If you didn’t already have an idea of how powerful Amazon is, you probably wouldn’t be considering it for your online business. In this blog, I will take you through the pros and cons of selling on Amazon, so that you can decide if it’s a good match for you and your business objectives.
When starting an online business, many entrepreneurs end up debating whether they should build their sites or join a marketplace that already has an existing audience.
Realistically, it is possible to turn both options into a successful venture. For us, using an existing marketplace was the best option; we have used Amazon as a springboard to expand our private label brands internationally.
Anyway, let’s start with the pros of selling on Amazon.
The Pros and Cons of Selling on Amazon – Plus Points
Here is why you should consider listing your products on Amazon:
Amazon Has High Traffic Numbers
The Amazon website receives well over 200 million unique visitors every month. Countless consumers start their search for products on Amazon before moving to other sites. As an Amazon seller, you can potentially reach millions of interested buyers (provided your development and marketing strategy is good enough). Amazon has a substantial organic presence on Google; it’s no surprise that they are one of the most visited websites on the planet. From the start, Amazon also understood the importance of paid advertisement; they are everywhere.
Buyers Have High Purchase Intent
Amazon shoppers know they can find a wide selection of the products they are searching for, which means they are generally ready to make a purchase. When customers use Amazon, I’d argue that they are more prepared to shop than they are on any other website.
Margins are Better for Exclusive Products
Amazon is the ideal marketplace for exclusive products, mainly because price sensitivity is not a concern. Selling unique products on Amazon produces better margins, making it easier to afford the seller fees and still generate a profit. The platform’s seller tools also allow you to keep a closer eye on your brand, ensuring you can keep the distance between you and your closest competitors.
Benefit from Recurring Sales
Amazon makes it that much easier to cultivate customer relationships and in turn, benefit from recurring sales. This is especially true if you choose to sell products that customers require regularly. Amazon makes this easy with the subscribe and save program, customers sign up for regular deliveries with the benefit of loyalty discount. We have a specific strategy to ensure we are offering our customers more value than they expect; this has resulted in more customers coming back to purchase again.
Getting Set Up is Easy
Since there is no need to spend weeks creating a site, it is much easier to start selling online when you sign up for a seller account on Amazon. Yes, there are still specific requirements you may need to meet, but overall, it is one of the easiest ways to launch an online business. Plus, there’s the bonus option of the Fulfillment by Amazon (FBA) program. As an FBA seller, Amazon takes care of the product picking, shipping, and returns for you. Your products will also be eligible for Amazon Prime’s fast shipping benefits. There are still a few details you need to take care of yourself though, such as the labels for your products – more on that here.
Create a Global Business
Becoming an Amazon seller is one of the best ways to reach a global audience. Amazon’s Global Selling program gives you access to 13 international marketplaces and customers in over 180 countries. No need to worry about the logistics of selling to customers across the world; Amazon takes care of it for you.
- You Can Start A Business With Limited-Time & Money
When we started selling on Amazon, we had around $2000 between the three of us, that was more than five years ago. We were also all working full-time jobs, that’s the beauty of Amazon FBA, Amazon did the heavy lifting whilst we were working our day jobs. In the video below, I explain how you could start an Amazon business at around $1000.
Anyway, enough about the upside, let’s talk about the downside.
The Pros and Cons of Selling on Amazon – Downsides
Here is why Amazon might not be right for you:
The Monthly Fees Can Be High
Selling on Amazon does not need to be a costly exercise. However, small mistakes can increase monthly fees quite quickly, which cuts into your profit margin. For example, products that don’t sell can attract long-term storage fees. If your products are damaged or mislabeled, Amazon will charge you extra fees. To avoid high fees, it is essential to understand all Amazon fees and follow each process correctly. More on Amazon’s fees here.
Dealing with Dishonest Sellers
Unfortunately, some sellers are just out to make a quick buck, even on Amazon. Using similar products and low pricing, dishonest merchants could try and lure customers away from you. Listing hijacking involves copying a reputable seller’s listing and damaging their reputation. Fortunately, signing up for Amazon’s Brand Registry is one way to stop this from happening. Here’s why it’s a good idea.
