With 3 billion visits a month, 200 million Prime members, and about $400 billion in annual revenue, Amazon is the largest e-commerce platform in the world. On top of that, it also ships to over 130 countries and is the dominant online retailer in more than 25 of them — it makes perfect sense to sell on it then, doesn’t it?
However, before you embark on this venture, you need to make sure it is the right move for you. So, read this article and learn how selling on Amazon works — then, you’ll be able to make an informed decision.
First, you need to determine whether the product you wish to sell is on Amazon’s list of prohibited and restricted items. If it is, you may need to apply for permission to sell it. Mind you, though — some items, including alcohol, tobacco, and lottery and gaming products, cannot be sold at all.
In addition, if your product is difficult or costly to ship, you may want to reconsider offering it on Amazon. Namely, some items are restricted to local shipping only, which might limit the benefits of the wide reach of this platform, depending on your location. By the same token, if your product is too large, heavy, or fragile, needs refrigeration, or has a finite shelf life, then shipping via Amazon can present a challenge.
Nevertheless, if you think that Amazon is still an option, we advise you to ship your inventory to the company so that it can be “Fulfilled by Amazon (FBA).” This means it will handle warehousing and shipping for a fee. One of the main benefits of going with FBA is that your items will be displayed with the Prime logo, which means Prime customers will enjoy free shipping.
If you think you’ve been the first to come up with the idea of increasing your sales on Amazon, you are gravely mistaken. The competition on the website can be fierce — both from other sellers and from Amazon itself.
Namely, in 2009, the company launched its AmazonBasics line, which provides low-priced products like batteries, smartphone cables, and charging cords. But that’s not all — it has continued to expand its product line by including small appliances, pet supplies, and fitness gear.
If you wish to use this platform to increase sales and acquire more customers, it is important to look at the additional costs associated with it and incorporate them into your margin analysis.
For example, Amazon receives a commission on every sale, and if you use FBA, you will pay shipping fees both to Amazon warehousing and to the customer (although this is well hidden in the Amazon FBA fees (which are higher than if you fulfilled it and shipped it yourself – a concept called Fulfilled by Merchant or FBM), as well as storage fees. In addition, if you want to advertise on Amazon, this will also result in additional expenses.
Therefore, you must ask yourself — is it really worth it? After all, do you really acquire customers from Amazon, or are they simply Amazon users?
One of the great things about Amazon is that there is an entire industry that caters to sellers exclusively. For example, you can subscribe to apps that will give you data on the products’ price history over the past 12 months, their rank on Amazon (how popular the item is in the product category or how many sales have been made), etc.
If these services seem interesting to you, you can look up Keepa, Reprice It, and Scoutify, as well as Amazon’s proprietary seller’s app — Amazon Seller.
There is a smaller segment of sellers who are focused on retail arbitrage — buying and then instantly reselling on Amazon. They look for items to quickly sell, settle on lower margins, and reprice the products on a daily or hourly basis to keep them at the lowest price. Naturally, they do it using the Reprice It app.
Amazon does discourage this arbitrage to an extent, by not allowing the seller to drop ship (for example, purchase from Best Buy and ship directly to Amazon). In fact, if you were to do this, you would have to buy an item and then ship it to Amazon from your location.
In case you still want to go ahead but are now more confused than ever, here are some questions to consider:
Once you have considered all of these questions, you will be able to decide what is best for you.
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This blog is not meant to provide specific advice or opinions regarding the topic(s) discussed above. Should you have a question about your specific situation, please discuss it with your GBA advisor.
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