Pros and Cons of Selling On Amazon

Business.com / Sales / Last Modified: March 17, 2017

Selling on Amazon is a necessity for e-commerce brands. But learning how to sell correctly and avoid some of the pitfalls is essential for success.

If you start asking around, there's a good chance you'll find people who have made online purchases through Amazon. In fact, you'll probably have a harder time finding someone who hasn't; and of those who have, you'll likely discover that the vast majority are entirely satisfied and are repeat customers. When you ask why they shop on Amazon, the answer is often one word -- Prime.

In fact, it turns out that during the fourth quarter of 2016, nearly 60 percent of all e-commerce sales occurred through Amazon, an incredible number considering how many e-commerce sites exist and how popular some of them are. Of course, this is probably due to the extensive range of products Amazon sells, not to mention the incentives they provide to both customers and Amazon Prime members.

Shoppers can find everything from books and movies to clothing and jewelry. Amazon offers convenient, one-stop shopping from the comfort of home, and the company has excelled because they provide so many options for consumers.

Incredibly, statistics show that Amazon is beating out Google when it comes to product searches. While only 34 percent of product searches start on Google, 52 percent begin on Amazon. They are trusted and preferred by consumers, and that's pretty hard to argue with.

What does this mean for businesses looking to expand into e-commerce? It means you'd better at least consider listing with Amazon.

Currently, 50 percent of the products sold through their marketplace are provided by third-party retailers, and you couldn't hope for a better reference. However, there are a few things you should know going in so that you can make the most of your e-commerce efforts through Amazon.

The Good

Access to consumers

As a business owner, you have to go where the customers are, and online consumers are overwhelmingly using Amazon for purchases of every stripe. If your company and your products are not represented on Amazon, you're missing out on access to consumers and opportunities to improve brand visibility and, not to mention, sales. With so many online purchases occurring through Amazon, you can't afford to ignore the opportunities this e-commerce platform offers online vendors.

Ease of use

Selling your goods on Amazon is exceedingly simple, especially if you already have your own e-commerce site set up. All you have to do is register with Amazon to start, after which you can begin adding products to Amazon's catalog. You can either list products already sold on Amazon or add new listings.

If you plan to sell a lot of items, you may want to subscribe to the Professional plan so you can use bulk tools to upload items in batches. This upgrade also allows you more options for product categories to list with. As an individual selling on Amazon, you'll pay 99 cents per products sold, whereas the Professional plan is $39.99 per month, and you can sell unlimited products.

Utility

One of the best reasons to sell through Amazon is that they have fulfillment infrastructure already in place. In other words, you have the option to allow Amazon to fulfill orders for you when you choose FBA, or Fulfilled by Amazon.

Amazon boasts 70 fulfillment centers and over 90,000 full-time employees in the U.S. alone, easing the burden on your company to store and ship products sold through Amazon (where, let's face it, you could end up reaching a much larger audience than through your dedicated e-commerce site). Of course, if you already have a fulfillment branch that is more than capable, you can simply select the FBM, or Fulfilled by Merchant option.

The Bad

Split loyalty

When you decide to sell your products through Amazon, you gain access to a much larger group of consumers than you might otherwise attract on your own. Unfortunately, these people are Amazon customers first.

This doesn't mean you can't win them over as loyal customers to your own brand, but when you make sales through Amazon, you won't necessarily have access to all of the information that can be provided via tracking and metrics. This can make it more difficult to gain insight into buyer demographics and get the most out of every sale.

Dependency

So, you signed up with Amazon and now your products are selling like hotcakes. What's the problem? Making sales is never a bad thing, but you need to think about what's best for your brand long-term.

If you come to rely too heavily on Amazon for sales, it may be tempting to let your e-commerce site or other online efforts fall by the wayside. What will you do if your Amazon sales flag? You'll have nothing to fall back on.

Competition

Many businesses elect to sell their goods through Amazon. Your level of competition and ability to succeed in such an endeavor could come down to whether or not you sell branded products or you represent other brands.

If you sell products already listed, you might be just one of dozens of retailers listing those products, putting you up against a lot of competitors for sales. If you have your own branded goods, you can avoid getting lumped in with other third-party retailers; but even so, you need to prepare for the fact that competition is part and parcel of selling on Amazon.

For any e-commerce merchant today, Amazon has become a necessary partner. But I will caution you to keep it into perspective and use it to build your own brand. 

Photo credit: Shutterstock / Twin Design

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