If you run an e-commerce business, you know how challenging it can be to consistently attract new customers, in addition to getting repeat buyers. Even if you currently sell products on your own website or a marketplace like Etsy, you might be considering also selling on Amazon.
But you’ve heard negative things about Amazon. You hear that sellers barely make any money, and that it’s hard to stand out, with so many stores there.
On the other hand, around 200 million people shop on Amazon globally every month. The potential to grow your business through Amazon is certainly there.
So is it the right fit for you? Let’s weigh the pros and cons of selling your products on Amazon.
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Pros to selling on Amazon
Potential to skyrocket your business
If there weren’t benefits to selling on Amazon, you wouldn’t be reading this! Despite some drawbacks, which we’ll get into in a minute, there are plenty of reasons to consider Amazon as a selling channel.
You can reach more customers
You’d never have access to hundreds of millions of potential customers on your own website, even if you spent thousands of dollars on online ads every month. Amazon brings quantity.
The more positive reviews your products have on Amazon, the more customers you’ll attract! Amazon’s review system has been proven to spur shoppers to decide to buy a product, based on what other customers think of it.
You don’t have to worry about web design
If you don’t want to launch your own website because you don’t have a design-savvy bone in your body, Amazon does all the work for you. You simply upload product images and descriptions. No need to modify a website theme or choose pretty pictures and colors for your site.
You can let Amazon do the shipping
Another perk of selling on Amazon is that you can opt for Fulfillment by Amazon, where you ship your products in bulk to an Amazon warehouse and they handle the order fulfillment and shipping.
Not only does this mean less work for you, but if you use FBA, your products will also be eligible for free Prime Two-Day Shipping, which is often a deciding factor for shoppers when comparing one product to another.
Related: 6 Ways E-Commerce Startups Can Compete with Amazon Shipping (and Win)
Cons to selling on Amazon
Your profits may suffer
On the other hand, there are some significant drawbacks that you need to be aware of before diving into selling products on Amazon.
You can’t control the design
Maybe you like the idea of having some say over how your website looks. Maybe you want something other than the Amazon design to stand out.
Unfortunately, with Amazon, there are few options you can customize beyond product photos and descriptions. This doesn’t make it easy to stand out, so remember how important it is that your product photos be top-notch.
You’ll pay fees
There’s not a single e-commerce channel that doesn’t charge you a fee. Even if you sell your products or services through your website, you’re paying a merchant card processor to process payments. And Amazon is known for its high fees.
There are two plans for selling on Amazon: Individual and Professional.
With the Individual plan, you’ll pay $0.99 for each product you sell, plus variable closing fees ($0.45 to $1.35) and referral fees (6 percent to 25 percent). For Professional accounts, you pay a $39.99 fee a month and don’t have to pay the $0.99 per product.
To make a profit, you’ll need to have high margins, like between 50 percent and 66 percent.
However…
You’ll probably take a profit loss
Amazon is sometimes like a garage sale: it’s a race to the lowest price. Shoppers go to Amazon because they know that they can get a great deal if they filter through sellers of a given product.
You may want to see profit margins of 50 percent to 66 percent, but if you hope to actually sell products, you may have to lower your expectations a bit. And/or find a cheaper supplier.
It’ll be harder to stand out
This is true no matter where you sell your products, but when you’re in a contained marketplace, your competition is fierce. Amazon has, of course, learned to capitalize on this fact, and offers advertising to sellers to be featured on a product page.
You’ll need to offer free shipping to attract customers
If you don’t elect to use Fulfillment by Amazon, you’ll be responsible for paying to ship every product you sell. And shipping costs eat into your already dwindling profit margin.
However, 79 percent of shoppers say that free shipping is more likely to entice them to make a purchase.
So if you’re not offering it, you’re not selling.
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The decision to sell on Amazon is clear as mud, right? If you have products with high profit margins and low costs, you probably could fare well on Amazon.
The key to the platform for (most) entrepreneurs is using it as an additional e-commerce channel, not your only one.
