The 43% Solution

May 8, 2017

I would never sell Amazon. They don’t respect my pricing and I have to protect my regular retail accounts that don’t want me doing business with them. No Amazon for me.”

Ah, they say everything in life is timing. If you heard a vendor say this in 2002, you’d probably agree with him. Amazon was still basically a book and video seller back then and represented a percentage point or two of general merchandise sales. As a home furnishings supplier, you were making the right decision by not selling them. Your business was with the stores.

The trouble is that opening statement was made by a supplier I was talking to last month. This guy was still in major denial about the impact of online and what it meant for both his business and the overall American retailing industry.

He wasn’t going to sell Amazon, that was it.

I immediately made a mental note to contact him in 18 to 24 months to see if he wanted to take a going-out-of-business ad in the magazine because that’s where he was likely headed.

To all of those suppliers — even the ones that have begrudgingly started to sell to e-commerce — who still are trying to stay away from Amazon because of the issues it raises about pricing integrity, I offer you this one single statistic: 43%.

43%. That’s the estimate made by a third party of what percentage of online sales occur on Amazon. 43%. That includes both direct selling by Amazon itself and sales done through a third party through the Amazon market place. 43%.

No matter how you back out the math, that is a huge piece of business. To ignore it or otherwise practice sales prevention is not only just plain bad business, but it’s downright stupid.

Think back to when the big national discounters really came into their own in the 1990s. Textiles vendors were still reluctant to sell them, fearing they would alienate their big department and specialty store accounts.

But remember the big turning point? The Springmaid brand, owned by Springs Industries, had been a cornerstone of the upstairs world, as venerable a label as existed in the home textiles world — then and now.

Springs made the bold move and offered the brand to Walmart, a massive shock that rocked the industry at the time.

Asked to explain, the equally as venerable — then and now — president of the company, Tom O’Connor, gave a simple answer: “That’s where the business is.”

End of discussion. Springmaid went on to do almost a billon dollars a year at its peak with Walmart and yes, the department stores stopped carrying it, but let’s face it: who cares?

Springs took the brand to where the business was and where the customers were shopping. It’s the same thing today with Amazon. Anyone holding onto a rapidly evaporating model of where the business used to be is risking not having any business to do at all.

It’s a really tired joke — and I’ve milked it a couple of times – but it never gets old: anyone not embracing Amazon is caught up in the backwater of another river: denial.