Is Selling on Amazon Worthwhile?
There’s no simple definitive answer to whether selling on Amazon is the best eCommerce platform for your business. There are other platforms, such as eBay or Shopify, not to mention your own website. Why choose (or not choose) selling on Amazon over these?
Let’s take a look at the pros and cons of selling on Amazon and whether it makes sense for your business:
- Pros of selling on Amazon
- Cons of selling on Amazon
- Selling on Amazon and other platforms?
- The Pros and Cons of FBA Reimbursement
Pros of Selling on Amazon
Amazon is the world’s largest and best-known eCommerce platform. This means selling on Amazon provides quick access to an immense and broad global customer base while associating your business with a trusted brand valued for providing the highest levels of customer service. Listing on Amazon gains instant credibility for your business.
Since Amazon attracts millions of shoppers daily, your marketing costs are lower. Unless your products are so distinct they occupy their own exclusive niche, this is not to say you needn’t do any marketing at all. But selling on Amazon means your products are readily available via the Amazon search engine relied on worldwide as the preferred shopping tool. A large portion of marketing is already done for you. And you don’t have to invest a lot of time and money in developing and maintaining your own website and online store.
As a general rule, Amazon customers are looking for products, not so many particular brands. This makes it easier for businesses without established and/or widely known brands to attract customers.
Selling on Amazon also makes it easier to test product appeal in new markets and scale your business. It’s relatively simple to register products internationally and if they take off Amazon has an international logistics system already in place, as well as localized payment systems and customer support.
Another advantage of selling on Amazon is how easy it is to become an Amazon seller. It doesn’t cost you anything, and the instructions and steps to follow to register are straightforward. Another definite advantage is you can even arrange for Amazon to handle your inventory management and order fulfillment logistics.
Fulfillment by Amazon (FBA) vs Fulfillment by Merchant (FBM)
FBA is a great way for smaller businesses to outsource their logistics. Of course, there are fees to be an FBA seller, though there are equally costs incurred if you are handling your own warehousing and order fulfillment as an FBM seller. Which is better depends on various factors including your product line, number of SKUs, customer base, and profit margins. Generally speaking, if your product portfolio consists primarily of low-margin items, FBA is the better option, both in terms of cost and convenience.
Cons of Selling on Amazon
While Amazon’s global presence as the leading eCommerce platform is a definite pro, it’s also in some respects a con. Since so many businesses are selling on Amazon, potential competition is higher. Newer entrants are going to have a harder time breaking through, especially in saturated product categories.
Amazon also has specific requirements for its product data. All your products must have an ASIN number and product uploads are done by the Amazon API. If you have relatively few products, that’s not a big deal; if you have a lot of SKUs you need to spend the time to manually update a properly formatted spreadsheet and upload it. You could use a third-party automated feed tool, but that comes with an additional cost for you selling on Amazon.
There are also a variety of fees to pay for selling on Amazon. Whether these fees compare with the normal cost of doing business on platforms other than Amazon depends on your product mix, resource availability, and budgets, among other considerations.
Perhaps the biggest potential drawback is that Amazon has a lot of rules you have to follow, particularly as it concerns your communications with customers. If you violate any of Amazon’s terms of service, such as asking a customer for a positive review, you face potential suspension and even removal from selling on Amazon.
Best of Both Worlds?
There’s nothing to preclude you from selling on other platforms just because you are selling on Amazon. Many Amazon sellers go to the trouble and expense of setting up their own websites and social media if only to drive traffic to their stores on Amazon. The more selling channels you have, the more opportunities you have to sell.
Of course, if you are also selling on sites such as Shopify or eBay in addition to selling on Amazon, you have to maintain your own logistics for orders on those sites. If you are handling order fulfillment and inventory for products sold on multiple platforms, it probably makes more sense to opt for FBM for selling on Amazon.
The Pros and Cons of FBA Reimbursement
If you do choose FBA for selling on Amazon, be aware that when Amazon makes mistakes managing your inventory or fulfilling your orders, you are owed FBA reimbursement for those errors. One possible con for selling on Amazon with FBA is that Amazon doesn’t always automatically credit you with FBA reimbursement. In most cases, you have to identify the errors and submit claims for FBA reimbursement.
How many errors can Amazon make? Given the millions of orders it handles daily, even a small percentage can add up. It is estimated that FBA reimbursement can add up to between 1% to 3% of an Amazon seller’s annual revenues. The more money you make, the more money you could potentially lose.
Fortunately, this isn’t necessarily that much of a con for selling on Amazon. GETIDA (GET Intelligent Data Analytics) makes the whole process of obtaining your FBA reimbursement simple, easy and cost-effective. GETIDA software reviews the previous 18 months of transactions to flag instances where Amazon mistakes are eligible for FBA reimbursement. It is free to run the report.
A team of former Amazon employees experienced in the FBA reimbursement claims process filed with the appropriate department and follows up on your claims until there is a resolution. There is still no charge.
The only charge is a percentage of approved claims. And the first $400 in FBA reimbursement is free of charge. Given the time and effort, GETIDA saves you so you can focus on running your business, it’s a more than worthwhile price.
You can sign up with GETIDA in a matter of minutes. It’s a definite pro consideration for selling on Amazon.