How Small Companies Can Compete With Amazon

How Small Companies Can Compete With Amazon


This is a guest post by Andrew Youderian of

Few companies can strike fear into the hearts of ecommerce merchants like Amazon. Its massive scale and focus on growth over profits allows Amazon to offer pricing that many smaller merchants simply can't compete with.

As an ecommerce entrepreneur myself, I would have an easier time hating on Amazon if it wasn't such an outstanding company. But unlike many huge organizations, it does a great job of providing quality customer service. And if you're an Amazon Prime member – like I am, full disclosure – you get free, fast shipping on just about anything you'd ever want.

So how can small merchants like us compete with such an appealing giant? 

Brand Yourself as a Specialist

Amazon's massive size allows it to benefit from economies of scale, but such a wide scope can also be a weakness. With so many products for sale, it's impossible for Amazon to offer specialized, expert guidance.  

SonicsOnline founder Dave Huckabay has taken the opposite approach, choosing instead to become laser-focused with his ecommerce catalog. He focuses exclusively on ultrasonic cleaners for jewelry and industrial use, a niche most people probably don't even know exists.

Take a product found on both his site and Amazon: the GemOro Ultrasonic Jewelry Cleaner. The item costs $120 on SonicsOnline, almost double the $67.95 it's listed for on Amazon. Yet it still manages to sell well on Dave's site. 



So how does SonicsOnline compete with Amazon? Though not professionally designed, the SonicsOnline page is chock full of information, including videos, manuals and detailed specs. Perhaps most important is that customers know they're buying from a company with highly focused niche expertise. They can get specialized help for specific questions or problems. 

The combination of quality information and industry expertise is powerful and has helped SonicsOnline grow to approximately $300,000 in annual revenues. When asked about successfully competing with Amazon, Huckabay said:

When done properly, real expertise comes across in a website. You can't fake it, and reviews by your customers are not a substitute.

By becoming a true niche expert – and successfully conveying that through your ecommerce store – you'll be much better equipped to compete against Amazon without having to rely on razor-thin pricing.

Create Your Own Products

Creating your own product is undeniably the hardest (and most expensive) way to get started with eCommerce. But if you have a great idea and the resources to pull it off, it's probably the best way to build a highly profitable business and successfully compete against Amazon.

Just ask Dan Andrews of He and his business partner, Ian Schoen, were surprised at how expensive – and ugly – cat furniture was. So they decided to create their own line that would blend in with modern homes. Here's their popular 'modern kitty litter box' as an example: 

One of the biggest advantages of manufacturing their own product was drastically better margins, which led to increased profits and growth opportunities. While many small resellers don't have enough margin to profitably advertise, pay-per-click has been an integral part of helping Modern Cat Designs grow to approximately $120,000 in annual revenues, despite having a catalog of only eight products.

Perhaps best of all, manufacturing allows you to control product distribution and set pricing guidelines to protect your margin. On competing with Amazon and pricing issues, Andrews said:

People buy from us because our products are unique. You just can't find them on Amazon. We also make sure that the dealers we do sell through follow strict pricing guidelines to prevent pricing wars.

Creating your own product isn't for everyone, but it's a great way to successfully compete against Amazon. 

Sell With a Deeper Purpose

By connecting with the core values of your customers, you can build a loyal and passionate customer base that isn't shopping based on price alone. A quick Amazon search reveals more than 330,000 different shoes for sale. Yet Tom's Shoes has built a successful business based on the premise of donating a pair of shoes for each pair sold. is another site with a deeper purpose: to reduce waste by selling products made from previously discarded material. The concept, called “upcycling,” is used to turn bike sprockets into bowls and computer waste into light fixtures. Here is one of their most popular products, Grey Goose Vodka rocks glasses:

Founded barely a year ago by Andrew Sell, the company already has two full-time employees and a sizable presence on Facebook. 

When asked how Hipcycle positions itself to compete against Amazon, Sell replied:

We are passionate about diverting materials from landfills, and our customers want to support that. And we're definitely in the business of building the company one customer at a time and turning them into evangelists for our brand and for waste diversion.

