Should you sell on Amazon?- Pros and Cons on Selling On Amazon
“Are you ready to expand your brand to Amazon, the fastest growing marketplace in e-commerce?”
One of the main reasons why every seller should consider selling on Amazon.com is because of one reason- you can reach at the largest customer base online selling platform than found on any of the other e-commerce websites which includes eBay.
Additionally, what is even more challenging is the fact that you can potentially earn more money by doing lesser work!
Amazon is indeed one of the biggest ecommerce stores in the world. Shopify just partnered with Amazon to add some features that will allow entrepreneurs to sell their products through Amazon so easily. You can definitely use Amazon as a sales channel to grow your revenue.
Truth is, there is no perfect place to sell online, but despite that Amazon offers a wide variety of advantages for those who are willing to take risks financially, wish to reach a larger and more diverse online consumer.
Amazon has Large Number of Potential Customers
The number of potential customers you can reach through Amazon.com is more than triple the number of potential eBay customers. Statistical data estimates the number of Amazon.com customers at 237 million. In a recent Forbes article, the Trefis Team estimated the number of active eBay users at 70 million. If these estimates are correct, you will reach over three times as many potential customers if you sell on Amazon.com.
Amazon built their platform in a way that it could cater hundreds
People Love to Shop With Amazon.com
People spend a lot of money on Amazon.com, and the amount of money they spend is increasing fast. According to Amazon.com, about their sales- the reported a revenue (the total amount of money it earns from sales) in June this year is of $81.76 billion. In June last year, Amazon.com’s revenue was $66.85 billion, according to Ycharts.
People spend over three times as much on Amazon.com as they do on eBay. A survey by the firm RBC quoted by Motley Fool writer Daniel Kline noted that the average Amazon customer in the U.S. spends $320 a year on Amazon.
What do these figures mean for the average seller? For starters, you should recognize the incredible amount of business to be had on Amazon. The tricky part is capturing some of this business for yourself.
Amazon have built Reputation over the Years
Amazon.com has a much better reputation than eBay. Many people will not shop on eBay because they regard it as cheap and dishonest. Those same people love Amazon.com and shop there regularly.
Every seller should keep this in mind if they are choosing between the two big e-commerce platforms.
Programs like Amazon Prime can increase your revenues and customer base. Prime does this by encouraging customers to spend more money by offering incentives, such as giving customers free two-day shipping on a wide variety of products with no minimum order.
A survey of 2,000 U.S. Amazon.com customers by RBC found that the average Amazon Prime customer spent $538 a year on the site. Compare this to the $320 that the average Amazon customer spends and you will see the instant advantage to using Prime in your Amazon e-commerce strategy.
Amazon Has No Listing Fee
You will not have to pay anything to list an item on Amazon.com. In fact, you will not be charged until you actually sell something. This means you can list more items and leave the listings up longer, which is great news for a seller!
Be aware, however, that Amazon.com will take a hefty cut out of the sales price, usually around 20 percent. Amazon will take out an even larger cut if you participate in programs like Fulfilment By Amazon (FBA).
You do Less Work on Amazon
You may be able to do less work when you sell on Amazon.com. Unlike eBay, you won’t have to continually relist items, but you will have to handle the shipping and customer service chores unless you opt for FBA. The Fulfillment By Amazon program handles these tasks for American and UK sellers. (FBA is not available in Australia yet.)
We highly recommend that you read our article on Fulfillment By Amazon (LINK) if you are interested in reducing your workload as a seller.
Amazon Testing Purposes
Selling through Amazon.com is one of the best ways to test the market for a new product. Amazon.com data can show you whether there is a demand for a product, what that demand is, and, more importantly, what you can charge for the product.
From Amazon to Your Online Store
Amazon.com can be a great means of driving customers to your online store. If you can gather contact information from your Amazon.com buyers, you can tell them about offers or products that are not available through Amazon.com.
This is a long-term strategy, but every seller should have this in mind when they start off.
As a seller, you can take advantage of the Amazon Associates service to promote products related to your industry on your website. This is basically an affiliate program where you earn commissions for sales. There is a danger, however, that there will be a conflict of interest between the products you sell and the products you promote.
