Amazon begins Webstore phaseout: Why it makes sense

Amazon says it is no longer accepting new sellers into its ecommerce platform service, which has been steadily losing out to the competition.

It's curtains for Amazon's ecommerce platform Webstore.

After reports surfaced last week that Amazon would discontinue Webstore on July 1, 2016, the internet giant posted a message on the platform's homepage that at least somewhat confirms its demise:

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Amazon first notified Webstore users via email that the service would shut down, promising support as sellers migrate their e-commerce operations to another platform. MarketingLand.com obtained a copy of the email:

We realize your own website is important to your business. We will support the Webstore service until July 1, 2016 to give you 15 months to prepare for the change.

Please make sure you secure all relevant data from your Webstore by July 1, 2016, as you will not have access to Amazon Webstore content or features after this date. Amazon Webstore's data export features can be used for this purpose as you migrate to a new platform.

The 15-month window gives Webstore users a decent amount of time to find another provider. Still, as the news spread to message boards for Amazon sellers, sentiments ranged from "good riddance" to "what now?" And that's where the story gets interesting.

Amazon launched Webstore in 2010 as a means for SMB retailers to create and run their own online shop. For $79 per month, plus sales charges between 2.10 percent to 2.90 percent, the platform helped small merchants create a mobile, tablet and desktop website, with additional features such as inventory and order management, payment processing and shipping services.

But in the five years since, the platform's momentum stalled. Amazon doesn't break out the official tally of Webstore users, but estimates indicate there are only several hundred companies currently using the platform.

"Amazon has been bleeding customers from this platform," said Peter Sheldon, VP and principal analyst for ecommerce at research firm Forrester.

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Even as the venerable king of ecommerce, Amazon struggled to appeal to smaller online sellers because of the conflicting relationship it presented.

At a most basic level, small merchants were, in a way, sleeping with the enemy. Although Webstore users were able to maintain their own brand presence on their store, Amazon's branding was always nearby. And if the price was right, shoppers could buy a cheaper product directly from Amazon in just a couple clicks.

"I think merchants themselves have a conflict of interest," continued Sheldon. "You can always tell if a merchant is running an Amazon store -- the flow, the structure, the UI and the checkout process -- it was all Amazon. So in terms of trusting Amazon as their core channel, it was probably a step too far for some of these merchants."

Beyond Amazon's frenemy reputation, it seems Webstore was also lacking in the innovation department. User complaints have described Webstore as cumbersome, with features failing to provide customers with the most up-to-date functionality. Under those conditions, Webstore users were drawn to the bevy of competitor platforms making headway in the market.

"Everyone is gong to the new kids on the block," Sheldon added. "Shopify, Bigcommerce -- they have taken hundreds of millions in VC funding and have built compelling features. Amazon couldn't compete."

But it's also possible Amazon simply did not want to compete. The profits Amazon made from Webstore were likely negligible, turning the business from strategic to more of a distraction. Exiting the Webstore business will allow Amazon to reallocate its resources to one of its more profitable segments. While it remains speculation at this point, Amazon's same-day delivery and FAA approved delivery drones could be in for an investment boost.

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