Limited Brand Control
As an Amazon seller, you can’t always control how your brand shows up during a customer’s shopping experience. Your products will show up on the same page template as many other sellers, making it difficult to establish a brand presence. Amazon also owns the customer relationships you generate. This means you can’t always communicate with buyers in the exact way you would want to. On the plus side, it is now possible to create a multi-page storefront for your brand, which helps you stand out. I’ve created a detailed guide for beginners here.
You Need to Make Time for Customer Care
Even sellers who sign up for Amazon’s FBA program will still need to make time for customer care and support. This includes answering customer queries and ensuring they are happy with the returns and exchange processes. By not setting time aside for this task, you could end up with negative comments and reviews that can quickly ruin your reputation. If you have some additional budget, you can get a virtual assistant to help you with this. To start with we did all of this ourselves, once we had enough profit this was one of the first areas we outsourced.
Problems with Real-Time Inventory Levels
It is not always possible to get a clear idea of your inventory levels due to syncing issues. Successfully syncing your warehousing software with sales numbers can be tricky. So, you may not always have a clear idea of how much stock you have left. This speaks to the importance of keeping a close eye on inventory during the beginning stages until you can identify trends. Fortunately, there are several tools you can consider to make the inventory management process a bit easier.
- Amazon Seller Support
There is no doubt about it; at times, Amazons seller support can be a nightmare; it can become very frustrating. Previously we’ve had listing taken down for several weeks; this can have a considerable impact on company revenue, not ideal at all. However, over the years, you learn how to navigate the Amazon support network, you also learn how to do things properly, which means fewer issues! This all comes with time, of course.
Should You Build Your Own eCommerce Site Instead?
Amazon is one of the fastest ways to get your products online, but it might not give you the kind of control you are after.
Having full brand control is one of the main reasons some sellers prefer to take the time to build their eCommerce sites. This, of course, has a lot of benefits, with your store it’s much easier to develop and nurture the customer relationship.
Then there are Amazon’s fees. Sellers need to consider how these might cut into their profits. With that being said, there are several costs associated with building and maintaining an eCommerce site too. This is over and above the cost of third-party packaging and delivery services.
Lastly, there is the issue of losing out on word-of-mouth referrals. When a satisfied customer talks about your products, there is a good chance they will refer people to Amazon.
By having your site, it is more likely that customers will repeat your brand name, which drives more direct traffic to your online store. When customers come to your online store, you control the data, with your store, it’s much easier to target people that have bought your products in the past.
In my opinion, Amazon should be used as a sales channel; you should not be relying on them entirely. It’s a great place to start after you’ve built some momentum and profit you can start setting up your store, why wouldn’t you want to do both?
Is Selling on Amazon a Good Idea?
Even as an Amazon seller myself, I will admit that there are pros and cons associated with it.
Amazon is established and is one of the most effective ways to place your products in front of millions of customers. However, selling on Amazon has a steep learning curve. You can’t just randomly choose a product, place it online, and hope for the best.
Making a profit on Amazon requires a deep understanding of how the platform works. You also need to know which products have the most potential and how you can best reach customers.
A lot of sellers complain about Amazons seller support system; things do look to be improving on that side of things. As the years go on, Amazon are starting to do more for their third party sellers, and it’s about time too! We do make up a substantial proportion of the companies revenue after all.
Building your online store gives you much more control; this is a big plus point. You also have the power to adjust your expenses and find new third-party suppliers and service providers if you need to. However, if you don’t have digital marketing expertise, you might find things difficult at first.
With Amazon, you don’t have to worry about traffic, when it’s your store you are going to have to get customers to see your products in the first place (this isn’t easy if you aren’t experienced).
Overall, the call is yours. If you want to get set up quickly, can afford a bit of trial and error, and prefer a mostly hands-off approach to selling, Amazon might be right for you.
Amazon has become more and more competitive over the years, so you’ll need to ensure you are doing things in the right way. We have been selling full time on Amazon for more than three years now, and we’ve learnt A LOT along the way.
If you want to benefit from our experience, check out our Amazon training, you can see how we’ve built our Amazon businesses step by step.
If you’ve got any questions, please ask away below.
Until next time!