Is Selling on Amazon Right for Your Business?

There's a lot of talk about Amazon among both small and large businesses, but many are still undecided about whether Amazon is the right path forward for them. Last year, Amazon generated $232.9 billion in revenue, and over 100 million people have premium memberships. This giant clearly offers enormous opportunities and advantages, but there are also potential problems and difficulties that might make Amazon not the right choice for every business.

‍

In this post, I'll try to clarify who should and shouldn't sell on Amazon and the advantages and disadvantages it can bring. The first thing you should do is review your market. Do products in your niche sell well on Amazon?

‍

How well does your niche sell on Amazon?

Amazon sells enormous quantities across many categories, but there are also categories and niches that don't perform as well. Before you start selling on Amazon, it's important to review how your segment sells. If it sells well, there are all opportunities to break in and take a piece of the pie. If not, why is that? Maybe you should still position yourself on Amazon? Maybe not. Some categories that don't sell well on Amazon are easy to understand why, others are less obvious. An example of a category that doesn't sell well is branded clothing, which sells better on niche marketplaces and retailers.

‍

By searching for your category or competitors on Amazon and reviewing how your competitors appear to be selling, you can get a good idea of the situation. Either by looking at the number of reviews and number of competitors or by using tools like JungleScout to get an estimate of sales figures. If you're serious about entering Amazon, it might be best to get help from a consultant you trust to get a proper market analysis with all the figures from Amazon's various marketplaces. Even if your category sells well on Amazon, it's not necessarily a given that you should sell on Amazon. There are both advantages and disadvantages you should be aware of before entering the market.

‍

7 Advantages of Selling on Amazon

#1 – Access to a Huge Market

Amazon is extremely large and the number of customers is constantly increasing. They currently have over 100 million premium members and a total of over 300 million customers. In 2018, their total share of the US e-commerce market was an incredible 49%. By selling on Amazon, you not only gain access to this market, but also to Amazon's future market. They are constantly growing, especially outside the US, in places like Australia and Europe.

‍

#2 – Customers Trust Amazon

As an e-commerce retailer, you might not have a large following, and no matter how large your following is, it's not as large as Amazon's. When a new potential customer visits your webshop, you need to build trust, but customers already trust Amazon and know they can get help if something goes wrong. They are used to shopping from Amazon and know how the process works, which they might not with your webshop.

‍

#3 – Fast Shipping to Customers

Many customers expect free fast delivery, which can be difficult to achieve when shipping a product to a completely different part of the world. When selling through Amazon and using their Fulfillment by Amazon (FBA) program, this is something you can now offer many of your customers. Fulfillment by Amazon means that Amazon stores and handles the delivery of your products. You can also choose to handle warehousing and shipping yourself, which is called Fulfillment by Merchant (FBM). Read more about FBA vs FBM here.

‍

#4 – Easy to Handle Growth

Sales via Amazon can sometimes create problems in success. Rapid growth can be problematic, and not only do more products need to be manufactured, but warehousing and staff also need to follow the expansion. However, with Amazon's FBA program, this becomes much easier to handle and often much cheaper as well. Since Amazon handles shipping, packaging, and warehousing, you don't have to worry about this. You also don't need to invest in expensive facilities, instead, you only pay Amazon for exactly the amount of warehousing you use and for each product you sell.

‍

#5 – Advertising Opportunities

Amazon not only allows you to be "found" by more customers, but also gives you the opportunity to advertise on one of the largest platforms. If you advertise on, for example, Google today, you understand the significance of this, and Amazon has even surpassed Google in terms of the number of product searches. When customers come to Amazon, they are looking for products to buy, unlike Google and YouTube where they often search for information. Therefore, Amazon's advertising platform has an extremely high conversion rate, and you need to sell there to access this feature.

‍

#6 – High Conversion Rate

Due to the advantageous shipping times and high trust, conversion rates often land between an incredible 10-20%. About 10 times as much as the average webshop!

‍

#7 – Development and Innovation

Amazon is not only advancing in growth, but also quick in development and technology. In 2018, they opened their first Amazon GO store, a store with a fully automatic payment system. They own a patent for 1-click buying and are developing drones with the goal of delivering products in under 30 minutes. These are just some of the advancements they have made or are developing. The further they go, the harder it will be to compete with Amazon, and the greater the advantages of selling with them.

‍

5 Disadvantages of Selling on Amazon

#1 – Costs

Amazon offers an enormous market, opportunity, and numerous advantages. But of course, they also charge for this. They charge for all sales that go through their platform, and additionally, they charge for those who choose to sell through their FBA program. These costs cover warehousing, packaging, shipping, return handling, and customer service.

‍

#2 – Losing Control

As a seller on Amazon, you must agree to all of Amazon's terms, and if you sell through their FBA program, you also lose control over packaging and delivery. Amazon has strict rules regarding many aspects, and by breaking these, you risk being suspended from their platform, which wouldn't happen with your own platform.

‍

#3 – Branding

Amazon is a large brand with high trust, but they are not associated with, for example, the luxury segment, especially not in certain niches. Amazon is not suitable for all types of products, and luxury products that not only offer a luxurious product but also an experience in connection with the purchase. These experiences can be difficult to deliver through Amazon (and other marketplaces). Therefore, it might be a smarter move not to associate with Amazon and instead own your own platform. This doesn't just apply to the luxury segment, but it's a clear example. That said, you can buy Rolex and Gucci through Amazon, but they had also clearly established themselves before entering Amazon.

‍

#4 – Competitors

Amazon is full of competitors, and many of the products sold by Swedish e-retailers are also available on Amazon for 1/3 of the price. If these sellers listed their products on Amazon without clear branding, I find it hard to see any sales volume coming in. So if you don't sell your unique product, Amazon can become a gateway to high competition and low margins. Note: A strong brand is, of course, a path to a unique product!

‍

#5 – Investments

You might decide to sell on Amazon. Or you might think about "testing" selling on Amazon. The problem is that "testing" is often difficult. What people often associate with testing is listing the products on Amazon and seeing what happens; in most cases, nothing happens. You'll get zero or a few sales, that's all (of course, it's different if you are world-leading in something or have a very hot brand).

‍

What is often required to test properly is to treat your test as if you are actually investing in Amazon. You will need to optimize your product page and drive traffic to it (either through paid traffic or traffic you "own"). Since Amazon is very "product-driven," those who want to test Amazon without fully investing can do this by selecting a few products they want to sell on Amazon and starting with these. If all goes well, add more products. If it doesn't go well, find out what you're doing wrong. I recommend getting help from someone who really knows Amazon if you're going to launch, precisely because you need to invest properly if you're going to succeed. Either get help from a consultant (like us at SellWave) or learn how to do it yourself through some form of course/blog/YouTube channel/podcast, etc.

‍

Summary and Conclusion

Amazon is not for everyone, and it's essential to both review how your niche sells on Amazon and weigh the pros and cons against each other. If you start selling on Amazon, it's important to dare to invest and understand how Amazon works. Understand how you appear in the search results and what you need to do to improve your sales.

‍

If you decide to sell on Amazon, start today! It is becoming increasingly difficult to break into the market as more competitors enter. These competitors gain an advantage in terms of the number of reviews, data on keywords, etc. If you decide not to sell on Amazon, understand how it will affect you and plan how you will be able to compete with their progress. Not just today, but also tomorrow, in 1 year, and in 5 years.

‍

Thank you for your attention and I hope this text can help you in your decision regarding Amazon!

‍