What You Need to Know About Building a Brand on Amazon and Shopify

Amazon and Shopify have been dominating headlines this past week, but the news is better for one of them.

On July 29th, Amazon CEO Jeff Bezos joined the other Big Tech CEOs in testifying before Congress at a highly anticipated antitrust hearing. In April, an investigation from The Wall Street Journal revealed that Amazon used seller data to launch competing products. Not a good look for Mr. Bezos, whose company has previously claimed that it doesn’t use proprietary data to undercut partners. At the hearing, the Congressional committee and everyone watching heard from sellers who testified about lack of support for counterfeit items and being priced out by Amazon’s private label brand.

Shopify, on the other hand, was in the news for a much better reason. A few hours earlier, the company released their Q2 earnings. Announcing a bigger than expected revenue of $714.3 million, it was a good day for CEO Tobi Lütke and his team. The unexpected growth is partially due to mandated store closures during the pandemic, since businesses have been forced to take their sales online if they want to stay afloat.

For many small businesses, there are two primary means of growing online. One, set yourself up as an Amazon seller, of which 36% rely on Amazon as their only sales channel. Two, go direct to your consumer with a platform like Shopify.

So what are some of the differences between these two options? I’ve sold products on both Amazon and Shopify, so I’ve learned what some of the trade-offs are.

There are many points to consider, but I’ll focus on those that answer this question: are you trying to build a brand?

Don’t be so quick to answer. First, let’s dive into how Amazon and Shopify allow you to grow a business or a brand. Spoiler alert: you can’t build a brand on Amazon, but you can build a business. With Shopify, you can build both.

So let’s begin.

#1: Amazon customers aren’t yours, they’re Amazon’s

Amazon is a marketplace. Shopify is an ecommerce platform. Anyone who sells on Amazon has to abide by the marketplace rules. The prevalent attitude is something like, “if you don’t like it, you can leave.” Shopify, on the other hand, hosts your store, but doesn’t regulate it. Yes, there are terms of service like any other software platform (so no, you cannot sell illegal things), but you control your product pages.

Selling your product on a hyper-controlled marketplace has a massive downside. This is it, the #1 reason you can’t build a brand on Amazon. If you’re keeping score, this puts Shopify in the lead for now.

Here’s what it is: on Amazon, you don’t own your audience. Your customers aren’t…well…they’re not yours. Amazon won’t share their name, email, phone number, or address unless they have to.

When do they have to? If you ship your products to the customer directly. You’ll need a name and address to ship it to, right? Except you don’t want to do that, because then your listings aren’t Prime eligible. Kudos to Amazon-they’ve made it unattractive for sellers to fulfill orders themselves. Clever on their part, because in the process, sellers are giving up something massive. Customer data. For this discussion, let’s assume you’re in the dark about who your customers are.

No matter how many customers you have, it’ll be difficult for you to grow a customer base. All of your communication is limited to Amazon’s internal messaging feature. Think about how you speak to your host on Airbnb, or your Uber driver, or to a freelancer on Fiverr. This protects Amazon’s customers, because again, they’re not really yours.

If your messaging contains anything that can take the conversation outside the platform, Amazon will return it with an error. Here’s an example of an email that would bounce right back to you.

Hey Joe!
Thanks for your order!

If you have any questions about your product, you can call us 24/7 at 123.456.7890

Sharing a customer support email or phone number is restricted, since once a customer calls you, Amazon can no longer monitor the conversation. Plus, you’ll have access to customer data (even though they provided it willingly).

So those thoughts of building an email list? You can throw them out the window. Trying to build a lookalike audience for Facebook ads? Never mind. Someone orders 50 units and you want to schedule a call with an account representative? Don’t even think about it.

Let’s look at Shopify now. Congrats- someone has made an order on your store. You finally know who your customer is! Feel free to send them emails (assuming they opt in) at the pace that you think is best. You can easily contact them if there’s an issue with their order. It’s not a problem to reach out to that business that purchased 50 units. Interact and engage and there is hope for building a brand.

Why would I ever want to sell on Amazon?

Well here’s why.

#2: Shopify traffic is like driving through Alaska

When was the last time you bought something on Amazon? Today? This week? The behemoth has a whopping 38.7% share of ecommerce sales in the US. If you can imagine it, you can probably find someone who sells it.

Amazon is where the customers are. All day, every day, millions of people are there buying everything from toilet paper to furniture.

Are you still keeping track? Because now Shopify and Amazon are tied 1–1.

