message along the lines of “Roy bought your widget and he lives in Arkansas”. You can kind-of-maybe message them using Amazon’s Buyer-Seller Messaging. But that’s it. Sticking strictly to the Amazon system, Roy bought your product and now he’s a ghost. Gone. You’re not building a list, and we know how valuable email lists can be for an e-commerce business. And you’re not building your customer base. It’s not great.
There may have been a time when you could just throw any old thing on Amazon and expect reasonable sales. No more. In many (or most) niches, Amazon is crazy competitive. If someone already has a similar product with thousands of reviews and you have zero, well, you better find a new idea — something that’s not as competitive but still profitable.
And we can help. Head over to YouTube and subscribe to our channel for the latest strategies and tactics you can use to discover a profitable niche and build a thriving e-commerce business on Amazon.
With all that competition, you need to stand out. And that means getting your products ranked and reviewed. That will cost money. How much exactly will depend on how competitive your niche is: If your competitor has thousands of reviews, it’s going to be expensive to compete. If they have 50 or 100 reviews, life is going to be way easier.
On the bright side, remember that you aren’t paying for an entire creative team to build a custom website. But your plan needs to consider that every product launch will require an investment at the start.
To illustrate a few of the points above, we’re sharing numbers from two of our smaller e-commerce businesses. This is in no way scientific or a perfect test, though one day we’ll certainly do a true apples-to-apples comparison. That being said, we think it’s still interesting to glance at the numbers.
Here’s what we’re working with:
Our Shopify store had 20,000 sessions and a nice $106 order value. But the conversion rate is only 0.35%. That’s pretty terrible.
But we have all this other information available. Among other things, we can see total customers, repeat customers, how many people add items to the cart, how many reach the checkout, and how many convert. (That is, buy.)
We can see a big drop off from ‘Add to Cart’ to ‘Reach Checkout’. And another drop in the number of users who reach the checkout page but don’t complete the purchase.
Which is all very interesting, but that conversion rate. Ouch. We can tweak the website and try a lot of things to boost our conversion rate, but the reality is it will take time. You have to build trust.
Could I put these same products on Amazon and see a way better conversion rate? Probably. We’ll see.
Again, we’re looking at very different product categories here. But over the same amount of time, our Amazon products have less traffic and more sales. Our top-selling item is getting a 20% conversion rate and the “worst” is at 7%. Compared to less than half a percent for our Shopify product.
Our biggest Amazon business does millions in sales each year, and we consistently see a 20% conversion rate. And often even higher.
Why the difference? We think it comes down to customer acquisition and intent.
People on Amazon are the same as people in a real-world retail store: They’re there to buy, not to be entertained or catch up with friends. They decided they need a new water bottle, so they hit Amazon to compare prices and read reviews. Very often that leads to a click on the ‘Buy now’ button.
To get traffic to your Shopify store, you’re probably going to run ads. As a result, a big chunk of your traffic will come from social media. Do it right, and you can target the right people. But not at the right time, because this is interruption-style marketing. They’re doing something else, in a different state of mind. And you’re asking them to stop what they’re doing on Facebook or Instagram and focus on you.
Even if they like what you’re selling, it’s unlikely they’re ready to buy at that exact moment. The best you can hope for is that they see your ad enough to finally purchase, or they remember you for later.
If you’re ranked well on Amazon, you don’t have to fight the battle for traffic. By showing your products to buyers who are primed to buy exactly what you’re selling at that exact moment, it’s a machine that constantly makes you money.
Choosing between Amazon and Shopify depends on your business goals.
Shopify is great if you’re trying to build a true direct-to-consumer brand. A recent example is Purple Mattress. They launched with a memorable hook (purple? why?), a great website, and an ambitious advertising campaign that went viral. They’ve also expanded into pillows and other related items. (Also note: Today, they’re selling on Amazon, too.)
If your vision is a big, splashy launch — beautiful website, ad campaign, email marketing, PR, social influencers, etc. — and you have the budget to make it happen, Shopify is perfect. You’re free to let your creative flag fly.
On the other hand, if you have a couple SKUs and lack the massive marketing budget, Amazon allows you to generate passive income and grow your business over time. It’s also better for the more analytical among us who understand numbers or get a kick out of researching product niches, perfecting ranking techniques, and testing ideas until they find what works.
Regardless of where you start, you’ll eventually want to be available on both Amazon on Shopify. Just like Purple Mattress.
Building your reputation on Amazon makes it easier to get traffic on your Shopify website, as you already have a core group who love your products.
If you’ve built your brand on Shopify, you can bring your audience, reputation and momentum to Amazon. This is especially exciting when you launch new products. You can be new to the platform but have the power of a heavyweight, making you competitive even in cutthroat niches.
If you’re currently selling on Shopify or a brick-and-mortar store and you’re ready to grow your business on Amazon, we’d love to help you make the move. From initial setup to creating a strategy to really crush it, that’s something we’re really (really!) good at.
For those moving in the opposite direction, Amazon to Shopify, that’s something we’re still working on. It’s not a core competency just yet. What we do have is a way for Amazon sellers to build their email list really easily. That is most definitely one of our core competencies.