Should Your Small Business Start Selling On Amazon?

In a press release published back in January, Amazon proudly announced that millions of small and medium-sized businesses from over 130 countries utilized the platform in 2018. Amazon reported that thousands of retailers were able to dramatically increase their profits and attract countless new customers after choosing to sell on the massive online store.

However, despite Amazon’s glowing self-assessment of its services, some small business owners remain wary of the ecommerce monolith. The platform certainly isn’t viable for every company out there, but there are some ways to determine if it could be helpful for your own business.

ADVANTAGES FOR SELLERS

There are a few obvious benefits that Amazon can provide its sellers, such as access to millions of online shoppers and increased online visibility, but there are some lesser-known advantages to consider as well:

Shoppers search Amazon first. One survey found that 44% of online shoppers begin their shopping journey by searching directly on Amazon’s site rather than using Google or other search engines.

FBA (Fulfilled By Amazon). Sellers who sign up for FBA services will get to store their inventory at one of Amazon’s fulfillment centers where employees will take care of all packaging, shipping, and customer service needs. In addition, products listed as FBA are all eligible for free 2-day shipping, which Prime members greatly appreciate!

International reach. Jeff Bezos reported that there are over 100 million Amazon Prime members located around the globe. These are all customers who pay for perks such as free 2-day shipping, early access to deals, and numerous other features. In addition to these 100 million Prime members, there are millions of other online shoppers who visit the site for everything from basic household items to coffins.

Geared towards mobile commerce. Mobile optimization is becoming a necessity for ecommerce stores, and Amazon is well-prepared for the increasing popularity of mobile shopping with its app and responsive web design.

Detailed sales dashboard. The Seller Central dashboard is a user-friendly tool that displays data including various sales statistics, total product orders, revenue earned, and more. Users can toggle the information to view specific data for a single day or compare their sales from month to month.

Easy to get started. All you need to do is choose a seller account and get your products approved (if required) before you can start listing your items. It’s definitely a faster and easier process than creating and designing your own website if you’re an entrepreneur who wants to start selling right away.

DOWNSIDES OF THE AMAZON PLATFORM

The positive parts of Amazon certainly don’t come without a cost. In order to earn any of the aforementioned perks, sellers must also face:

Constant competition. It’s no secret that Amazon can be a brutal marketplace. Small business leaders must be aware of any other sellers that are listing similar products at a lower cost on the platform in order to stay relevant and attract new customers.

High costs. Amazon offers an Individual Selling Plan, which costs $.99 for every item sold, or a Professional Selling Plan, which requires a monthly fee of $39.99. Both plans may include other various charges on items, such as referral fees, closing fees, and shipping fees.

Lack of feedback. It can take sellers quite some time to build up positive reviews on Amazon since only 1 in 30customers will leave feedback after buying an item. This may also cause a conflicting situation because the majority of online shoppers like to read reviews before purchasing a product, and a lack of feedback can make them turn to another seller instead.

Minimal customer data. Amazon is constantly collecting and analyzing customer purchases, habits, and search histories, but sellers don’t get to see the majority of this information.

IS SELLING ON AMAZON RIGHT FOR YOUR BUSINESS?

Most small business owners who sell on Amazon use the platform in conjunction with their own company website to create more awareness for their brand. Selling on Amazon can also be a good first step if you’re trying to develop a multi-channel presence, or if your website is still not optimized for mobile commerce. That being said, companies are most likely to experience success on Amazon if they:

  • Offer unique products. If you have one-of-a-kind items that are specific to your brand, you’re far more likely to gain consumer attention than if you resell other items or offer similar products to those already sold on the platform.
  • Have reasonable profit margins. CEO Dave Hermansen warns small businesses that they have to maintain adequate margins to stay afloat on Amazon. He says that, “They charge anywhere from 15-20% of the sale price in addition to the listing fees. When your margins are low, you simply can’t afford to give it all to Amazon.”

In conclusion, although Amazon indisputably has the largest potential customer base, there are several rules that retailers have to follow or they risk being suspended from the site. You’ll have to determine for yourself if the potential sales and attention are worth the extra fees, strict guidelines, and limited access to your consumer data. If you simply want to increase awareness for your brand, this can be an acceptable trade-off; but if you want to maintain full control over your brand, you would be far happier using social selling methods instead.

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