Amazon launched in Australia just six years ago, yet it has already become a household name for online shoppers. Besides offering a wide range of products and an easy shopping experience for customers, Amazon helps millions of businesses and passionate individuals sell their products, both locally and globally. With its strategy to attract both buyers and sellers to its platform, Amazon has evolved into one of the largest ecommerce companies in the world.
If you're a business owner looking to generate revenue, Amazon can be a reliable online marketplace. But it's important to first consider why you want to sell on Amazon. Is it because everyone else is doing it? Or is there real potential to grow your business? In this blog, we'll discuss the possible benefits and drawbacks of selling on Amazon, so you can decide if the platform is worth your time and effort.
Reach a large audience
Over the years, Amazon has worked hard to win people's trust and build a loyal customer base. When you sell on Amazon, you get an immediate opportunity to expose your business to millions of active users who wouldn't have stumbled upon your brand otherwise. It's worth noting, Amazon's reputation for smooth deliveries and returns is so positive that many shoppers prefer using the platform over unknown ecommerce websites.
Fulfilment by Amazon (FBA) is a paid service that Amazon offers its sellers to save them the trouble of managing shipments, and dealing with last-minute delivery hiccups. Under this program, you ship your products to Amazon's fulfilment centre, where they will be stored in a warehouse alongside other goods. From there, Amazon handles the rest of the work for you. When someone places an order, Amazon packs and ships the item to your customers. They also manage any return and replacement requests you receive. When you choose the FBA program, Amazon Prime customers enjoy free shipping on orders valued over $39, and free two-day shipping on certain eligible orders.
It's easy to get started
If you've yet to take the plunge to set up a fully functioning business, Amazon can be a great platform to start your ecommerce journey. Here, you won't need to worry about designing your website, figuring out SEO, and dealing with all the other configurations that come with starting an online business. You can test the waters and sell on the platform first to see if your company generates some revenue before moving on to build your ecommerce business. Even if you're already running a well-established ecommerce business, setting up an Amazon seller account is pretty easy. Check out this beginners guide by Amazon to learn how to get started with the platform.
It's a great research platform
People visit Amazon not just to shop, but to compare product prices, features, and reviews. Even if you don't want to rely on Amazon for revenue, it's still a good idea to list your products on the platform, so you are always visible to users looking to make a purchase. Whether a customer already has a certain product in mind or they are browsing the platform to evaluate products, brand recognition may motivate them to choose you over others.
Selling on Amazon can be advantageous for several reasons—but it doesn't come without a catch. Here are a few possible drawbacks you might encounter when selling on Amazon.
Selling fees and charges
Amazon gives you a great opportunity to win new customers and grow your business, but it still needs a share of the pie. Apart from paying for its selling plan and FBA service, you'll have to pay Amazon a referral fee for every sale you make on the platform. The referral fee usually ranges from 5-15% and varies based on the product category. And if Amazon decides to hike its charges, things can get more expensive down the line. If that happens, you'll have to decide between raising your product prices and reducing your profit margin.
Research firm, Finbold found that around 3,700 new sellers joined Amazon every day in 2021. Considering that Covid-19 pushed more businesses online, we can expect this number to rise yearly. Unless your products are unique, you'll find sellers competing against you, offering similar products for a very competitive price. You may have to keep lowering prices until you earn enough customer reviews to prove why your products are superior to others. And to make matters worse, you may even find Amazon competing against you, selling similar products and highlighting them at the top of search results.
Always an uncertainty
When you sell on Amazon, things are never fully under your control. Amazon holds the power to change any rule at any time. And there is always a risk of your seller account getting sacked on short notice, if you don't comply with its regulations. Even if you can prove that there are no violations on your part, you never know how many days or months it will take to reverse your suspension. All the hard work you put into building your seller profile could be undone in a matter of seconds, leaving you with unsold stock and no money.
Limited customer loyalty
The bitter truth is that most people will remember they made their purchase through Amazon—not you. People don't get to learn anything about your business beyond the brief description you provide. Plus, Amazon guidelines forbid you to promote your business to your Amazon customers and direct them to your website. So even if a customer is happy with your product, there's not much you can do to nurture that relationship and earn their loyalty—a crucial requirement for long-term business survival.
We hope this post helps you decide if Amazon can be a good fit for your business. Do you think we missed any crucial pros or cons? Let us know in the comments below.