The Pros and Cons of Big e-Com Platforms from an Expert
At this moment, there are many big players duking it out to be the e-commerce storefront service of choice. We sat down with a veteran of e-commerce to discuss the pros and cons of three big choices: Amazon FBA, Shopify, and Magento. It can be difficult to figure out which situations each platform is most appropriate for and what makes each unique. Simply diving in and creating a store on a thoughtlessly chosen platform can be costly in time, energy, and money down the road if later you realize your e-commerce business is being held back by the learning curve or scalability of your platform choice.
Our expert, Johnny Yan, is now E-Commerce Marketplace Manager at Gertmenian, where he recently pulled in a return-on-ad-spend (ROAS) of 3.613; that means for every one dollar spent on ads, there was a net gain of $3.613. He has experience with self-employment using e-commerce storefronts but has also worked at multi-million dollar revenue companies with sizes ranging from 20 employees to over 500. He is also a consultant for small to medium business owners. During his career, Yan had ample opportunity to consider the costs and benefits of three platforms in particular: Amazon FBA, Shopify, and Magento.
According to Yan, Amazon FBA is an incredibly powerful platform to sell products on for anyone who is just starting their e-commerce business.
“It’s good, it picks up sales fast, and you gain traction incredibly quickly,” Yan said. “But in the end, Amazon FBA is sort of an addiction. It’s hard to get away from if you build your entire e-commerce business within it! They take a substantial referral fee, somewhere around a twelve to twenty percent cut, and they have total access to your sales data and have all the leverage over your business and inventory.”
“There are numerous ‘horror stories’ out there of small e-commerce businesses having their accounts closed and inventory held without much in the way of explanation by Amazon,“ said Yan. “It’s part of the risk of having your entire operation within Amazon FBA. One of my former employers made most of their sales through Amazon. Once their account was suspended due to ‘unclear product detail page specifications’, they were left with nothing but their outdated, low-traffic website from 2008.”
Yan recommends no greater than a 50/50 split of revenue when it comes to Amazon. If Amazon sales occupy more than half your revenue, you will find it very difficult to leave the Amazon ecosystem in the future and it will put a hard cap on your profit. It’s important to try and drive customers toward a second e-commerce site where you can have total control over the customer data, collect emails, and avoid the Amazon referral fee.
But at the end of the day, the power of Amazon is hard to deny. An analysis by Slice Intelligence released this week found that 43% of all online retail sales in the US went through Amazon in 2016, as the e-commerce giant’s market share continues to grow.
“[My current employer] is not a start up and we still rely heavily on Amazon. Conversion rate and buyer intent is just very high there,” Yan said. “I strongly suggest starting your e-commerce venture from Amazon as it brings fast profit and helps you build the confidence essential to moving forward. But always consider when it might be the right time to start diverting a meaningful amount of Amazon profit into building your own e-commerce property. Attempting to build your fortress inside someone else’s kingdom is not a reliable long-term solution.”
Yan is a big fan of Shopify‘s low barrier of entry and intuitive user interface.
“The core concept of most e-commerce platforms out there is the same,” Yan explained. “My personal choice is Shopify because it’s just so user-friendly and very, very easy to pick up even for someone who doesn’t really understand e-commerce. Shopify also has numerous add-on apps for extra functionality that are free of charge. “
According to Yan, the biggest challenge with a platform such as Shopify is that it’s hard to find traffic initially. This is why he recommends building out sales on Amazon at the same time.
“You have the minimum revenue from Amazon, but you’re still growing something of your own,” Yan said.
Yan believes Shopify is suitable for small- to mid-size companies. He personally uses it the most, recommends it first, and overall has more than five years of experience with it specifically.
We agree with Yan on this. Logic Inbound was able to create a beautiful and functional store in less than a weekend using Shopify. We’ll have a case study for our process available soon.
In Yan’s experience, Magento is a powerful but confusing tool that isn’t necessarily a good fit, especially for e-commerce businesses that are still trying to figure out their product line and scale up.
“The other options out there [like Magento] take time to get used to. It took me time to understand Magento, but Shopify I picked up in a matter of days. And if you look at WooCommerce, that’s actually also after more advanced users and is generally best for people who want heavy WordPress integration.”
Yan says that after growing to a big enough size and revenue, truly large enterprises will want something highly customizable to reflect their brand and their priorities. For such a business, Magento can work, but often they’ll turn to something fully customizable like Ruby on Rails.
One common criticism of Magento is that it takes extra steps for tasks that are automated in “easier” platforms and that the framework feels like an old-fashioned internet forum. With complexity often comes flexibility, and Magento is no exception: for products with complex configurations, Magento can be customized to handle it, if you find someone with the skills to do so.
For the majority of starting stores, however, the cost of developing a Magento site can rapidly spiral out of control. A business that wants to make rapid or frequent iterations on their storefront (perhaps for A/B Testing or while figuring out their product line) will find themselves shelling out large sums of money on a regular basis. That is money that could have gone toward advertising, content, or SEO instead.
The Role of Quality Content and Optimization on Any Store Page
Regardless of platform choice, Yan explained that a common error that small to medium business owners consistently seem to make is undervaluing quality content.
“They’re not willing to spend money on decent videos or images of the product, or articles about the product,” Yan said. “[Many business owners] think they can just take some photos with their phone and upload them with photoshop. That’s not enough! You need to have decent content these days and invest and build a relationship. Make a compelling case that your product is the right thing to buy after smart shoppers compare to your competitors. There’s no shortcut, there’s no secret. The most effective approach is to put yourself in your shoppers’ shoes and try to really understand what are they looking for and at what price range, then show it to them.”
“So many new business owners are willing to spend a great deal of money on pay per click but nothing on decent content optimization. Enhance your content so that anyone who visits your website simply must buy your product, then invest in pay per click. Not the other way around! I used to be very stubborn about optimizing my content, both on the front visually and the back end with SEO and metadata. The truth is that these things require ongoing commitment and expertise to do correctly. They are about trial, error, and iteration, so the sooner you get started on improving them, the better off you will be.”
A good first step is to make sure your product has enough images in the first place. A product can receive a 10% bump in sales just by increasing from 1 image to 3 images of a product on the page! Pixelz offers a great breakdown of the importance of literally looking at things from a different perspective.
Final Thoughts About e-Commerce from Johnny Yan
Yan has one big piece of advice that he’s learned in his ten years of e-commerce: treat your buyers as your close friends. Don’t get so caught up with the nuts and bolts of your business or your platform that you neglect the humans buying your products.
“You have to put a lot of heart into developing a strong relationship with them,” Yan said. “One of the biggest and most expensive mistakes I ever made was back in 2006 on Amazon. I began neglecting my relationship with my customers as my revenue increased. They’d send feedback about what they would like and possible improvements, but I just wasn’t really interested in developing two-way communication with them.”
“In the end, that business crashed. I stopped providing my customers what they really wanted because I was going in one direction and not listening to them. You have to ask yourself: are you really interested in the industry you’re heading into? Do you have the determination and courage to follow through on the venture? Starting an e-commerce business can be fun and make a lot of money, but you have to have heart, especially in this environment [in 2017] because now the competition is very tough.”
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