Things Retailers Need To Consider When Deciding To Sell On Amazon
July 7, 2021It is no secret that Amazon is one of the biggest marketplaces in the entire globe. With over 200 million unique monthly consumers, it serves as a great platform for retailers to sell their products online. However, selling your products on Amazon comes at a cost. From no control over merchandising to counterfeit products, selling on Amazon can be more disadvantageous than selling the products in your own eCommerce store.
Besides, the possibility of becoming a successful retailer in the Amazon marketplace depends upon various factors and is no piece of cake. Though there are many pros of selling on Amazon, there are several significant cons of selling on Amazon, too, that can not be ignored.
So let us go ahead and explore things retailers must consider before deciding to sell on Amazon.
Different Business Models for Retailers on Amazon
Before we jump ahead to decide if Amazon is the best marketplace for you to sell your products online, let us first look at how different business models work on Amazon.
Business Model for Resellers with No Exclusive Sourcing Relationships
For a reseller that has no exclusive sourcing relationships, earning a profit through the sales is extremely difficult unless the products you sell offer a significant pricing advantage. This kind of seller is not likely to earn more than 10% of the sales if competing against 9 other resellers of the same niche.
Besides that, the reseller must have authentic paperwork for the product from the organization from where they are sourcing it. If unable to present the right documents to Amazon’s seller performance team when asked for, the seller would not be able to address a claim for selling an inauthentic or counterfeit product.
Business Model for Resellers with Exclusive Sourcing Relationships
Though exclusive sourcing relationships are more preferable by the resellers, only a few sellers comprehend the real dynamics of the Amazon marketplace. When selling on Amazon as a reseller with an exclusive sourcing relationship, the sellers need to maintain their brand image well on Amazon. Some of the things required to be maintained by the brand in the process are:
- Consistently improving the listing content
- Keeping inventory levels adequately stocked at all times
- Ensuring MAP/MSRP prices are in place
Also read: Selling Under Own Brand Vs. Online Marketplaces: What To Choose In 2021?
Business Model for Private Label Sellers
Amazon offers its sellers to build their own brand and sell the products under their own brand name. In such a case, the seller can make large profits from selling their products and have to give a small percentage of their profit share to Amazon.
However, the problem arises when other private label sellers start identifying the best selling products of your brand and replicate them to create more competition in the market which eventually affects the prices of the products.
Things to Consider Before Selling on Amazon
There are a plethora of things that a seller must consider before becoming an active seller on the Amazon marketplace. Let us take a look at a few of them down below:
Amazon is the Rulemaker for its Marketplace
As Amazon provides you a market to sell the products, it ensures all the rules are set by it. Whosoever you may be selling your product to, eventually all the customer information goes to Amazon. This customer search and purchase data information is never fully shared with the seller.
This refrains you from understanding the consumer behavior and selling products as per the demand of customers. Moreover, Amazon gets to decide which seller gets the sale when different sellers are selling a similar product to a customer.
Higher Competition for Similar Products
It is not uncommon to see hundreds of sellers selling the same product on Amazon. Unless your brand has some rigid distribution controls over the product, you will find a plethora of sellers offering the same products. This creates huge competition amongst the sellers, which invariably affects the price and profit margin of the product.
Amazon’s ‘Fulfillment by Amazon’ Program
All third-party sellers on Amazon need to comply with its Fulfillment by Amazon (FBA) program. Under it, the sellers need to list their products in the fulfillment centers of Amazon.
When a customer orders a product, the order is fulfilled by Amazon and not the seller. Though Amazon claims that this is done to ensure the highest quality, this may also be a good way to keep the customer’s information away from the sellers.
Other Sellers can Steal Your Listings
Checking the product information from any seller is easy on Amazon. There are several tools available in the market that can be used for it. Many times, various sellers try to list inauthentic products under somebody else’s ASIN (product number) to use their marketing for the sale of their own products.
Although, Amazon is working on this issue and has developed new algorithms to counter this problem, still this way can be used to spoil a brand’s reputation.
Customer Inquiries Must be Answered within 24 Hours
Amazon requires its sellers to maintain a high standard for their marketplace. This includes them answering customer queries within 24 hours time period. Also, the seller must provide information on shipping times, confirmation emails, order cancellation rates to the customers without fail so that the reputation of the Amazon marketplace does not get affected.
Selling on Amazon is Expensive
It might surprise you, but Amazon has over 2.5 million retailers. All these retailers have set the bar quite high for selling the products on Amazon store. To become a successful retailer on Amazon, you need to create different marketing channels and give ads for your brands. Also, there are commissions, account management deals, advertising buys, etc., that cost a substantial amount of money.
Wrapping Up
To sum it up, there may be some valid reasons to sell on Amazon, but there are numerous practical reasons why not to sell on Amazon. Apart from it, there are various other platforms such as Quick eSelling that offer sellers to create their own eCommerce stores on their own terms at zero capital investment. The hosted ecommerce platform allows global retailers to sell the products at a higher profit margin.
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