This is a question that comes up time and time again with ecommerce retailers that I deal with. Often, a smaller business will start out selling products on eBay or Amazon due to the lower startup costs – you pretty much just need your inventory and a logo (not even that in some circumstances) and you can start listing your products. However, both Amazon and eBay take an average of around 15% of the final sale price for each product you sell, which can be a big chunk of profit on some products. Over time, sellers can feel understandably aggrieved at handing over so much of their profit despite spending so much time fulfilling orders.
The obvious solution would seem to be setting up your own ecommerce website and selling directly to customers, cutting out the middleman and keeping that extra 15% for yourself. After all, platforms like Shopify and WooCommerce have made it relatively straightforward to build an online shop without needing to spend thousands of pounds on bespoke development.
Unfortunately, it’s not quite that simple, and there are some fairly important considerations that sellers sometimes overlook when deciding to make the move.
Where Do Your Customers Come From?
One of the biggest advantages of selling through Amazon or eBay is that they already have an enormous audience of potential customers. Millions of people visit these websites specifically because they’re looking to buy something, and many will search Amazon or eBay directly rather than going anywhere near Google.
When you list your products on these marketplaces, you’re effectively paying for access to those customers. The 15% commission might seem excessive, but consider what it would cost to attract the same customer to your own website.
Let’s say you’re selling a product for £50, and Amazon takes £7.50 in commission. That’s £7.50 you could potentially save by selling directly, but only if you can attract the customer to your website for less than that amount.
If you’re running Google Ads and paying £1 per click, with a conversion rate of 2%, you’ll need an average of 50 visitors to make one sale. That’s £50 in advertising costs to sell a £50 product, which obviously isn’t going to be sustainable.
Of course, these figures are purely illustrative, and conversion rates and advertising costs vary enormously between industries. However, the point remains that acquiring customers yourself isn’t necessarily cheaper than paying marketplace commissions.
What About SEO?
This is where having your own website can become considerably more attractive, particularly over the longer term.
Unlike paid advertising, where you’re effectively paying for every visitor, a well-optimised ecommerce website can generate traffic from Google’s organic search results without incurring an advertising cost for each click.
However, SEO isn’t free, despite how it’s sometimes described. Whether you’re paying an agency, employing somebody internally or spending your own time optimising your website, there’s still a cost involved. It can also take months, or even years, to establish strong organic rankings in a competitive market.
There’s another complication too. Search Google for almost any popular consumer product, and there’s a good chance you’ll find Amazon or eBay appearing prominently in the results. You’re effectively competing against the very marketplaces you’re considering leaving.
That doesn’t mean it’s impossible to outrank them, particularly for specialist products or more specific searches, but it’s worth understanding what you’re getting yourself into.
Owning Your Customers
There’s another important advantage to selling directly that I think is sometimes overlooked, and that’s the relationship you have with your customers.
When somebody purchases a product through Amazon or eBay, they’re primarily a customer of that marketplace. You might fulfil their order and provide excellent customer service, but your opportunities to communicate with them afterwards are restricted by the platform’s rules.
With your own website, you have considerably more control over the customer experience. You can build your brand, offer related products, encourage customers to return and, with the appropriate consent, use email marketing to communicate with them in the future.
This can make an enormous difference to profitability, particularly if you’re selling products that customers are likely to purchase repeatedly.
Returning customers are generally much cheaper to sell to than new ones, because you don’t necessarily have to pay to acquire them all over again. That initial £7.50 marketplace commission might therefore represent considerably more than just the profit lost on a single transaction.
The Costs of Running Your Own Website
Of course, operating your own ecommerce website comes with its own expenses. There’s hosting, development, maintenance, payment processing, security and potentially subscriptions for additional functionality.
You also become responsible for making sure everything works properly. If Amazon’s checkout stops working, that’s Amazon’s problem. If your own checkout stops working, it’s very much your problem.
You need to consider customer confidence too. People are generally comfortable handing over their payment details to Amazon or eBay, whereas a small, unfamiliar website might struggle to establish the same level of trust.
And while marketplaces handle much of the technical infrastructure, running your own website means dealing with things like abandoned baskets, payment failures and website performance yourself.
None of these issues are insurmountable, but they all need to be factored into the decision.
Why Not Do Both?
Personally, I think this is often the most sensible approach, particularly for smaller businesses that are already generating a reasonable volume of sales through marketplaces.
Rather than abandoning Amazon or eBay entirely, why not continue using them to acquire new customers while gradually building up your own website?
You can start investing in SEO, building your brand and experimenting with paid advertising without putting your existing revenue at risk. Over time, you might find that direct sales become considerably more profitable, particularly as your organic traffic and repeat customer base increase.
There’s no reason why the two approaches can’t complement each other, provided you’re careful to comply with marketplace rules around customer communication and directing transactions away from their platforms.
Ultimately, I think the mistake is assuming that marketplace commissions are simply money being thrown away. In reality, you’re paying for access to an established audience, a trusted platform and much of the infrastructure required to sell online.
The question isn’t really whether Amazon’s 15% is too expensive. It’s whether you can generate the same sales, at the same or lower cost, through your own website.
If you can, fantastic. If you can’t, that 15% might actually be quite good value.