Thursday, December 2, 2021
UncategorizedAmazon: Friend or Foe?

Amazon: Friend or Foe?


We ask ourselves as small business owners time and time again whether Amazon is our best friend, or our fiercest foe. We practically salivate like a Pavlovian dog at the prospects of its global reach. We want to jump on board even if it means lower margins, because we will more than make up for that with greater sales.

So why not? Well, apparently many of you view Amazon as a foe. In Lendio’s American Dream Survey of more than 2,000 small business owners, it was clear that many viewed Amazon as a threat to their bottom line. In fact, two out of three small business owners said they view large corporations, such as Amazon and Google, as having a negative impact on growth opportunities.

In the ILSR survey above, three quarters of those surveyed listed competition from Amazon, including its marketplace, as their number one challenge. Be careful what you wish for my friends. Remember, on one hand, Amazon needs you, for now. Roughly half of all annual Amazon sales are those of small businesses, and $2 billion in sales alone on Amazon Prime Day are from small and medium sized companies.

The retail landscape changes so quickly it is important to keep up with what these monolithic platforms are doing. As we’ve mentioned before, Amazon intends to invest more than $15 billion this year to help third-party sellers grow through the Amazon platform. Just when you want to walk away they lure you back. Lendio’s survey also suggests that many small businesses feel like they’re up against an unbeatable rival in Amazon with its one-click ordering and now, one-day shipping for Prime members. According to Shari Lava, Research Director, Small and Medium Business at IDC, “As retail and digital business evolves, small and medium-sized businesses embracing digital transformation are nearly twice as likely to see double-digit revenue growth.”

Look, no one has the right answer for your business regarding your affiliation with Amazon and others. It is up to you to focus on the aspects of your business that you can control. As I’ve said before, Amazon, nor any other platform or distributor should comprise more than one-third of your overall sales. That way if Amazon whimsically pulls the plug on you, your business will not be totally under water. Focus on the fundamentals and you will be fine.

Make customer service your top priority: It sounds so cliché, but it is true. With all the options available from your competition, customer support is an area where you must stand out.

Monitor Cash Flow Closely: We have written whole pieces on cash flow because of its significance to keeping you afloat. Free forecasting and financial management software are easy and available, and you should be encouraged to use it. Don’t let this important aspect be diverted solely to a bookkeeper or accountant. You must have your hand in this pie to know what’s coming in and what’s going out.

Plan for the Unexpected: Like you would with a personal savings account, your business should have a plan for capital in the event of an unpredictable event. Whether through disciplined saving, a business line of credit or a business credit card, I recommend having a six month reserve in place.


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