Should I sell on Amazon or through my own website?
A guide to help you decide whether to use a rented or owned platform for your online presence
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The short answer answer to this question is to: do both, but gradually shift to your own website as your products become more popular.
But let’s not stop there. As you are building your digital presence, you will run into the same question adapted to many different situations.
- “Should I blog on medium or my own website?”
- “Should I promote my Facebook page or my own website?”
- “Should I post my coupon on GroupOn or send it through my own email list?”
All of these questions are about choosing between using a platform that you either “rent” or “own”.
Platform such as Facebook, Twitter, Amazon, and GroupOn, are called “rented” platforms because the users does not have complete control of the resources built into those platforms.
On the other hand, when owners use their own website, mobile application, or email list to promote their business, they are promoting on their “owned” platforms — platforms they have complete access to.
In this article, we will look into the pros and cons of “rented” and “owned” platforms in order to give you a better idea of what will work best for you.
Ultimately, we will formalize the recommendation I gave at the beginning of this article and express it as a general rule that will help you in any situation in which you must choose between these two types of platform.
The Rule of Thumb: How to choose between “rented” and “owned”
There is no point in forcing you to read this entire article before presenting you with the rule of thumb, so here it is.
First of all, I want to make it very clear that you can use both types of platforms at the same time and, in fact, most companies do just this.
However, you do need to choose a platform to prioritize and promote — that’s what this rule of thumb will help you do.
Rule of thumb:
To summarize the graph in the business setting: If you are entering the digital space with few customer resources at your command — you should start with a “rented” platform due to it’s ease of set-up and access to a large audience.
However, as your digital presence grow and revenue increases, you should gradually start building your “owned” platforms and shift your traffic to there for more flexibility and control of your customer resources.
Additionally, when you are spending money promoting your product or service, you should always direct the users to your “owned” platforms because:
- it helps with the SEO performance of your site, and
- you need to have full control of those customer resources to maximize your return on investment.
I know most of you will probably stop here and call it a day, but I strongly recommend that you continue reading to fully understand the pro and cons of this choice.
Meanwhile, if you are heading out, you can read more articles like this in our publication Analytics for Humans and sign up for our newsletter below for more updates.
The Comparison
User Base (Winner: “Rented”)
“Rented” platforms are generally extremely popular and come with a ready-to-connect user base.
Consider platforms such as Facebook and Medium. Each has millions, if not billions, of users, and you can access that user base instantly by simply utilizing the platform. hat’s extremely beneficial when trying to build a digital presence.
“Owned” platforms, on the other hand, start with almost no user base. Rather, you have to slowly build it yourself via various marketing efforts. That takes both time and effort to accomplish.
For this reason, “rented” platforms are hands down the best way to go if you are just starting and want to instantly reach a huge pool of potential users potential audiences
However, one caveat to note is that while using “rented” platforms will give you access to a large amount of users, it will also restrict your communication with those users to take place within the platform.
Let’s take Amazon for example, it intentionally hides the contact information of anyone who has made a purchase of your product so that you can only contact them through Amazon.
Effort (Winner: “Rented”)
There’s no way around it. “Rented” platforms take much less of your time to run and operate.
On platforms such as Amazon and Facebook, the structure and tools that you need to create beautiful and well-designed stores or web pages with ease are already in place.
The infrastructure provided by these platforms to help you build your presence aren’t only easy to use, they’re the result of intense R&D and user testing so they’re good.
However using an r “owned” platform requires you to do all of the design and optimization by yourself. That takes both time and focus away from the core aspects of your business.
While tools such as Shopify and Squarespace have made it easier than ever to create a well-designed ecommerce website, you still need to hire a dedicated employee to optimize the site and manage potential errors, making them a hassle to use if you don’t have a budget set aside.
Therefore, if you are a small team without the budget or manpower to manage your “owned” platforms, using a “rented” platform is a good place to start.
Flexibility (Winner: “Owned”)
While “rented” platforms are easy to setup and use, they suffer from a lack of flexibility.
Let’s take Amazon as an example again. If you are using their fulfillment service (which means they your inventory), they maintain complete control over which warehouses hold your inventory.
While this often presents no issue, every so often Amazon will shift your inventory from warehouse to warehouse without your permission and while your products are in transit they are unsellable.
For this reason, when using Amazon you always need to keep a close eye on your inventory to make sure your product does not suddenly go out of stock due to Amazon’s inventory management.
Similar issues exist for Medium as related to custom styling for fonts and headings, Facebook for design and layout, and almost all other rented platforms in one way or another.
However, if you manage your own inventory or design your own website/blog you will have the freedom and flexibility to do whatever you want.
While it may take you more time and resources to customize, “owned” platforms are hands down a far better option when it comes to flexibility than the often rigid rented options.
Cost (Winner: “Tie”)
In short, “rented” platforms are cheaper for companies that have just begun building a digital presence whereas “owned” platforms are cheaper for more established companies.
The primary reason “rented” platforms are generally cheaper in the short term is because they help small companies bypass much of the hassle designing and developing platforms entails.
Rented’ platforms also grant access to a large user base at a relatively low cost. This means that promoting content on these platforms is significantly cheaper: a plus for smaller companies s.
However, as companies scale, “rented” platforms become much more expensive.
The cost of “rented” platforms can be divided into two categories: upfront costs, and hidden costs.
“Rented” ecommerce platforms such as Amazon and Etsy either charge a subscription or take a percentage commission for each item you sell on the platform. Naturally, this cost will go up as your company gets bigger and collects more revenue.
When it comes to social platforms, such as Facebook, the same problems persist. For example, on the social network you are only able to reach 20% of your target audience organically. For this reason, you need to pay for advertising on in order to effectively reach your audience.
Now let’s talk about the hidden costs.
One of the largest costs is customer resources.
As explained above, if you sell your product on Amazon or have your page on Facebook, you won’t be able to access the contact information of your customers or users.
This prevent you from obtaining further value from your relationship with them since there is simply no good way to reach them.
This cost will go up as your company becomes bigger since over 40% of ecommerce revenue comes from repeat customers (source).Put simply, you can’t facilitate repeat purchases from customers if you can’t reach them.
To move their audiences from “rented” platform such as Priceline to “owned” platforms such as their website, large hospitality companies like Hilton (which I consulted for a couple of years ago) are spending millions of dollars in benefit every year — illustrating the benefit of “owned” platform in terms of benefit to the companies.
Analytics (Winner: “Owned”)
In terms of advanced analytics, “owned” platforms have much more flexibility and, since you can access their code, are much easier to customize when it comes to analytics.
This is not to say that “rented” platforms do not provide you with analytics.
Facebook and Amazon provide robust and easy-to-use analytics capabilities and are usually sufficient for novice analysts and small businesses.
However, as you grow your digital presence, you will inevitably begin using multiple platforms simultaneously and while their analytics capabilities perform well individually it’s extremely difficult to combine their data in a way that will yield viable results and insights.
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