Simon regularly comments for Forbes, Fortune SMH and NZ Business.
Latest posts by Simon Slade
- 4 Online Educational Opportunities for E-Commerce Entrepreneurs - May 31, 2020
- Don’t Let These 5 Sneaky Startup Expenses Break Your Budget - March 1, 2020
- Here’s Why Customer Service is the Heart of E-Commerce - September 27, 2019
Online selling platforms are plentiful these days. E-commerce professionals have a variety of options for where and how they set up their store, from Etsy and eBay to Amazon and Shopify. Amazon is a popular choice for online sellers for a variety of reasons, but there are some important facts to consider before embarking on your journey as an Amazon seller. Amazon can work great as an e-commerce platform for some, but for others, it might not be the best choice.
Why Amazon is a great place to sell
The benefits of Amazon as a selling platform are plentiful. Firstly, sellers have access to a massive group of buyers who inherently trust the platform and go there to shop. That type of exposure can’t be underestimated. Not only is there a very high volume of traffic on the site, but many customers return to the site because Amazon works hard to earn repeat business through excellent customer service and perks like free two-day shipping for Prime members.
That goodwill extends to those who sell on Amazon, too. The company works hard to support its third party sellers, who make up a third of the site’s total sales. Despite these benefits, there are several reasons why an online seller might be unable to sell on Amazon. Here are a few setbacks that you might experience as an entrepreneur.
Why you might not be able to sell on Amazon
- You can’t get approved
Amazon has a long list of categories and products that require approval. Each category has its own restrictions and requirements which can present a challenge for a seller. Your product has to meet Amazon’s expectations completely or you won’t be allowed to sell.
For example, in order to sell DVDs, videos or Blu-ray, you will need to have an existing seller account with some very high ratings, including a cancellation rate of 2.5 percent or less and an order defect rate of less than 1 percent. Additionally, you’ll have to provide Amazon with three invoices or purchase orders from your largest inventory source. These stipulations, while required by Amazon to protect the customer, can make it very difficult to break into some sales categories on the site.
- You need your money ASAP
Amazon distributes payments every two weeks, period. It’s a simple, easy direct deposit, but the timeline is strict (there are some workarounds, but they require an application process and approval). This can present a major challenge for sellers who need the money immediately to put it back into their business and help with growth.
- You are low on capital
A seller account on Amazon can cost between zero and about $40 per month. Regardless of the type of seller account you have, you will pay a referral fee for every product sold. Depending on the type of product you are selling and how much you are selling it for, this can be as low as 6 percent or as high as 20 percent. Some product categories even have a minimum referral fee, usually between $1 and $2. For media products, like the videos, DVDs and Blu-rays used in the example above, you’ll pay an additional $1.80 to Amazon for each sale.
All of these seemingly small charges add up, especially if you were hoping to get the perks of the monthly $39.99 business account. For a small operation with little capital to start, these mounting fees can make selling on Amazon a very unattainable prospect.
- You are too small or unique to price compete
Many, if not most, of the products sold on Amazon were purchased in bulk by the seller. Bulk purchasing allows sellers to drive the price down very, very low. If you can’t make large orders—either because you don’t have the overhead or because your item is one-of-a-kind—it’s going to be really hard for you to compete.
It’s not for everyone…
But that doesn’t mean it’s not for you. These are just a few challenges associated with this selling platform, but they don’t negate it as a valid option for many online sellers—even some startup businesses. If you have the right information and you’re prepared to jump through some hoops, it might end up being the perfect platform for you. Every startup is different!