With its massive size and influence as an e-commerce platform, it is unsurprising that almost every brand contemplates whether it is suitable for their business to sell on Amazon. The online marketplace has an impressive count of 300 million active Amazon customer accounts, along with over 1.9 million selling partners globally. Furthermore, the sales generated by third-party sellers are experiencing an annual growth rate of 52%, surpassing the 25% growth rate of Amazon’s own sales.
What are the ways for a company to determine whether selling on Amazon would be suitable for their brand or small business? Although the potential is immense, outcomes will differ for various businesses. It is crucial for any brand contemplating taking the plunge to thoroughly consider all the advantages and disadvantages of selling on the Amazon marketplace.
Pros of selling on amazon
There are numerous advantages for brands to consider when selling on the Amazon platform, given its prominence in the e-commerce industry. Assessing these benefits can assist brands in determining whether selling on this e-commerce platform aligns with their objectives.
1. Large customer base
With over 300 million active customer accounts, Amazon provides a vast and untapped market for brands or small businesses looking to sell their products. By placing their products on Amazon, brands not only gain access to a new audience of potential customers but also enhance the credibility of their listings. Customers tend to trust and prefer purchasing from Amazon’s marketplace over unfamiliar brands.
It is important to understand that when it comes to customer behavior on Amazon, customers primarily visit the platform for making purchases rather than specifically searching for products from a particular brand. Nevertheless, this can be advantageous for you as the potential lies in the act of exploration.
When a customer begins searching for a particular product, they may come across a certain brand. It is the brand’s choice how they utilize this opportunity. If the brand offers an excellent customer experience, they can anticipate gaining a loyal customer as a result. That’s why it is important to prioritize optimizing your Amazon SEO for product listings.
2. Convenient and user-friendly platform
Setting up a standalone e-commerce store is much more complex and time-consuming compared to starting to sell products on Amazon. Brands can easily list their products on the platform without requiring any technical expertise.
Although it is simple to begin, sellers can still enhance their listings and differentiate themselves from the competition. With the platform handling most of the setup and logistics, brands can dedicate more time to optimizing product listings and conducting digital marketing.
3. FBA option
When it comes to selling on Amazon, one of the major factors to think about is the opportunity to utilize the Fulfillment by Amazon option. By joining this program, brands can provide Amazon Prime shipping and conveniently handle online marketplace fees and fulfillment through a single payment. Additionally, brands gain the advantage of accessing Amazon’s vast network of order fulfillment centers and logistics operations.
4. Strong brand reputation
Amazon’s unparalleled brand recognition is well-known, and by selling on the platform, brands can take advantage of this recognition. The platform has earned the trust of both buyers and third-party sellers. For six consecutive years, Amazon has held the #2 position on Fortune’s list of the World’s Most Admired Companies.
5. Marketing and advertising opportunities
Amazon offers various advertising options for brands to boost their sales, such as their demand-side platform for off-site advertising, audio and video ads, sponsored brands, display, and products. By availing these digital marketing and advertising opportunities, brands can avoid the need to pay for additional advertising services, at least in the beginning phase.
6. Hassle-free shipping
Amazon offers its sellers a paid service called Fulfilment by Amazon (FBA) to alleviate the hassle of handling shipments and addressing unexpected delivery issues. Through this program, sellers are required to send their products to Amazon’s fulfilment center, where they will be stored together with other merchandise in a warehouse.
Once you opt for the FBA program, Amazon takes care of all the remaining tasks on your behalf. Whenever a customer makes a purchase, Amazon takes care of packaging and delivering the item to your customer. Additionally, Amazon handles any requests for returns or replacements that you may receive. By choosing the FBA program, Amazon Prime customers can benefit from free shipping on orders worth more than $39, as well as enjoy the perk of free two-day shipping on eligible orders.
7. It’s easy to get started
If you haven’t taken the leap to establish a fully operational business, Amazon can serve as an excellent platform to initiate your ecommerce venture. On this platform, you can be relieved of concerns related to website design, SEO implementation, and managing the various settings synonymous with commencing an online business.
To assess your company’s revenue potential before developing an ecommerce venture, you can initially sell on the platform. Even if you already operate a successful ecommerce business, creating an Amazon seller account is a straightforward process. Explore Amazon’s beginner’s guide to discover the steps for starting on the platform.
