For e-commerce entrepreneurs, the prospect of selling on Amazon sounds almost too good to be true. As a growing seller, you get access to a global audience with millions of loyal Prime members and endless advertising opportunities.
But as you get deeper into your research, questions may start to pop up.
How much control will you have when selling on Amazon? Will the fees limit your profitability? What’s to stop counterfeiters from hijacking your listings?
Eventually, you’ll arrive at the biggest questions of them all: Is selling on Amazon worth it and should I sell my products on Amazon?
In this article, we’ll take an objective look at the pros and cons of selling or scaling your sales efforts on Amazon. This will help to clarify if it’s really right for you.
Understanding the Value of Selling on Amazon
- Is It Still a Good Time to Sell on Amazon? Your Top FAQs Answered
- The Real Pros and Cons of Selling on Amazon
- What’s the Verdict? Should I Sell My Product on Amazon?
Is It Still a Good Time to Sell on Amazon? Your Top FAQs Answered
Before getting into the potential benefits and drawbacks of selling on Amazon, let’s take a look at some of the most frequently asked questions (FAQs) about the Amazon selling process.
Is It Easy to Sell on Amazon?
Amazon makes it very easy to sell on its platform with a simple sign-up process that requires you to supply some key information about yourself and your business.
This includes:
- Bank account number and bank routing number
- Chargeable credit card
- A government-issued ID
- Your tax information
- A phone number
You’ll also have to decide if you want to sell as an individual (and pay Amazon $0.99 per sale) or as a professional (and pay Amazon a flat fee of $39.99 per month). Once that’s done, you’ll gain access to the Amazon Seller Central dashboard where you can start selling your products.
Is It Profitable to Sell on Amazon?
Because of Amazon’s global reach and brand recognition, selling on Amazon can be a great way to sell your products to the masses. But as you may already know, Amazon takes several fees which can eat into your profits.
Regarding specific profit margins, 60% of Amazon sellers report seeing margins higher than 10%, while 32% of sellers report profit margins of over 20%.
What Are The Best Products to Sell on Amazon?
The most popular product categories on Amazon include:
- Home and kitchen products
- Beauty and personal care
- Toys and games
- Apparel and jewelry
How Much Capital Do I Need to Start Selling on Amazon?
One of the benefits of selling on Amazon is that you can get started without much upfront capital. If you become an Amazon FBA seller, you also don’t have to worry about bearing the full weight of fulfillment costs.
However, you may need some startup capital to cover FBA costs, digital assets, and marketing. Depending on your unique business model and growth goals, it’s recommended to start with anywhere from $500 to $10,000.
Is Selling on Amazon Worth It?
For new businesses, there’s a lot to be said for the benefits of selling on Amazon. But if you’re an established brand with years of strong sales under your belt, there may be more to consider.
If you already have a loyal customer base on another marketplace or platform, it may not be necessary for you to share your income with Amazon. That is unless you’re sure you’re going to see a healthy ROI.
If you’re thinking about entering Amazon as an established seller, make sure you understand what you want to gain from it and the different scenarios for achieving those goals with and without using Amazon as a sales channel.
Do I Need a Loan to Grow My Amazon Business?
Millions of active customers visit Amazon each month to purchase goods. If you want to
advertise your products to that established customer base, getting a loan for your Amazon business is certainly an option, but not a must.
Loans for growing your Amazon business are available through Amazon’s lending program. If you’re curious about some of the other ways to grow your Amazon business, you may also want to look into alternative funding options to see which ones offer the best terms and rates.
Should I Sell My Product on Amazon: The Pros and Cons
Now that we’ve laid the groundwork, let’s review some of the top advantages and disadvantages of selling on Amazon.
The Pros of Selling on Amazon
Plug-and-Play Platform
One of the great things about Amazon is that you won’t need to hire programmers to develop a custom website. You simply list products on Amazon’s platform and run your business directly from there.
Amazon allows sellers to create an Amazon Seller Account. Once this account is live, you’ll have your own Amazon store. Each product can have its own information page with an FAQ section for shoppers.
From your seller account, you can also collect reviews and promote your products with Amazon ads.
Easy Fulfillment System via FBA
Amazon is known for its robust shipping and fulfillment infrastructure.
Marketplace sellers can tap into the Fulfilled By Amazon (FBA) service, allowing you to easily pack, ship, and handle customer service and returns without investing in your own dedicated staff and resources.
Amazon presently has 110 US fulfillment facilities with 185 worldwide. The FBA program uses Amazon’s warehouses to store and ship your items. The company then handles your inventory, simplifying and speeding up the process.
