Amazon’s Fine Line: Infrastructure Provider vs. CompetitorBy Josh Catone
Today, Amazon took its Flexible Payments System — a PayPal-like service aimed at merchants — out of beta (at least in the US). They also launched a number “Quick Starts,” which are simplified sets of APIs making it easier for merchants to begin taking orders through Amazon’s payment system, and as a way to entice new accounts, Amazon is offering free payment processing up to $500,000 for the first three months.
For consumers, paying with Amazon is a no-brainer. Because Amazon is essentially synonymous with ecommerce, and because most consumers have had good experiences with them, it is easier to trust them to handle payment processing for smaller, less well known merchants you need or want to deal with. Even more than PayPal and Google, the Amazon name lends a feeling of security to the purchasing process.
But for merchants, the decision to go with Amazon isn’t so cut and dry. Amazon offers perhaps the most complete end-to-end ecommerce solution on the web — they’ve truly made available their entire infrastructure. You can take payments with Amazon, let them handle fulfillment, tap into their backend infrastructure, sell or advertise your products, even let Amazon publish your book, DVD, or CD. It all sounds great, and in many ways it is. Amazon’s infrastructure services mean that the barrier to entry for creating an ecommerce business is extremely low, and many of the headaches associated with selling online are taken care of for you.
But it comes with a price: Amazon is also likely one of your main competitors. As we noted six months ago, many larger retailers are wary of partnering with Amazon because the retailer is a competitor and giving them access to sales data might not be in their best interests. For smaller ecommerce businesses, this might be less of a concern, though certainly still something to think about.
Perhaps the bigger consideration before jumping on board a complete end-to-end platform like Amazon’s is that relying so much on one company puts your business at significant risk. If Amazon handles payments, fulfillment, and advertising for your company, for example, then changes to any of their products could alter your business in ways you might not like but have little control over.
On the other hand, mashing together services from multiple providers might not be as easy, as painless, as pretty, or as cost effective, but it does mean that if one spoke in the wheel gets taken away, recovery is a lot easier. Amazon’s end-to-end ecommerce platform has lowered the barrier of entry for creating an ecommerce business, and that’s great, but there’s a choice that business owners need to make between simplicity and speed to deployment vs. security and flexibility.