Top ten reasons for and against selling on Amazon

With all the online marketplaces available should you consider selling on Amazon?  With the work I do at Inspire Technologies, I have a unique perspective on the pros and cons for selling on Amazon.  The list is not any order.

Reasons to Sell on Amazon

1. Amazon is the World’s largest online marketplace.  Therefore your products will be seen by the largest group of consumers.
2. It is simple and inexpensive to get started.  Ex. the profession plan only costs $39.99 per month.
3. Amazon handles all of the customer payments.  As a merchant you have a low risk of fraud.  Amazon will handle the merchant transaction and your account will be credited for sales.  This has additional value for overseas sales that have an increased risk of fraud.
4. You can choose to sell your products only in the United States or Worldwide.
5. If Amazon already has the item defined in their catalog it is easy to link information to your product content.
6. Amazon has some of the best product reviews.  Good product reviews are an excellent sales tool.
7. A merchant can be the manufacturer of an item or someone working from their home.  It does not matter.  Each merchant will be rated using a common set of metrics by Amazon.
8. You can sell almost anything on Amazon.  They are the 21^st century General Store.
9. Consumers will find your niche items.  Amazon’s customer base is large and global.  If you have a specialized product and want to reach a global market, Amazon is the place.  Niche items can also demand better profit margins.
10. Merchants that sell on Amazon must provide excellent customer service functions.  Apply their best practices across all of your sales channels to improve customer service and it will help your sales.  Here is a link to a blog I had written about using Amazon’s sales metrics.

Top Reasons not to Sell on Amazon

1. Amazon gets to see all product sales.  If a product is selling well Amazon will purchase the item directly from the manufacture and become your competition.
2. Product content uploaded by merchants become part of Amazon’s product catalog.  For example, any image or product description uploaded can be used by all merchants selling that product. This can be beneficial or can be disastrous when the product content uploaded is incorrect.
3. Incorrect product descriptions will drive returns.  It is not uncommon for there to be ten or fifteen ASINs for one UPC.  The product content can vary, be listed in a different department or represent a different package configuration (sold individually or in a 12 pack).
4. There is a lot of competition for commodity items.
5. Amazon charges a sales commission on all products sold in their marketplace.  The commission rates vary, 15% is common for most product categories (note that this includes credit card fees that typically cost a merchant 3%).
6. Amazon owns your store.  They can turn it off at any time.  I have seen accounts get suspended for days or completely terminated due to merchants not meeting Amazon’s requirements.  Here is information on Amazon’s A-to-Z  guarantee  as well as a link to the restricted products.
7. Amazon can warehouse and pick your items. It is called Fulfilled by Amazon (FBA).   This can be convenient but adds a number of additional costs to a sale.  Here is a link to their FBA fees.
8. Offering products for sales that you cannot fulfill will drive your seller ratings down. To be successful on Amazon you will need to have a solid system to accurately manage inventory and orders.
9. Product feeds are used to add and maintain product content, prices and inventory.  The product feed specifications are different by department and are continually changing.
10. Your competition has access to your prices.  Amazon provides tools to allow merchants to retrieve competitive product prices.  It helps drive lower prices, but you need the right applications to leverage this raw data (this is a service that Inspire provides).

Conclusion

Amazon is the global Internet marketplace.  If you plan to do any Internet sales Amazon should be the first major marketplace you sell through. Amazon will drive your sales but maintaining profit margins can be difficult.  Amazon will educate you so use them to sharpen your business process and use the increased sales created by Amazon to get better discounts from your suppliers.  Don’t stop with just one store.  Open your own private branded store or stores in other marketplaces.  A high SKU count is key to a profitable Amazon store.  Inspire Technologies has developed the Item Intelligence system that can help your business streamline the process of listing product on Amazon.  Give us a call to learn more.

-Joe Hainey