Notice that he didn't mention fast shipping or insanely low prices. Instead, Hipcycle connects with customers over a deeper purpose – one that can't be found on Amazon.

Opportunities Still Exist for Small Merchants

Amazon's rapid growth, scale and pricing power make it a force to be reckoned with online. But despite its sizable influence, it's still very possible to succeed as a small merchant. You just have to be smart about how you position yourself in the market.  

So how do you plan to compete against Amazon? Let us know in the comments. 

Written by Andrew Youderian. For more on successfully competing with Amazon, download  Andrew's popular free eBook on growing a successful ecommerce business. You can also follow him on his blog,


  • Andrew Johnson
    Andrew Johnson
    October 30 2012, 11:31AM

    I have my MP3s on both iTunes and Amazon and I am grateful for the sales, however, both those giants of e-commerce have a very different pricing structure leading to the same files on my being 50% cheaper. I have complete control over the pricing on my site. As the apps make the AJ brand more popular, more people will buy from me (i hope)

  • Nick Shockett
    Nick Shockett
    October 30 2012, 11:39AM

    We actually do sell to Amazon – I feel that being able to take advantage of their huge existing customer base is a resource i should be fully utilizing, the increased number of sales far outweighs the smaller margin I get. However, we also brand our products and packaging clearly enough that people are often directed to our own website for repeat sales. The dynamic pricing on Amazon can be annoying, however I still make my wholesale price on products whatever they sell them for.

  • Andrew Youderian
    Andrew Youderian
    October 30 2012, 11:46AM

    @Andrew & @Nick – Using Amazon as a sales distribution channel is an interesting strategy. Obviously, being able to tap into their massive network and platform of customers is attractive. But for some merchants, the fees will simply be too much – I know they are often around 15% or higher. In an industry where a 30% margin is good, you’re giving up HALF of your profit margin for distribution.

    Also, call me paranoid, but I’m not I’d want Amazon to see the raw sales numbers of how my niche was doing. I don’t know if they actually do this, but this data would potentially allow them to see what niches are doing very well, and then stock up with their own inventory to take advantage of the strength of the market. For unique niches, selling through Amazon could potentially lead to increased competition from them directly.

    I think @Nick’s approach is smart – use their channels for distribution but make sure you’re doing a lot of branding to drive customers back to your site in the future.

  • Nick Shockett
    Nick Shockett
    October 30 2012, 12:25PM

    We actually sell to Amazon directly, we don’t have an Amazon store. They purchase our products at wholesale price and place re-orders every week to be delivered to their various DC’s to top up stock. I agree that I would never use them for a distribution house – they take far to large a %age, it works if you’re making huge margins, but unfortunately that’s not the case for us.

  • Andrew Youderian
    Andrew Youderian
    October 30 2012, 12:37PM

    @Nick – Thanks for clarifying! So you’re using strategy #2 – Create Your Own Products – to compete with Amazon. Having Amazon as a wholesale purchaser sounds like a big win, as long as they don’t undercut your market if you’re selling retail. Thanks for sharing!

  • Eric
    October 30 2012, 01:49PM

    Great post. Nice to help the little guys compete with the big guys.

  • Andrew Youderian
    Andrew Youderian
    October 30 2012, 02:34PM

    @Eric – Thanks! Us little guys have to stick together…. ;-)

  • shiran cohen
    shiran cohen
    October 30 2012, 03:52PM

    Right on time :)
    Great post with lots of useful information that can be used.


  • Sam Rye
    Sam Rye
    October 30 2012, 06:21PM

    Great post guys, very interesting to think about how Amazon may effectively be usurping their own customers in uncompetitive / attractive niches.

  • Andrew Youderian
    Andrew Youderian
    October 30 2012, 06:24PM

    Thanks Sam! Glad you enjoyed it.

  • dimmodd
    October 31 2012, 02:06AM

    Actually I do not know SonicsOnline sells it for $120, dozens shops on the Internet sell out for less than $80. Everyone has Google and everyone can compare!

