Amazon and the HFSS rollout: why owning your own sales channel will benefit you in the long run
Article topics
- HFSS explained
- How online retailers have been penalised by Amazon
- The benefits of owning your own routes to market
- Creating an online store doesn’t have to be expensive
Retailers that sell sweet treats and salty snacks found themselves in a sticky situation with Amazon recently, thanks to the mishandling of new government legislation.
The news reminded us of the importance of having your own routes to market, instead of wholly relying on third-party marketplaces like Amazon, eBay, and Etsy.
Let’s start by looking at the legislation that caused the issue.
HFSS explained
Following a consultation in 2019, the Government agreed to restrict the promotion of foods and drinks that are high in fat, salt, and sugar (HFSS) across England. The Government did this to tackle obesity in adults and children.
The regulations came into force on 1 October 2022, affecting both stores and online retailers (although online stores that mainly sell food from one category are not affected.)
From an eCommerce perspective, online sellers and retailers are no longer allowed to promote HFSS products in the following places:
- In searches and results for unrelated products (so you could promote crisps in a search for crisps, but not for ice cream or salad)
- On the homepage of a website
- In pop-ups
- On ‘recommended for you’ pages unless the customer has marked a product as a favourite or bought the product before
- In basket pages or during checkout
From 2023, there will be further restrictions on the promotion of HFSS products by volume price, for example, ‘buy one get one free’ offers.
How online retailers have been penalised by Amazon
So, how does Amazon come into this? Like all large third-party marketplaces, Amazon had to implement measures so businesses could not promote HFSS products with advertising. The problem was that the online retailer took an overly cautious approach, meaning several retailers were frozen out of advertising until they could prove their products were non-HFSS.
In a competitive marketplace like Amazon, which can account for 40% of eCommerce sales, a successful paid-ads campaign can make the difference between being seen, and not selling. And with Black Friday and Christmas on the horizon, this can lead to thousands of pounds of lost revenue.
Amazon has admitted to losing control of the process, but this will likely be of little comfort to retailers relying on the marketplace.
The benefits of owning your own routes to market
There are advantages to selling on third-party platforms. You can boost your reach, it’s easy to set up, and you can take advantage of well-established search engine optimisation.
The downside is that you’re entirely at the mercy of the platform in question. If they change their policies, increase prices, or make a monumental error in the same vein as Amazon, you have no comeback.
Earlier in 2022, Etsy frustrated long-term customers by raising transaction fees from 5% to 6.5%. While some business owners went on strike by closing their stores and many others signed a petition, it didn’t have an effect on the price hike.
With this in mind, owning your route to market in the form of an eCommerce store can lead to more sales, and more revenue in your pocket.
- You can access comprehensive sales data you can use to market to your customers more efficiently. For example, by looking at which product pages shoppers are dropping off, you can make changes with conversion rate optimisation to encourage retention and grow sales
- You can create incentives to encourage sales, which is hard to do on a third-party platform. For example, you can offer discounts to your most loyal shoppers, create an email marketing list, or launch a referral programme
- If you opt to sell on both your own website and a third-party marketplace, a high-quality eCommerce store can make both easier to manage. For example, Magento, WooCommerce, and Shopify let you manage stock and keep an eye on all your orders
- You have complete control over the user experience. You don’t have to worry about competing products being shown to shoppers, and you can choose the payment options that best suit your customers’ needs
Creating an online store doesn’t have to be expensive
A professional eCommerce store not only sets you up as a reputable brand but also provides a worthwhile investment return for your business.
Think of having your own online store like buying a home, while selling on a third-party platform is like renting. While there’s an initial outlay, all the money you earn is yours. Plus, there’s no landlord to worry about!
If you’re looking to create an eCommerce store, Xigen can help. From £5,000 we can design, develop and implement a high-quality online store that your customers will love. What’s more, we can have you up and running in a matter of weeks, ready for that all-important Christmas rush.
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