Small Businesses Selling on Amazon – It’s Not That Easy
At first glance, it might seem as though online marketplaces such as EBay and Amazon are good places to sell your product. And you’re right… it is! I mean, think about it, at 90 million visitors per day, even a tiny proportion of those visitors who view and purchase your product can drive a huge increase in sales for you. That huge number of visitors gives you an opportunity to acquire new customers. The consumer never searches for specific stores on Amazon; they search for products, which is great news if they come across yours! Having said that, don’t be too quick to jump aboard the Amazon ship. Here are the things that small businesses selling on Amazon should keep in mind:
1. Ridiculously high fees
Increased sales are great, but at what cost? The seller fee can sometimes be so high that it’s almost not worth the hassle of selling on Amazon at all. There are 3 fees you should be aware of. The first is a “referral fee” that ranges from 8% to 25% of the item price, depending on which category your product falls into. The second is a “variable closing fee”, which is a fixed dollar fee of $1.35. If your product is not a book, DVD, music, software/computer, or video game, then Amazon charges $0.45 instead, and adds a further fee of $0.05/Ib. Lastly, assuming you don’t pay Amazon a monthly subscription fee, you pay a per item fee of $0.99 for each item sold. So for example, if your book sells for $15 on Amazon, you will receive only $10.41 ($15 – $2.25 – $1.35 – $0.99 = $10.41), meaning you lose 31% of your revenue! If your business margins are tight, that might even mean you’re taking a loss by selling on Amazon!
2. You become generic
Selling your product on Amazon among hundreds- sometimes thousands of stores means your brand can very easily become lost in the crowd. This means that even if customer acquisition increases, your customer retention rate stays low, making the time and effort you put inefficient.
3. Poor seller support
It’s a well-known fact that Amazon Seller Support is awful. You wait forever to get email replies and all you get is an annoying automated response! Then, there’s this terrifying situation where Amazon might freeze your funds for 30-90 days if you forget to comply with one of their silly little fine print rules. Going unpaid for 90 days could mean a serious cash flow problem for you and your business.
4. You never get any feedback
Now, unless you’re one of those sellers who sell a gazillion of the same product per day on Amazon, don’t expect anyone to rate or review your product. Especially if the product you’re selling isn’t terribly exciting. 9 times out of 10, Amazon customers simply don’t care enough about your product to review it. Think about it. How many products do you actually care about enough to write a review?
5. Difficult to keep your inventory in sync
Selling on multiple marketplaces makes keeping track of inventory significantly more difficult. Yes, it all draws from the same inventory, but keeping everything in sync is not easy, and makes keeping operating expenses in order much trickier.
What are some of the experiences you’ve had selling on Amazon? Let us know in the comments!