If you are trying to explore the pros and cons of selling on Amazon, there is no end to it. The more amazon pros you find, the more amazon cons will pop up. If you talk to sellers who are already selling on amazon, they will ramble on and on about it with no clear answer. Is selling on Amazon right for you? Is selling on amazon worth it?
We might agree with the Amazon sellers. There is no straight answer to this question. What may work for some businesses may not work for others. These pros and cons of selling on Amazon should actually be looked into as facts that you should know before you start. Some sellers would consider the benefits of selling on Amazon more than its drawbacks because it works for them. In other cases, this might not be true.
The big fact is- Amazon is one of the biggest marketplaces. It made an average of $1.29 Billion in daily sales and had over 98 million average monthly users in 2021 (Statista). There is doubt that Amazon offers a great opportunity to sellers to exponentially expand their business. But it is not as easy as one might think.
Amazon can boost your sales. You can start selling on Amazon from day one. This might be true but there is a lot that goes on behind these two simple sentences. In this article, we will cover the most important aspects of selling on amazon. The pros and cons of selling on amazon can get tedious and you might just end up being more confused than before. So, here we are to the rescue!
Why should you care about the pros and cons of selling on Amazon?
Amazon is big- big on sales, big on customers, big on revenue.
There are millions of loyal customers that visit and buy from Amazon. This makes the Amazon marketplace and selling on amazon a huge opportunity. But, before you dive into a new marketplace, it is important you understand the system well. Selling with Amazon may seem like an easy, profitable option to many of you out there but the ground realities are very different. This is the reason why the pros and cons of amazon should be looked into carefully. It is important you know the truth about selling on Amazon.
Pros of Selling on Amazon
Amazon is one of the biggest marketplaces globally. The opportunities for growth on Amazon are endless and there are a ton of Amazon pros that you should consider before rejecting the idea completely. With a big market comes more customers. This means that there will be millions of eyes prying on your product. This will be more than any other marketplace or your own retail website.
If you are considering Amazon against creating your own retail website and selling your products there, then Amazon will definitely beat the traffic you can get on your website. This is an important thing to consider if you are the owner of a small or medium business. But the facts are still incomplete. Let’s see what are the other pros of selling with Amazon.
Large Customer Base of Amazon
Share of Amazon’s CredibilityMillions of people are buying and selling in Amazon marketplace. This is both a good and a bad thing about it. But first, we will talk about the Amazon pros and that is the large customer base that already exists on Amazon. This is not your usual traffic that comes and goes on an eCommerce platform. These people are the loyal customer base of Amazon. If you are selling with Amazon, they indirectly become loyal customers to you too. Basically, customers put their trust in everything that is sold by Amazon. This can be a huge advantage for small businesses that are yet to gain customer credibility and trust.
Expanding your Customer BaseAnother advantage of this huge customer base is the expansion of your business. If you are a local business, selling with Amazon can expose you to millions of national and global customers in the quickest time period. This will be exponential growth compared to what you will have through generating traffic on your own website.
International ExpansionAnother aspect of this is International Expansion. More people will trust buying from amazon than any other website, especially the countries where online shopping is not that mainstream. Rather than buying from any international website, people buy from Amazon. Even the extra shipping charges are justified when people get them from Amazon. This makes selling on Amazon an amazing opportunity for international customer base penetration.
A Global MarketplaceIn addition to its international credibility, Amazon serves as a universal platform for all international locations. Your logistics, operations and payments are easily managed by Amazon. In other cases, you will have to figure out a system on your own. This might cost you more than the fee you pay to Amazon. you can provide one platform for all international locations.
Product TestingAnother one of the best pros of Amazon is that you can test your product. So, in case you are launching a new product, selling on Amazon can give you real-time analytics and feedback from your global audience. This works well even for a product that you are selling locally or within your country. By trial and error, you can learn what sells on Amazon and what does not. Amazon also provides you with some amazing Business management tools that you can utilize for customer feedback and sale analytics.
Very low Marketing CostsThe reason why many sellers prefer using the Amazon marketplace is the low or almost negligible marketing cost. Yes, there is a commission fee and several other kinds of fees that you will have to give to amazon to enjoy all the benefits of selling on Amazon. But you already have a huge traffic potential that you can capture. If you have enough profit margins to compensate for the Amazon fees, this is one of the best Amazon pros. With millions of customers visiting Amazon daily and the credibility of Amazon that is transferred to your product, marketing becomes easier and cost-effective. It gets easier to get customers by selling on amazon than otherwise.