The hardest part about growing a business on Shopify is that publishing your store doesn’t mean someone will find it. It takes thousands of dollars and hours of work to make your store discoverable. If you’re an influencer selling merch, congrats! People will flock to your store, but that’s because you’ve spent a tremendous amount of time building your audience beforehand.

With Amazon, there’s no need for all that. You don’t have to build an audience or spend money on Instagram ads. You don’t have to write think pieces on the future of hula hoops to sell your hula hoops. Which is why if you do sell hula hoops, and don’t care to build a brand, Amazon is the place for you.

And just because someone finds your Shopify store, will they end up buying something? Amazon has figured out how to convert customers so that you don’t have to. Each listing page is optimized to sell. Q+A? It’s there. Reviews? It’s there. 1-click checkout? It’s there and it was patented.

A Shopify store is a blank slate. There are many apps available to help you convert customers, but you’ll have to mix and match until you find the equation that works for you. It may sound like an obvious choice, but a Shopify product page doesn’t even come with reviews built-in. That’s a separate app you’ll have to install.

So why would I want to spend thousands of dollars and hours of work trying to drive traffic to my Shopify store and convert customers?

#3: More money out, means more money in

All that Amazon traffic comes at a price. If you sell your products at any retailer, like Home Depot or Walmart, it works the same way. We’ll give you customers, but pay us in fees. Amazon charges a referral fee of between 8%-15% of every item sold. That’s pretty similar to the fees at Walmart Marketplace.

So sure, on Shopify you may have to spend money on ads to bring customers to your store, but your margins are higher.

This is one of the most enticing elements about DTC brands. No middleman, no middleman fees.

Shopify takes the lead again at 2–1.

#4: Let someone else take care of order fulfillment

One of the reasons behind Amazon’s massive popularity among consumers is, you’ve guessed it, Prime. I’d argue that they’ve changed consumer expectations forever- any shipping options longer than 2 days feels like eternity. That’s a bonus for sellers, too.

Sellers can ship their products in pallets to Amazon warehouses. Not only do they not have to worry about hiring employees to handle order fulfillment, but the shipping rates are extremely competitive. Seems like a no brainer.

At first glance, this seems to tie Shopify and Amazon at 2–2.

Not quite.

In 2019, Shopify announced Shopify Fulfillment Network for certain merchants. The move put them in a position to compete with FBA (Fulfillment by Amazon) directly. Unlike FBA, orders shipped by Shopify can retain their branding. That unboxing video is still an option.

There are also a number of third-party order fulfillment services that integrate with Shopify. Take Deliverr, for example. They offer next-day or 2-day shipping everywhere in the continuous United States. The platform integrates with Walmart, Shopify, and eBay, so you can use the same inventory to power all three channels.

Both Shopify Fulfillment Network and Deliverr have a network of warehouses just like Amazon does. Send your inventory to a few key locations and BAM, 2-day shipping nationwide. This coverage allows the shipping costs to remain relatively low, especially if you’re a smaller brand that doesn’t have five warehouses spread across the nation. Plus, Deliverr will pop a 2-day or next-day badge on your product pages depending on the zip code of your site visitor. They don’t just provide a service, they help you market it.

So, I’m not so quick to give this one to Amazon. With a slight amount of effort, you can provide 2-day shipping at your Shopify store without breaking the bank.

So who wins?

Overall, I’d say Shopify is a winner here. It offers almost everything, except it’s no small feat to get traffic to your store.

In an ideal future, the differences between these two options would be narrower. Even better, this future is also one where Shopify is better positioned to take on Amazon.

Here’s what I mean by that.

If you don’t want to build a brand, Amazon might be fine for you. But as a business that is trying to build a brand, Shopify (or any other DTC ecommerce platform) wins in every regard except for traffic.

On April 28, 2020, Shopify released the rejuvenated Shop app. The goal was to make it easier for customers to buy products, track their purchases, and discover local stores. If you know a brand you love, you can follow them on the Shop app to view their latest products.

This doesn’t help new online brands. People don’t know to follow them, unless they’ve spent the hours, money, or both to make themselves known. The Shop app doesn’t necesarily increase brand awareness.

If Shopify designed the app to browse products or categories instead of brands, they would be in a much better position to compete with Amazon directly. They won’t knock them off the top spot, but they can bring some of that customer base that makes selling on Amazon so damn appealing.

For the most part, it’s not an either/or scenario. There’s no reason a brand can’t sell on Amazon and Shopify! In fact, most do.

These are some of the points to consider when thinking about where to focus. Are you working harder to make a Shopify sale or an Amazon sale? Or both? Why? Some of the information here may be helpful for you in answering those questions.

Have a different take? I’d love to hear it. I’m on Twitter, so reach out and share your thoughts.