Amazon, the world’s largest online store dominates the ecommerce industry. In fact, in 2018, Amazon sold more than $140B in net sales in the US alone. Selling on Amazon can be really influential for your ecommerce business.
You don’t have to sell on Amazon to have a great business, but it can help! Here are a few things to consider if you’re considering this move.
- Amazon has high fees. FBA (Fulfillment by Amazon) fees are high and Amazon almost always costs more than running your own store on a per-order basis, and always more than other channels such as eBay.
- Selling on Amazon (and multiple channels generally) gives you access to more potential customers. Multi-channel sellers are shown to get more customers than single channel. It makes sense, having an Amazon and eBay and Shopify store at once can give you more places customers can find you, theoretically increasing the number of people who will find you.
So, you need to decide if it’s worth it to take a hit on your profit margin, to have access to more customers.
When Selling on Amazon Makes Sense
Use these key indicators to help determine if it’s the right time to take your business to the big guys.
- You’re selling a commodity item and don’t mind making next to nothing in profit for each sale
- You’re a new business with no customers and you don’t have a good way for people to be able to find you
- You sell used and refurbished items that are already listed on Amazon (people click the Used button frequently and if you can compete on price and good reviews you could have a great channel)
- People are searching on Amazon for your brand name today
- Your product include electronics, books, or cheap household goods—the dominate categories on Amazon
If you have an established brand, make your products, and are reasonably successful, selling on Amazon could benefit your business. You’ll potentially engage with more customers but it does come at a cost.
What You Give Up When Selling on Amazon
You lose the ability to control the customer experience. Amazon controls the look, so you can’t customize your experience for your customers. You could supplement your Amazon efforts with social media to fully express your brand identity.
It’s harder to market directly to your customers. When selling on Amazon, the customer relationship belongs to the retail giant. That can make it harder to find the same customer again and market to them, or tell them about new products you have launched. Make sure you keep accurate customer logs so you can engage with them and encourage future sales.
You’ll give up at least 15% of your sales—sometimes more. On average, Amazon takes 15% of the sales to cover the FBA and storage fees.
You could go dark at any moment. Amazon is notoriously tough on vendors. Often you have no recourse in the case where their algorithms or faceless employees decide to remove your listings.
But, if people are searching your brand name on Amazon and you’re not there, they will find copycats, competitors, knock-offs, or resellers taking your place. Pay attention and take the right steps to get in front of your customers.
Should You Sell on Amazon?
It’s hard to take the plunge and start selling on Amazon. If you know people are searching for you brand on the platform, create your store. No questions asked.
Just know that you will make less profit on those orders and you can’t remarket to these customers.
In our opinion the best way to sell on Amazon as an established brand is to use it to liquidate your excess stock, or sell your “second-tier” SKUs or accessories, which don’t compete with the main items your business sells.
Most businesses have items they tried at various points that didn’t sell well. Holding on to them for a long period of time is likely killing your profitability by raising your long term storage and inventory costs, as well as the fact you’ve bought something that you never sold.
Often clearing out old inventory can be overlooked as a way to boost profits. That’s why we recommend this “killing two birds with one stone” approach of setting up an Amazon store specifically for clearance items.
This allows you to capture some of the customers who are searching for your brand on Amazon. You won’t cannibalize your store’s higher margin sales and you can give your profit a boost.
Now if you put your best items on Amazon, you’re taking an unnecessary profit hit, assuming customers are finding your store today. And if any of your popular items have success on Amazon, it will be detected by algorithmic sellers and Amazon themselves, leading them to compete directly with you when they inevitably launch a private label version of your product.
What About Prime Customers?
A common myth is that Prime Members only buy on Amazon. In truth they tend to be the biggest internet shoppers around, and some of the savviest. They do like Amazon but will comparison shop at a lot of different stores. And often, they are wealthier and enjoy shopping, and do it at many types of business.
Don’t sell on Amazon just to have access to Prime customers. They are not so blindly loyal to Amazon.
Of course there are also going to be some Prime customers who try to only buy on Prime to get their fast free shipping, but if your store also offers that, it’s not going to be a deterrent.
How to Start Liquidating Stock on Amazon
If you’re a new seller, you need to read a few guides to create the best Amazon store. We might publish our own eventually but there are a few good ones out there.
Assuming you have a successful store already, selling on Amazon isn’t that complicated. You need to use the right keywords, upload beautiful photos, write compelling descriptions, take advantage of anything Amazon lets you do to boost your page.
Then you need reviews, ASAP!
Products without reviews on Amazon don’t sell.
The next thing you need to do is set up a sale. There are a few types of Amazon sales and we recommend you skip the Lightning Deal. Instead, create sale from the Offer Tab in Manage Inventory.
Make sure you jump in slowly. Don’t send Amazon stock that won’t sell or you’ll end up getting the dreaded long-term-FBA-storage fees. These come around twice a year on all products that have been in the warehouse for more than six months.
But you should be using FBA, make no mistake. Amazon’s fulfillment speed and trustworthiness is its biggest asset.
We’ve heard of some sales and deals that didn’t get any clicks because a lack of inventory. Amazon doesn’t want to show promotions to a ton of people if they know there’s not enough stock to fulfill orders. So there’s a balance to strike between putting enough stock to get the deal visible, but not so much that you’ll never sell it all.
Take Advantage of Amazon PPC
Amazon PPC is affordable advertising and it’s growing. In a world where advertising is getting more difficult and saturated day by day, we do recommend using emerging platforms over established.
There are plenty of guides out there for Amazon PPC but it’s pretty simple:
- Get your keywords right
- Take advantage of the AI tools
- Constantly tweak the ads
Take this advice and you’ll succeed.
The Bottom Line
Selling on Amazon requires a dual-strategy approach for your multi channel commerce.
- On your main site, which should be your own web store, you sell all your flagship products and try to get the majority of your customers.
- On Amazon, sell sale and overstock items, second tier branded accessories and anything else that aren’t your key profit drivers. It’s a great channel to move unsold inventory quickly thanks to the massive customer base, and it can be powerful to attract new customers to your business if you are just starting out.
Need help figuring out how to sell on Amazon? Give us a call. Our Profit Partners are ready to help.