You should, however, note that there is heavy and fierce competition on Amazon. But, even with a little effort and a smart strategy, you can stand out among hundreds of other sellers. This works especially well when your product is niche and unique. Creating your own retail website and other online listings takes more effort and money.
Enjoy the benefits of Amazon FBAFulfillment by Amazon or Amazon FBA is a service that Amazon provides for a little extra money. Here, sellers do not need to keep an inventory or stock with themselves. They can directly send their products to Amazon in bulk. Amazon will pack them and ship them to the seller.
- This service makes it easier to sell on Amazon. You do not need to worry about the logistics system and the operations get easier. The fee that you pay to amazon may vary according to the product but in any case, you can consider this as a good option. Another pro of Amazon FBA is the tag of Amazon Prime.
- The packaging and shipping make your product seem more authentic and credible. This means better reviews and feedback which ultimately benefits your sales on Amazon.
Cons of Selling on Amazon
Reading about all the amazing pros of Amazon may have made it seem all rainbows and sunshine. But there are still some factors that you need to consider before committing to selling with Amazon. The Amazon marketplace pros are great, they seem like anyone could do it with little effort. The truth about selling on amazon is a little more complex. Let’s dig into the amazon cons for a better understanding.
Existing CompetitionAmazon has over 300, 000 Small and medium-sized businesses that are US based only and sell on Amazon. The competition is fierce and making your presence be visible on Amazon will take more than just a little effort. A lot of sellers are already there which makes selling on Amazon very difficult for some sellers. However, this is not always true. For some sellers who have unique and niche products, the competition is low and Amazon becomes a great opportunity to expand. But even with fierce competition, a good strategy, understanding of what sells most on Amazon and how selling on Amazon works- you can beat the heat of selling products on amazon.
Amazon Buy BoxIt is another important factor for sellers to consider. There is very high competition on getting a share in the Amazon Buy Box and not all sellers are eligible. Only businesses with high seller metrics can win the buy box.
Product-centric algorithmYou need to keep in mind that amazon is more product-centric and you will need a great strategy to rank on the top results. Multiple sellers exist for the same product and Amazon’s search engine decides on who will best sellers. So, with high competition selling your products on Amazon could get a little tough. But if you analyse your competition and draw a good strategy for selling on Amazon, this might not be one of the biggest cons of Amazon.
Fierce CompetitionHigh competition can be one of the biggest Amazon disadvantages because you may have to keep your price accordingly. Competitive pricing can hurt your profit. If there are more sellers for the product you are selling and their prices are lower than yours, you will have to adjust your pricing accordingly. This might not be the best thing for your profits.
Selling Fees on Amazon
High Commission for every product
- All the benefits of selling on amazon do not come out of the generosity of Amazon. It comes with a cost. Unlike other eCommerce Platforms, Amazon does not take a fee per click or visit. Amazon takes a commission for every item you sell. The commission varies across categories and products.
Amazon gives you the option to pay this monthly fee in the form of two options.
The Professional Plan will cost you $39.99 per month. Here Amazon will not take a fee per item sold. This could be a good option for sellers who have high demands for their products and can project high sales on Amazon.
The Individual plan has no subscription fee but you will have to pay $ 0.99 per item that you sell. This could be a good option for sellers who are not very sure about Amazon or who do not have enough sales yet. Apart from a monthly fee, amazon also takes a referral fee for every item sold. This fee varies category-wise across products.
If you want to take the benefits of selling on Amazon FBA then you will have to pay a fee for that too. Although you may think that the Amazon FBA would solve a lot of problems for your business there is a cost that you will have to pay for it. The Fulfilment fee is charged per product with a monthly storage cost. The inventory storage fee is per cubic foot.
Amazon is very strict on order management. If you are not well equipped to comply with the procedure set up by Amazon, then Amazon can take action against you.
There is no integrated shopping cart system for sellers. This means that the seller can only check the stock status after the order is fulfilled. No real-time order availability system results in sellers promoting and taking orders on products which are not in stock. This makes it difficult to be up to date with the product availability and meet the demands. If these products are not regularly updated, the seller metrics go down.
Although you can use some third-party tools that help you see the items available and are up to date with your inventory, this is an added cost that could have been saved by Amazon itself.
