Amazon is the world’s most renowned international online marketplace. Amazon.com continues to grow every day, as more e-commerce business owners are turning to the site for increased profits.
In May 2020, the marketplace had over 2.5 billion desktop and mobile visits, increasing by almost half a billion visits in February.
There’s no debating that Amazon is a dominating empire, and it’s helped many businesses throughout its history. But is it the best place for you to sell?
Here, we’re sharing some of the most important pros and cons of selling on Amazon so you can decide if this venture is the one that’s right for your business.
How to Sell on Amazon
Before we share the pros and cons of selling on Amazon, here’s what you need to know about selling on this platform. Every seller will have a unique experience, depending on how they choose to sell, and that will influence the pros and cons.
There are three main options for selling products on amazon:
Fulfilled by Merchant (FBM)
This option is about using the Amazon marketplace as it is. The seller needs to upload lists of their items, fill in the information form, and start selling.
From the Amazon website, you’ll see FBM sellers with their products cards written “sold and shipped by” and their name after.
FBM sellers handle the sales, shipping, returns, and other post-sale services that the buyers might require. It is quite an easy way to sell, in most cases, although it might be a waste of time and money to sell some products with low-profit margins.
Unfortunately, Amazon doesn’t have clear guidelines on selling that works for all types of products. Therefore, it is not uncommon to receive plenty of negative feedback and reviews on your items and selling conditions.
Fulfilled by Amazon (FBA)
With FBA, Amazon gives you the option to use its logistics network to sell and ship your items. If you’re a manufacturer, FBA requires you to send Amazon all your stock to manage the storage, shipping, and returns.
FBA by Amazon is similar to third-party dropshipping, in which you are the one to provide the items. On the website, you’ll mostly see “sold by X and managed by Amazon” on product cards, which shows just FBA.
It is a great way of selling because you don’t have to worry about all the logistics; you only need to sit back and wait for your earnings to grow. However, Amazon charges a fee for this, which might make it difficult to choose this option, as you’ll see in the pros and cons of selling with Amazon.
The previous options are best for businesses that aren’t too big. This option appeals to bigger companies and is the VIP section for Amazon. This also means that it’s quite difficult to become a vendor, as you need an invitation, just like in an exclusive event.
The vendor is a wholesaler who sells to Amazon and also to end clients as a retailer. They get the tag “Sold and shipped by Amazon, ” which many buyers like to see. All the buyer requires to do is send an order, and the vendor will take care of everything, including setting the price, and most commonly, their price is the lowest you can get.
To become one of Amazon’s vendors, you need to:
- Have a powerful product
- Have completed loads of sales as a seller
- Be a consolidated seller
Otherwise, Amazon will not interested in adding you to their ranks.
Pros of Selling on Amazon
Easy to use
You can easily find information on how to sell on Amazon. The process of joining is also easy because you only need to read the instructions of becoming a seller, set up an email address, fill in their form, and start publishing your products. There are no major difficulties, and you can complete the process in a day, without spending any extra money. This is a major advantage of Amazon in the eBay versus amazon for sellers debate: Amazon is much easier to use.
You’ll also save yourself the complications of figuring out the design and structure of your website, or marketing through email address marketing and social media, that you’d have to do if you were creating your own shop. Your only worry when working with Amazon is managing your catalog.
Remember, as we mentioned earlier, you’ll need to receive an invitation to become an Amazon vendor. However, to become an individual seller, you’ll need up to 40 references. To become a pro seller, you’ll need more than 40 items and a competitive advantage over individual sellers. Becoming an individual seller is a better choice because you can always upgrade later.
Increases visibility of your products
Because Amazon is one of the most visited websites in the world with millions of daily users, your potential audience is multiplied exponentially. You don’t have to worry about marketing strategies such as SEO or SEM, visitors will come, and your sales will increase as a result.
Furthermore, it doesn’t matter which country you registered from, as it would with a website because of the .com, .uk, etc.
As mentioned above, you’ll have increased visibility on your products, and if you work in line with Amazon’s rules and guidelines, you’ll receive an increase in sales and revenue in the long-term. The site’s millions of users contribute to the large volume of consumers, which leads to more profit potential for sellers.
Another advantage of selling on Amazon is that users of this online store search for a specific product, not a brand. This raises your chance of attracting unique customers because there is an increased likelihood of them discovering your business.
Additionally, Amazon has a great cataloging system that ensures that your inventory is an appropriate location for potential clients to find it. This is a great benefit of Amazon’s investment, which has been put into paid Google searches. This means that your items will always appear on top of google searches, leading to more sales compared to selling on your website.
Generates instant trust
Even though buying on the internet has become a normal thing, your clients will feel safer when purchasing on Amazon because it is a big company that gives shoppers a satisfaction guarantee. Buying from Amazon assures the clients that if anything goes wrong, it will be solved immediately. Amazon also has great customer service, which saves you both time and money.
Because the Amazon marketplace is used worldwide, it gives your business the chance to expand and sell items in different markets. Your business can extend past your local geographical location to other parts of the globe, where there are millions of customers ready and eager to buy.
Cons of Selling on Amazon
Although your revenue is likely to increase, it comes at a cost, and it might not be profitable if you sell products with low-profit margins.
Amazon fees range between 10% and 15% for each sale. If you’re an individual seller, you’ll need to pay $1.16 for each product you sell. You are limited to sell 40 items per month. As a professional seller, you have no limits in the number of sales, and the fees are less than those of individual sellers. However, there is a fixed fee of $45.68, in addition to taxes.
There are also other charges for storage and shipping management associated with the online store:
i. Fulfillment fees
This is the cost of processing the order, usually between $2 and $3 for each order, depending on its size. Small products need to pay $2.42, $2.81 for mediums and $3.43 for large products.
ii. Management fees
The fee to store your products also depends on the size and time of storage. In the first six months, you’ll need to pay $30.45 per square foot in the low season and $42.16 in the high season, running from October to December. From 6 to 12 months, you’ll need to pay $585.59 per square foot. Amazon charges a hefty price to discourage long term low rotation, which is why there is a 2000% increase in price. For more than 12 months, each cubic meter cost over $1000.
iii. Amazon vendor fees
Amazon vendor option is mostly free because it’s the company that offers you the position. However, there are a few services you need to pay for. First, the company assigns you an adviser that gives you recommendations on your account. They advise you on issues such as running ads and other strategies. You need to pay the adviser, in addition to other charges for retail analytics, a panel that gives you all metrics related to your product.
Competition on Amazon is sky-high because there are thousands of sellers that your business is competing with.
Lack of control
Amazon focuses on products, not sellers, and you must abide by all the rules. This means that you have no means of showcasing your brand presence. It’s not possible to personalize your profile or add any detail that will make it easier for customers to identify you.
You give Amazon all your data
By selling on Amazon, you are giving the company all your sales information. It’s no secret that the company can use this information to add to its products to make more profits. Additionally, if you register as a seller, you have to tell them who your suppliers are, which means that they can contact the supplier directly, which can run you out of business.
Is Selling on Amazon Worth It?
Although many businesses choose to sell on Amazon, it isn’t your only option. There’s eBay, and it’s also possible to sell on your own website through a host like Shopify.
However, this one is up for you to decide. Although every Amazon seller will face these pros and cons, each experience differs based on the business and method of selling (FBA, FBM, etc.)
Consider these pros and cons as you research how you’d like to sell on this major network, and whether you’re more drawn to eBay vs Amazon for selling.