8. It’s a great research platform
Users visit Amazon not only for shopping purposes, but also for the purpose of comparing product prices, features, and reviews. Even if generating revenue from Amazon is not your goal, it is still advantageous to have your products listed on the platform in order to maintain constant visibility to users seeking to make a purchase.
Brand recognition can play a significant role in persuading customers to choose you over competitors, regardless of whether they have a specific product in mind or are simply exploring options on the platform. While there are several advantages to selling on Amazon, there are also a few potential downsides that you should be aware of.
Cons of selling on amazon
When brands make the decision to sell on any e-commerce marketplace, it is crucial to carefully consider all the advantages and disadvantages that come with it.
9. Competition from other sellers
Amazon’s popularity offers a promising chance to expand reach and sales, though it also brings about heightened competition. This competition is not limited to other third-party sellers but also encompasses competition from Amazon itself. An example of this can be seen in the Amazon Basics line, consisting of products that closely resemble the top-selling items.
10. Amazon’s fees and commissions
Amazon imposes high commissions and fees on product sales. The fees can be categorized into two options: an individual plan which incurs a charge of $0.99 per each sold unit, or a professional plan where a fixed monthly charge of $39.99 is levied regardless of the number of units sold.
Referral fees on Amazon, which vary depending on the product category, range from 8% to 45%. It is worth noting that Amazon charges customers and brands receive payment upon shipping, while third-party sellers are paid by Amazon after a 90-day period.
11. Limited control over customer experience
Sellers on Amazon’s marketplace enjoy the advantages of the brand’s reputation; however, they have little control over the customer experience.
Amazon is responsible for handling the sales and shipping of the order to the customer, if a brand participates in Fulfillment by Amazon. However, the Amazon marketplace offers limited customer data, which can impede the growth of a brand seeking to cultivate a customer base.
12. Possibility of counterfeit products
Many e-commerce brands are familiar with the alarming incidents of counterfeit products being sold alongside a brand’s genuine products. In response, shoe retailer Birkenstock made the decision to remove all its products from Amazon’s marketplace due to the prevalence of counterfeiting.
Counterfeiting has the potential to cause reduced sales due to the significantly lower prices offered by fake products, and it can also result in unfavorable reviews for the authentic item. These negative reviews can have a detrimental effect on sales, brand reputation, and overall business performance.
13. Dependence on amazon’s policies and algorithms
Amazon has full control over the regulations when a brand engages in selling on its platform, and it possesses the ability to modify these regulations without giving much prior notice. The primary objective of Amazon is to ensure the satisfaction of its customers rather than its sellers. Amazon has the tendency to swiftly close accounts that have received negative reviews, and the procedure to reinstate a professional account is neither simple nor fast.
When it comes to fees, including referral fees and Fulfillment by Amazon (FBA) fees, Amazon holds the ultimate authority. Numerous e-commerce brands experience a boost in profits initially after opting for FBA as their marketplace fulfillment service, but a significant portion of those profits is subsequently used to cover various FBA fees such as fulfillment fee consolidation, order handling, pick and pack, and weight handling.
According to a report in 2023, it was discovered that Amazon currently receives approximately half of the total sales amount. These fees are constantly open to modification. Each year, Amazon has consistently raised FBA fees, putting brands that rely on this service in a position where they must endure the growth or seek alternative fulfillment options.
14. Always an uncertainty
Selling on Amazon means that you can never have full control over your operations. Amazon has the authority to modify rules whenever they want, and failing to adhere to their regulations can result in a sudden termination of your seller account.
It is uncertain how long it will take to lift your suspension, even if you can provide evidence of no wrongdoing. The effort you have invested in establishing your seller profile could be swiftly undone, resulting in unsold inventory and financial losses.
15. Limited customer loyalty
Regrettably, the hard reality remains that the majority of individuals will recall that their purchase was made on Amazon, rather than associating it with your business. People have limited opportunities to gather any information about your business beyond the concise description you offer.
Additionally, Amazon regulations prohibit the promotion of one’s business to customers on the platform and redirecting them to an external website. As a result, even if a customer is satisfied with the product, there are minimal options available to cultivate that relationship and establish their loyalty, which is vital for the enduring success of a business.
Profitability in Amazon
Sellers can achieve considerable profits by effectively navigating the integration process and making a well-informed decision to sell on the Amazon platform, considering the undeniable impact of the Amazon effect.
Although competition for customers on Amazon has heightened in recent years, the overall demand for e-commerce has also experienced an increase. Consequently, brands can still maintain profitability on Amazon by adopting a strategic approach to their selling methods.
