Is Amazon Right for Your Business?
Sep 01, 2024
If your business sells products, you may be looking at selling them on Amazon and with Amazon’s 170 million unique monthly customers, all businesses should look into this option and assess whether it is right for their business sales growth strategy.
There are however pros and cons of selling on the Amazon platform, so here we investigate these to help you to consider all the options.
The Benefits of Selling on Amazon
Access to Amazon’s huge customer base
Amazon’s customer base is the greatest benefit to business sellers. Over $100B is spent every year on Amazon and when you list your products on Amazon, you have access to hundreds of millions of their online customers.
Selling on the trust factor
Many customers are more likely to buy products from Amazon rather than from other retail outlets. Amazon offers a promise of excellence and promotes itself as providing a great service both of which drive customers to buy from their platform. People generally trust Amazon and get peace of mind they can return goods easily so by listing your products on Amazon, you gain credibility and trust. T
International business reach
By selling on Amazon, you can reach international customers through their global selling platform which would normally take you months and with much higher costs by doing this yourself. And you won’t have to deal with issues of local payment systems, logistics, and operations.
Lower promotional costs
As a seller on Amazon, you can start selling immediately with minimal marketing costs and effort. There is a high level of competition between sellers on Amazon so you need clear USP’s to differentiate yourself but once done, you can benefit from accessing Amazon’s huge customer database.
Automated fulfilment
For smaller businesses that do not have the time or infrastructure to pick, pack and ship orders, Amazon takes away all the strain and offers the Fulfilment by Amazon (FBA) service. They manage all storage, packing, and shipping of your orders (including free shipping for Amazon Prime members) as well as international exports and returns all saving you valuable time and money.
Research has shown that 71% of FBA sellers say their unit sales increased by more than 20% since joining the program.
The Pitfalls of Selling on Amazon
Amazon’s Fixed pricing and restrictions
If you intend to get your products into some national retailers or high-profile online partner platforms, be careful as several of them either dislike you selling on Amazon or restrict you from doing so.
They could either specify that to sell your products with them you cannot sell on Amazon or else specify the lowest price you could sell your products on Amazon.
They are fearful of Amazon competition so check your contracts with any partners you have or try to obtain and make a decision on whether the benefits of Amazon outweigh other sales outlets.
High competition on Amazon
Competition on Amazon is extremely high so you need to have a clear sales strategy or else your products will fall to the bottom of selected lists. When multiple sellers have the same product on sale, Amazon decides which seller is the best fit. When a customer clicks the Add to Cart button the items of the featured seller will be added to his shopping cart. https://amzscout.net/blog/high-demand-products/
Commissions
Like all other online partner platforms, you will have to pay Amazon a percentage of each sales order as a commission, so you therefore need to ensure that you have high enough margins to cover these commissions. Amazon’s fees range from 8% to 15% depending on the category you are in, so if you are selling products with a low-margin, then Amazon may not be right for you.
Barriers to entry
It has become more and more difficult to sell on Amazon as it has had to become stricter in allowing who can sell, what, and how on its platform. Sellers need to receive approval to sell items and it isn’t easy to be approved.
Payment periods
When you sell your products on Amazon, they pay you for your orders every 14 days so you need to ensure that your cash flow allows for a 2-week payment process.
Risk of product restriction
Amazon works closely with established brands and if a brand decides they don’t want you listing their products on Amazon, they can have Amazon remove your products at any time. This means that only the brand owner can sell the product on Amazon’s platform.
So, there are clear pros and cons in selling on Amazon but for many small businesses, using their platform provides numerous benefits which they could not easily achieve themselves without a high level of cost and effort. Do your research and make your decision on Amazon’s viability for your products.
