Amazon’s latest financial results have sparked quite a buzz. While the company remains a juggernaut in the market, some cracks are starting to show. A recent article in the Financial Times highlights a noticeable slowdown in growth within Amazon’s consumer-focused sectors—like online retail and third-party seller services.
If things are getting tough for Amazon, just imagine how much harder it must be for the smaller businesses that depend on its marketplace.
Small Players in a Big Pond
Smaller eCommerce companies often find themselves caught in a tough spot due to Amazon’s sheer size and dominance. When Amazon feels the heat from up-and-coming competitors like Shein and Temu, it can make moves that most smaller retailers can only dream of—such as leaning on its cash-rich AWS division to cushion any slowdown in sales growth. Amazon has the luxury of offsetting retail challenges with profits from its cloud computing arm, but marketplace sellers? Not so much. For them, even a slight dip in consumer spending can spell disaster when margins are already razor-thin.
The Marketplace Dilemma
Many small businesses flock to Amazon for its reach and exposure, but as competition heats up, the benefits are shrinking. Price cuts are happening everywhere, fueled by overseas competitors, which puts even more pressure on sellers who are already struggling to get noticed. In a marketplace built on convenience and low cost, customer loyalty often gets lost in the shuffle, leaving smaller eCommerce businesses in a constant fight to protect their margins.
Here’s the real kicker: while Amazon can afford to take these hits, the smaller sellers on its platform cannot. Their fortunes are tied to Amazon’s success, yet they don’t enjoy the same safety net. AWS revenues don’t flow down to them. So, when Amazon cuts prices to stay competitive, third-party sellers feel the squeeze even more intensely.
Building Value Beyond Price Wars
So, what’s the takeaway for smaller eCommerce players? Stop relying solely on the marketplace. Competing on price alone is a race to the bottom. Instead, it’s time to build a strategy that doesn’t depend on Amazon’s ecosystem. Think about developing a direct-to-consumer model, or focus on delivering better service and unique value propositions. Smaller retailers can find success by standing out in ways that go beyond just slashing prices.
There’s a big opportunity here for companies to focus on optimising their margins and building a loyal customer base that values quality over mere discounts. While big retailers use cutting-edge technology and AI-driven insights to stay competitive, small businesses can also benefit from tools that help navigate the complexities of eCommerce. Tools like PromoLens, for example, provide insights to plan smarter promotions and make better pricing decisions.
Looking Ahead: Focus on Margins, Not Just Revenue
Amazon’s recent struggles offer a lesson for all retailers: being a giant doesn’t make you invincible, and pinning your business model to a single platform is a risky bet. Smaller eCommerce businesses should focus on strengthening their margins and creating sustainable growth models. Sure, the marketplace can drive volume, but your own customer relationships will build long-term value.
Even in the digital world, service and quality still reign supreme. Now is the time to prioritise what truly matters—profitability and customer loyalty. Depending on marketplaces like Amazon might seem convenient, but true growth comes from investing in your brand, nurturing customer relationships, and offering value that goes beyond the next big discount.