The only way to avoid this conflict is to select the products you promote very carefully. The last thing you want to do is cannibalize your business (i.e., compete with yourself).
Charge Higher Prices
You can usually charge higher prices on Amazon. Amazon.com is basically a retailer. A retailer makes money by selling items at a competitive price; this is in contrast to a wholesaler (which charges the lowest price possible).
For example, on eBay (a wholesale market) the lowest price for women’s Ariat shirts was $5, whereas the average price for an Ariat shirt on Amazon.com was around $40. Part of the reason for this is that the items for sale on Amazon are usually new, while the items on eBay are often used.
Note: It can be hard to price items on Amazon.com and eBay because both sites list artificially low prices in an attempt to drive sales.
Amazon.com is one of the most trusted brands in the world. People like Amazon.com and many of its customers in the United States are willing to pay $99 a year to participate in the Amazon Prime service.
So what’s the takeaway point here? If you sell your products through Amazon.com, your business will be associated with a brand that customers know and, more importantly, trust.
A Big Chance for the Little Guys
It is impossible for the average person to get a product onto the shelves at a big retailer such as Walmart without spending a lot of money (or having some serious connections). Yet anybody can list a product at Amazon.com and put their wares before 237 million customers worldwide.
While some people may feel like the fees are too high, the truth is that they aren’t really when you consider what you’re getting. Imagine if you had to set into place the type of infrastructure that Amazon provides, the technology to check out, the customer base and more yourself? What is that worth?
The difficulty of Understanding the Marketplace Infrastructure
While the infrastructure is indeed awesome for some people, the technology may be too hard to understand. This may require that you hire someone to help train you on how to do shipments and list your inventory properly. Thankfully there are virtual assistants that do only that for their customers.
Amazon has No Branding Control
Selling on Amazon means you’re one of many million people selling products, and unless you are manufacturing a unique item only known to you as a merchant on your own, it will be hard for you to brand yourself. The brand that is on Amazon is simply Amazon.
You can notice that when you search for a product, the search results focus on the variation of products instead of brands.
You definitely have to decide for yourself if selling on Amazon is worth it or not for you. But do consider this: if you can price something well enough or have a unique enough product, you can make plenty of money on Amazon as a seller.
The 9 Basic Tips for Selling on Amazon
To get a good idea of how your business will perform in this marketplace environment, you’ll want to get a clear picture of what selling on Amazon entails.
1. What is the Buy Box?
When browsing on Amazon, customers will navigate to a product’s main page and click on the “offers” links below the product description (as indicated by the red circle on the screenshot below) to see the majority of available sellers. vblog_Amaon1
However, Amazon also gives merchants the ability to compete for the coveted “Buy Box” – the CTA button in that familiar shade of yellow. $56 billion of Amazon’s $62 billion sales happen right here, so it’s important to understand how it works.
The Buy Box is the box on a product detail page where customers can begin the purchasing process by adding items to their shopping carts.
2. How does Amazon determine who wins the Buy Box and the order of the merchant offers list?
Because a key feature of the Amazon platform is that multiple sellers can offer the same product, becoming the featured seller who wins the Buy Box is very difficult. In fact, it’s pretty unrealistic to think that your site is ever going to get ranked high enough to become the featured seller. But even if you never win the Boy Box listing, it is still important to understand how it works and how different parts of your site are weighted. Many of the things Amazon values fall in line with e-commerce best practices, so it’s in your best interest to be doing these things anyway. A number of factors affect where a merchant appears in the offers list, including:
Competitive pricing. This includes not only the product cost but shipping costs as well. Many shoppers expect to see low prices while browsing Amazon.
Competing offers. Generally, the more sellers there are, the harder it is to climb to the top.
How much history the merchant has on Amazon as a seller. Merchants who have long, positive selling histories with Amazon have better chances of obtaining one of the top spots.
How many Seller reviews the merchant has on Amazon. Online reviews have a huge impact on driving sales, and can really end up making or breaking your business.