Strong Sales Conversion Potential
Amazon is great at converting sales. The marketplace’s conversion tools are some of the top perks for growing sellers.
When shoppers turn to Amazon, they are actively looking for products to purchase. That becomes even more beneficial when you factor Prime memberships into account.
In 2022, there were 200 million paying Prime members worldwide, up from 100 million in 2018. In the US alone, Prime has 163.5 million members and that number is expected to rise to over 176 million by 2025.
Customer Review Platform
Amazon has the most robust authentic review platform available for products on the internet
today. Amazon star ratings have become a vital part of modern online shopping.
Customer reviews on Amazon are designed to reward high-quality products. Amazon allows consumers to give both a star rating between one and five and a written review. The platform then aggregates the ratings into a single value.
A massive 95% of consumers read online reviews before purchasing a product, with 88% stating that they trust reviews as much as a personal recommendation from a friend. Customers have even shown a willingness to spend up to 58% more to shop with a business that has excellent reviews.
Robust Ads Platform
Because Amazon is a search engine, there is an opportunity for sellers to grow conversions via ads. Advertising on Amazon allows consumers to find your store and products quickly and easily.
Consumers trust Amazon and its recommendations much like they trust Google to list high-quality websites on its search engine. If your products pop up near the top of the first Amazon page, you can easily win more customers.
In addition to ads shown on Amazon’s website, it also features a vast network of affiliates who use Amazon ads on their websites. These ads can appear on relevant sites and direct consumers straight to your products.
The Cons of Selling on Amazon
Third-party Impersonators (Counterfeiters)
Third parties may try to duplicate your product and undercut you on price. While this is often unavoidable in the business world, it doesn’t help when they’re able to sell on the same platform.
Unfortunately, vendors can sell knockoff products on Amazon alongside your own. The Amazon store algorithm might even recommend these products to your customers when shopping for your items.
This issue has caused companies like Birkenstock to sever ties with Amazon, citing bootleg impersonation products and Amazon’s inability to police them as “unacceptable business practices” that were jeopardizing its brand.
While the benefits of selling on Amazon may outweigh this problem, it’s certainly something to think about when planning your Amazon strategy.
Amazon Seller Fees
As mentioned, Amazon charges several fees for sellers.
For example, Amazon referral fees can range from 5% to 45%, with most sellers paying between 8% and 15%. The fee is determined by the sales price of your products and the categories you’re selling them under. Some categories also have a minimum referral fee of up to $2.
If you’re selling media such as books, video content, or music, Amazon also takes a closing fee of $1.80 from each sale. This is added to the referral fee.
Individual seller accounts will see a $0.99 closing charge on every sale, while professional sellers are charged a flat monthly rate of $39.99.
If you’re using the FBA service, Amazon charges storage fees for warehouse space as well as “pick, pack, and weight handling” fees. If you fulfill the orders yourself, Amazon gives you credit for shipping costs, but these credits don’t always cover the full cost.
Increased Competition
E-commerce is a competitive field. You’re constantly wrestling with large competitors to win the attention of shoppers. That battle can be even more challenging if your competitors have also decided to sell on Amazon.
When consumers search for your product using Amazon’s built-in search engine, they’re going to find you along with your competitors, even if they search for your product by name.
Once on your product page, Amazon might still recommend your competitors by highlighting their products as recommendations. This could potentially draw shoppers away from your listing, especially if the competing sellers are offering lower prices.
Less Control
When you sell on Amazon, you’re trading a certain amount of control in exchange for access to the world’s largest e-commerce platform.
As an FBA seller, your products will be shipped by Amazon and arrive at the customer’s home in Amazon-branded packaging. Loss of brand identity is often cited as a drawback when working through Amazon FBA, as many customers don’t even know which seller they ordered from. They simply see it as an Amazon product.
While it can be great to take the packaging, shipping, and even returns off your plate, you also have little control over them, which can be stressful when customers complain about problems or delays.
What’s the Verdict? Should I Sell My Product on Amazon?
There is no wrong or right answer to this question. While Amazon is a very profitable venture for some, others may be less comfortable with the potential drawbacks. It all comes down to your unique goals and growth model.
Whether you’re selling on Amazon or another platform, marketplace payment schedules can create cashflow problems for many sellers.
With the SellersFunding Daily Advance, you can receive up to 90% of your previous day’s sales on Amazon with rates as low as 0.5% of the advanced amount — including a zero prepayment penalty and no impact on your personal credit score.
If you’re considering selling your products on Amazon, you can learn more about how sellers are using the Daily Advance to grow 75% faster on average by registering for a free SellersFunding account.
