Are you considering putting your goods up for sale on Amazon? The answer might seem obvious as Amazon grows exponentially every year. But does this mean Amazon is a sound business partner for you? Before you can decide, you need to assess the pros and cons of selling on Amazon.
In this blog, we’ll discuss the advantages and disadvantages of working with Amazon. Once you understand them, you can decide whether Amazon is right for you. Let’s dive right in!
The Pros of Selling on Amazon
Before deciding to use Amazon as your selling platform, weighing the pros and cons of selling on Amazon is essential. Here are ways that selling through Amazon can be advantageous to your business:
1. Creating an Amazon Account Is Simple
Amazon has made setting up a Seller Central account quick and easy. All you have to do is register your account. Then, you’ll get an account from which you can manage your inventory. In fact, you mainly need this information to create an account:
- Tax number
- Government Issued Identification
- Phone number
- Bank Account and Routing Number
- Credit Card (internationally chargeable)
2. Customer Base Expansion
Normally, you can only access walk-ins and people who find your website. But when you sell through Amazon, you expand your customer base in two ways.
Firstly, you get access to everyone who searches on Amazon for your product or similar items. For instance, let’s imagine that you sell metal water bottles. If a potential customer searches for a ‘water bottle,’ they will still see your product. Additionally, they’ll find your product if they search for related items, e.g. ‘metal containers’.
Secondly, selling on Amazon expands the markets you have access to. You get a wider reach by selling your products internationally.
3. Brand Reputation
When you sell through Amazon, you get a brand reputation: Amazon’s and your own. Amazon delivers worldwide and is even the USA’s most trusted company. However, there’s another way that you get a brand reputation. On Amazon, you’ll receive reviews and ratings from customers. Your reputation will grow as more satisfied customers leave you glowing reviews and high ratings.
4. Fulfilment by Amazon
Also referred to as FBA, Fulfilment by Amazon is a service they offer. This service lets you ship your items to Amazon. Then, Amazon handles the order fulfilment, shipping, and returns. With FBA, your staff can focus on other activities instead of fulfilling orders. It can also reduce inventory costs since you send your items to Amazon.
5. Access to Amazon Ads
When you examine the pros and cons of Amazon, you must remember ads. As a vendor, you place ads on Amazon. This is a particularly powerful marketing tool since Amazon has over 300 million active users.
There are three main ways you can use this tool:
- Stores: On Amazon, you can get multiple pages where you’ll display your product portfolio.
- Lockscreen Ad: This type of advertisement is specifically for books. With a lock screen ad, you can target readers based on their interests.
- Sponsored Product: You can use this type of advertisement to promote products and brands. When you buy sponsored ads, your product appears high in the search results.
- Sponsored Brand: This advertisement gives your company a tailored headline and brand design.
The Cons of Selling on Amazon
Here are the disadvantages of selling on Amazon:
High Competition
There are nearly 10 million sellers on Amazon. Depending on the product, you’ll enter a crowded market. While you can leverage advertisement and market research to target customers, it might not work. In fact, 37% of sellers on Amazon fail to be profitable in their first year.
High Fees
While setting up a seller central account is easy, it comes at a cost. Firstly, there’s the selling plan. You can either get the professional plan at $39.99 a month or the individual plan at $0.99 per item. However, there are way more fees you need to account for, such as:
- Free Delivery: When Amazon offers to ship a product for free, you pay for it.
- Returns: You must pay for the processing of returns.
- Inventory: If you use FBA, you have to pay to store your goods. Plus, inventory costs go up during holidays.
- Aged Inventory: Amazon will charge you if your products stay in their warehouse for over 181 days.
- Removal: Amazon will charge you each time you request to dispose of an item.
Limited Customer Interactions
On Amazon, customers just buy and leave ratings and reviews. While in your own store, you could give them a survey. In fact, you can’t even talk to your customers. This can greatly limit your understanding of why customers like/dislike your product. While you can use social media and reviews to bridge the gap, nothing beats talking directly to your customers.
Amazon Is an Unstable Platform
Amazon makes changes to its platform in hopes of growing its profits. Sometimes, these changes can affect your sales. For instance, Amazon’s book category system is frequently changed. Authors and publishers constantly have to change how they operate to remain profitable.
Copycat Sellers
When you are dealing with your competition on Amazon, some companies also sell products identical to yours. Even Amazon itself was accused multiple times of selling copycat products. This can cut into your profit as loyal customers mistakenly buy copycats. Moreover, if the product is inferior to yours, customers may think that the poor quality of the item is your fault.
Is Amazon Right for Your Business?
When you’re deciding if you should sell on Amazon, it’s important to look at the Amazon pros and cons. Amazon might charge high fees, but it can also bring a lot more customers to your business. If you earn enough extra profit to cover the fees, then selling on Amazon could be a good idea. Also, remember that Amazon has helpful business tools, like the FBA service and advertising methods.
Conclusion
Determining if Amazon is the right platform for your business involves a careful assessment of the pros and cons of selling on Amazon. While Amazon offers significant advantages like a vast customer base, brand reputation enhancement, and services like Fulfillment by Amazon and advertising tools, it also presents challenges. High competition, fees, limited customer interaction, platform instability, and the risk of copycat sellers are notable drawbacks. Your decision should balance these factors against your business goals and resources. Ultimately, Amazon can be a powerful ally for growth and expansion, but it requires a strategic approach to navigate its complexities effectively. Consider your unique business needs and weigh these factors to make an informed decision about selling on Amazon.