Data feed to Amazon
Amazon has a system where sellers need to feed data to amazon every day. Amazon gives each product an ASIN Number that needs to be updated regularly and uploads are to be done via Amazon-APU. This is a very technical task and you will need to hire some sort of technical assistance for this. Although automated feed tools are available, the costs for all these are added to your account.
No Customer Relation
Another one of the biggest Amazon cons is that you have very little to no branding outside amazon. You will get loyal customers on amazon but your brand name will not see much loyalty. They will be the customers of Amazon. When people buy from you on Amazon, they remember “buying from Amazon” than buying from you.
Yet you will be the one responsible to build and sustain these customer relationships and customer satisfaction for amazon. The liability falls upon you in case there is any issue relating to customer service. If there is any negative review or default in the customer service, the customer will blame you more than Amazon. Not to mention, the ratings and reviews will go on your page rather than on amazon.
Important factors to consider before you start selling on Amazon
Creating a Strategy for Amazon
Selling on Amazon pros and cons are endless. However, there are some important things before you make a final decision. A fact to consider here is- like any other big marketplace, Amazon has high competition. Another Amazon con is that the fees are high and the procedure is complex.
Most sellers dive into this marketplace without understanding how selling on Amazon works. They start well but eventually have to quit Amazon. There is no sustainability in their business on Amazon.
1. Method of Trial and Error
To beat this, the only method that works for the sellers is- trial and error. You need to test which products work well on Amazon and what are your customer feedbacks. Not all your products will do well. You need to figure out what sells on Amazon, where there is a demand-supply gap. For most of the sellers, the downsides of Amazon Business Account show heavy loss when they do not have a good strategy.
2. The Risk Factor
If you wish to benefit from selling on amazon, you will have to risk a few things. The returns could be huge but selling on amazon is not as easy as it sounds.
3. Focusing on your own business
Amazon is a great platform for growing your business and expanding it to a wider customer base. However, it is not the only thing you should focus on to create your brand. If you are a small business that is looking to expand, you should focus on your website as much as you focus on selling on amazon.
The reason for this is that your website would be an amazing place to create a brand name and brand trust, but you cannot afford to lose the large customer base on Amazon.
Someone will eventually come along and cater to this audience on Amazon, but you may be leaving out a good opportunity. This is an important factor to consider.
The pros and cons of Amazon will eventually balance themselves if you truly understand them.
FAQs in Relation to Selling on Amazon
What sells on Amazon? Is selling for Amazon worth it?
To create your presence on Amazon and get all the benefits of selling on Amazon- you need to pay a price. Amazon takes high commission fees for every item you sell. Therefore, you must have sufficient profit margins to compensate for it. If you are in a niche which has high competition and low-profit margins- selling on Amazon can be the worst thing for your business.
Amazon or No amazon- who should sell on Amazon?
As we mentioned before, Amazon might not be the right choice for everyone. You need to analyse selling on Amazon pros and cons to decide if selling on Amazon works for you or not.
You need to consider what other options you have.
Creating a Brand on Amazon
Your retail website would not compete with the traffic on Amazon. But if you are looking to create a brand name for your business- having a retail website is necessary. The perks of having your site instead of running under the shadows of Amazon are very beneficial for creating your brand.
If you are a new company looking to directly hit amazon, then this might not be the right choice for you.
Amazon will do wonders for your sales and you might not care about Amazon cons so much if you already have a stable customer base and you wish to expand it.
A very important thing to consider here is- no one will wait for you. Traditional competition can come on amazon before you do. Your rivals can capture the market on Amazon before you do. So, if you are thinking about the pros and cons of Amazon, then you need to do this faster. To be ahead of the line, you need to be there earlier. This can be done when you get your brand strategies right for Amazon.
How to sell on Amazon without inventory?
What is Amazon FBA and how it benefits sellers?
What to sell on Amazon?
How selling on Amazon works?
These questions are very valid. If you are thinking about entering the Amazon marketplace, you must find the answers to these questions. We hope we were able to provide you with a clearer picture of selling on Amazon pros and cons. Not all Amazon cons would be a major drawback for you. You need to realise that Amazon does offer you a great opportunity- to expand, scale and flourish in its marketplace. But this doesn’t mean that selling with Amazon is a cakewalk. Make your choices wisely!
Samrudha Salvi ‧ Author
With more than 5 years on selling on amazon, and helping 100s to get started on Amazon.