  • Erik
    October 31 2012, 04:58AM

    The best way to start would be choosing option 1. Unless you do have a high capital and already earning well, selling for a cause or even creating your own products would be a risk. Providing the best information possible to the products you sell would increase buyer’s trust and reliability on your offers, IMO.

  • Andrew Youderian
    Andrew Youderian
    October 31 2012, 02:24PM

    @Erick – Agreed! I think branding yourself as the expert is easiest way for most small shops to compete with Amazon. Creating your own product and getting involved with a broader cause are viable options too, but just may not be for everyone.

  • Tom
    November 01 2012, 01:29AM

    We also sell to Amazon as well as several other retailers. It’s another channel for us (along with Urban Outfitters,,, several indy retailers, etc…) with our own website ( being the only place customers can get a complete selection of what we offer. These retailers all have their own customer bases that might never know our brand existed if we didn’t put it in front of them where they like to shop. It’s working well for us so far.


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    November 04 2012, 01:09AM

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  • Leslie Nicole
    Leslie Nicole
    December 07 2012, 08:34AM

    I have a niche that I’m very active in. (Photography). I’m involved in social media like Flickr, RedBubble and Faceboook. The photography community is very generous with sharing resources, so I’m very lucky that my clients often attribute my textures in their photo descriptions.

    Be involved in your community. Word will spread.

  • Abdul Haseeb Awan
    Abdul Haseeb Awan
    December 30 2012, 07:08AM

    I sell Omega wrist watch parts. Now this is very specific niche. I started selling on eBay and became power seller + top seller with 100% feedback in one year. I am planning to build my own store. Interestingly, my prices are higher than the same item sold on eBay. My listing is simple but have all the information while others do not have… Now we have started to purchase inventory, get description and resell it..
    In addition to that, I am building a store . aleady purchased a domain [ / ] and will start operating on it soon
    I feel description and pictures help ALOT !
    In case of our niche, people are mostly looking at description..

  • Bob Klunk
    Bob Klunk
    January 01 2013, 01:44PM

    We help small online retailers by providing order fulfillment that can compete with large national providers. has an app to connect your Shopify store to our fulfillment software with no upfront cost.

  • Evan
    June 17 2013, 03:06PM

    We just wrote a white paper on this problem at Protea Digital, readers should check it out if they want to learn more-

    I agree that becoming an expert is important, but I think it is even more importance to focus on strong and unique branding.

    Thanks for the interesting article!

  • Jeremy M.
    Jeremy M.
    October 23 2013, 10:43PM

    How would one go about creating a custom application suite with all the bells and whistles (ios, android, and windows apps) to compete with the larger companies that are already out there doing the same thing for subscription fees? Would the best option be to charge a one time set up fee for self hosted systems, or to sell your product for less?

  • Jessica
    July 11 2014, 10:43AM

    I think Amazon’s lack of interest in Profit makes it a real challenge to compete with. In Scotland they had a 10Million pound government investment to create a fulfillment center now slowly the jobs will be replaced with Kiva System robotic pickers.

    We also create our own products and tried listing them on amazon, did really well at the beginning but then counterfeits started appearing under our listing, with our pure 5 star reviews and our number in the category listing. Amazon refused to pull the counterfeit listings, as we are a small company we tried to take the first few sellers to court but by the time one pulled the listing down more were in its place, usually from the same provider. Net effect we were left with product to the point where we had no cash profit from the item, needed to sell below cost and the listing now has bad reviews to poor quality. The item continues to sell for less than the cost of production from other sellers, under our brand name.

    The real big problem with this situation is that Profit is the part that allows people to create new products and jobs. By selling without focusing on profit, people end up buying products cheaply but there are less people employed in general to buy at all.

    Also dont agree with the expert part totally as often people will research the product online but then buy from the cheapest site anyway. I would pay more not to buy on amazon but Wouldnt pay double.

    It does worry me though weather some day my job and the products we’ve created will be lost to Amazon / Market place sellers who are happy to make a dollar on a two hundred dollar sale.

  • mike
    November 06 2014, 05:02PM

    Yeah, you may think this giant is great from the buyer’s perspective.

    Have a look at what sellers say.

    These people are ruthless, and have a desire for dominance… at any cost.

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