There are many other factors as well, and there are some pretty good articles out there about how to optimize your sales. As a general rule of thumb, the most effective solution is to ensure that any transactions you receive through Amazon run as smoothly as possible. That means delivering your product in a timely manner and communicating with your customers along the way.
However, if you’re looking to break into the market a little quicker, here are two shortcuts that can help:
Start by selling a low-competition item to boost your seller ranking. This will increase the probability that the offer will show higher for more competitive products.
Try offering a very competitive price for a popular product. This draws in bargain shoppers and can increase your seller ranking. You can check out Amazon's "Most Wished For" list to see the most popular items by industry if you need some inspiration.
3. What is Fulfillment by Amazon (FBA)?
Fulfillment by Amazon is a program where you send your merchandise to one of the many Amazon fulfillment centers to be stocked; then customers buy products from you, and Amazon ships them. This sort of arrangement allows you to focus on other aspects of running your business while Amazon handles many facets of shipping and customer service. Other benefits include extending the reach of your products to Amazon Prime members and gaining an extra push towards winning the Buy Box, even if your products have a bit of a higher price. With Volusion, merchants have the ability to set up different shipping options including drop shipping, which allows flexibility to try using FBA. You can learn more about Fulfillment by Amazon here.
4. What types of merchants tend to benefit the most from selling on Amazon?
Three kinds of merchants tend to perform particularly well on Amazon:
Merchants selling unique-to-them products. (e.g. companies who produce their own products, such as a company that designs its own jewelry)
Merchants who sell hobby or niche products. Amazon generally won't start fulfilling or carrying hobby or niche products, so there's less of a risk you'd have to compete with Amazon itself.
Merchants selling refurbished or used products. Amazon has a huge market for these products, as they attract shoppers whose main concern is price and don’t mind waiting for shipping. It is worth noting, however, that used products cannot win the Buy Box spot.
That said, the benefit of owning your store’s URL and fully branded website cannot be overstated; this gives an extra level of credibility and authority, and visitors are more likely to remember you versus someone else. Many merchants who achieve popularity on Amazon still find it essential to have control over their own e-commerce website and branding. This allows them to achieve a fully independent store presence and market to large audiences outside of Amazon through other marketing channels.
Other frequently asked questions about selling on Amazon Marketplace
Now that we have the basics covered, let's get into the nitty-gritty. Here are a few common questions about the details of selling on Amazon:
5. Why should I associate one of my products with an Amazon product that's already listed?
Products are only allowed to be listed once in the Amazon catalog, so creating a second product detail page for an existing product will result in your listing being removed. By matching your product to the product detail page that already exists, your offer has a chance to be seen.
6. Why can’t I use certain shipping methods at first?
Amazon doesn’t allow new merchants to offer certain shipping methods right off the bat, such as two-day shipping. These shipping methods have to be earned by establishing a history of reliable shipping at the slower shipping speeds.
7. Why aren’t I being compensated correctly for shipping?
Amazon determines how much they think it should cost to ship a product based on the merchant’s origin, the customer’s address and the given weight of the product. However, oftentimes the amount of money that Amazon reimburses merchants for shipping won't match the actual shipping cost.
8. How can I increase the number of reviews on my Seller account?
Please note that merchants are forbidden from soliciting or paying for Seller Account reviews. Any sellers who engage in these practices risk having their accounts suspended. Your best bet is to give customers a great shopping experience (including aspects of product price, clear and informative customer communication and shipping reliability) so they want to vouch for you on their own. If your business is hurting for reviews, we have some advice to help you out.
9. Are there any policies I should look over before I start selling on Amazon?
Here are some policies you may want to review or view on their website before selling on Amazon:
- Product detail page rules
- Shipping policies
- Policies and agreements
- Selling Policies
- Prohibited seller activities and actions
When you want to sell on Amazon, the best advice we have is to first know your business, and know what you're getting from it. A new Amazon integration means a lot of new opportunities. By doing an audit and focusing on your business' needs, you'll be taking your online success to the next level in no time.
Good luck in your selling venture!
Need help selling on Amazon? Not sure where to begin?
- Arianne Cedeno