BEFORE selling on Amazon some food for thought
Amazon vs running your own personal web eCommerce store
Before selling on Amazon here is some food for thought. Profitability in ecommerce has its roots in repeat purchases and in selling more than one product to customers. When you sell on Amazon, you are tapping into a massive potential source of traffic, but your brand is nowhere because the traffic isn’t coming to your site. You have no opportunity to upsell the visitor; that opportunity is Amazon’s.The trust that comes from satisfying a customer need goes to Amazon, and your brand benefits hardly at all. Customers know that a purchase on Amazon will be hassle free, and if the purchase does need to be returned, Amazon’s robust customer service process will be there to help out. Even though you might be the seller of the goods, and shipping them to the customer, the customer mindshare is Amazon’s.
Two thirds of Amazon’s orders come from repeat customers. Amazon is a master at building and maintaining customer relationships to get its customers to come back and buy Amazon products. Only when a customer is searching for a product that Amazon doesn’t stock will they find, or even consider, your offer because Amazon owns the customer relationship. You are specifically prohibited in the Amazon terms of service from contacting the customer if they were first acquired on Amazon.If you use Fulfillment by Amazon — in which Amazon does the shipping — you know nothing about the customer at all. All you see is a revenue stream. They own the data and the customer relationship.
Amazon will compete with you, if you are successful. Amazon uses third party merchants to provide low volume specialty items it doesn’t want to hold in stock so that it can deliver maximum selection. But if your product line starts selling well, then you’ve just told Amazon which product it should stock next. That’s part of its strategy; merchants help Amazon to identify new niches and categories to enter which can be profitable. Every year Amazon has expanded into new categories — this isn’t going to change.
It’s also not cheap, and the pricing structure means that it will not work for low margin products. You’ll have to pay a subscription equivalent to approx $480 per year, plus per-transaction fees based on a share of your revenue. The per-transaction fees are typically 15 percent referral fee, which is calculated based on your selling price (excluding shipping). Fees for media products are higher with a closing fee per item as well (typically $1.35).
So in practical terms, you need to be making 40 percent margin on products that you consider listing on Amazon. Because of this — and its scale — if Amazon decides to stock your product category, you will not be able to compete on either price or service.
Selling on Amazon is not building your business in a sustainable way and does nothing to promote your business or your brand.