amazon

Amazon, the world’s second largest online retailer, is both a maze and amazing. If you’re wondering why you should sell on Amazon, there are 300 million reasons. Every year, Amazon gets more than 300 million annual customers buying 12 million products from third-party sellers that comprise over 50% of its vendors. Wow!

As a retailer, Amazon accounts for over 49.1% of the entire e-commercial retail market share in the U.S., more than its three main competitors (eBay, Apple, and Walmart) combined. That’s more than 5% of the entire U.S. retail market.

Sellers on Amazon report an average increase in profits of more than 50%, making it the ideal e-commerce platform for small brands starting out or medium-sized brands looking to expand their reach. Let’s examine why.

Why Amazon?
In a word, credibility. Amazon is the most trusted e-commerce retailer in the world, making more than $232.9 billion in annual revenue selling in the U.S., UK, France, Ireland, Canada, Germany, Spain, Italy, Australia, Japan, China, India, and Mexico. 

The best part about Amazon? It’s open to anyone and you only have to pay between $1-3 to list items on the platform. But it does take a cut of what you make – roughly 20% – if and when you sell an item. While the cut they take can be a turn-off for some small businesses, the platform allows you to keep your listings up longer without the need to relist them (like you have to do on eBay), saving you precious time to focus on your business.

If you are a third-party seller, Amazon allows you to use its Seller Central interface, which gives you the option to choose between an Individual Plan (for those selling fewer than 40 items per month), which includes no subscription fee. This establishes selling fees at $0.99 (with additional referral and variable closing fees). 

They also offer a Professional Plan (for those selling more than 40 items per month. This plan charges a monthly subscription fee of $39.99, but doesn’t charge fees per item listed.

With programs like Amazon Prime and Fulfillment by Amazon (FBA), it’s easier than ever to move your products on the platform, though enrollment in these programs means Amazon will take an even bigger cut.

If you do opt for Fulfillment by Amazon, you won’t have to handle the shipping and customer service aspects of your business on the platform, which can save even more valuable time that you could spend actually running your business.

Moreover, you can also get discounts on shipping and potentially unlimited storage space for your items. It’s no wonder over 66% of the world’s 10,000 top Amazon sellers use FBA.

Prime is another big draw. There are over 90 million Prime accounts in the U.S. alone and while the average Amazon customer spends $700 on the site yearly, the average Amazon Prime customer spends $1300 – more than double the non-Prime customer.

This also incentives customers to spend more with benefits like free shipping and no minimum payment requirement.

Finally, you even have the option of selling to Amazon and not for Amazon. By becoming a seller on Amazon’s Vendor Central, you sell your products directly to Amazon and not to consumers. This allows you to avoid the hassle of handling pricing, shipping, and other product sales logistics. 

With Vendor Central, Amazon makes bulk purchases of your products, which allows for better inventory forecasting, and you’ll have access to inventory projection tools unavailable to users on Seller Central. The caveat? Vendor Central is a party that’s invite-only.

Better Pricing
The biggest benefit of selling on Amazon is the pricing structure, allowing sellers to charge higher prices on Amazon than on competing e-commerce platforms. This is because Amazon is a retailer versus a wholesaler, shifting your focus as a seller from selling as many items as possible to selling as a few as possible at the highest price.

The world’ second largest e-commerce retailer, eBay, is an example of a wholesale marketplace. While you can typically find the same goods for much cheaper on eBay, most customers opt for Amazon due to the brand’s trustworthiness and convenience.

One thing that both eBay and Amazon share is their tendency to list prices at artificially low levels to drive sales. This is because both platforms make their money by providing shipping to customers rather than charging sellers a big amount to list their items.

Recognition is the name of the game in the e-commercial world. Simply having Amazon listings for your products makes your brand and products seem more credible, reliable, and trustworthy to consumers.

While big box retail placement requires a higher budget (or insider connections), sellers are able to list their items on Amazon and reach millions of customers for (relatively) free. It’s a win-win-win for seller, buyer, and Amazon.

Useful Data
Amazon also provides you with Advanced Customer Analytics that can show you performance data on your items allowing you to see where customer demand is placed, whether your product fits that demand, and how much you can charge for your product based on that demand.

If you’re planning to launch your online store, wait. It’s critical that you, as a seller, figure out how to utilize Amazon to drive customers to your online store before you even open it.

With their advanced customer analytics, Amazon allows you to learn more about your buyers and cater to their specific desires, allowing you to offer products and promotions they can’t get on Amazon.

Amazon Associates, an affiliate program where sellers can earn sales commissions, allows other companies within your industry to promote products on your website.

Occasionally, there can be a conflict of interest between these advertisements and your products, you can make easy money through cross-brand synthesis and likewise get your own products on other industry-affiliated websites. 

While you don’t want to compete with your own business, you can avoid self-cannibalization by carefully selecting the products you promote, e.g. advertising your toothpaste on a toothbrush seller’s website.

There are, of course, downsides to selling on Amazon in general. If you’re selling items that Amazon already has in stock, you can be artificially priced out of the marketplace. It’s important to sell items that Amazon won’t have in stock, like entirely new items of your own creation.

In low-margin, highly-commoditized categories, the amount you spend selling on Amazon may make it a bust for some businesses while for others it’s a boon. Amazon is also a marketplace, which means its focus is on its own bottom line, not yours. 

Their goal is to prioritize products over sellers, which means they can restrict your branding, custom communication, and items you can sell. Amazon can also go around third-party sellers, identifying popular products you may sell and simply stocking it themselves. In that instance, you’re paying for Amazon to screw you. Ouch.

Still, if you’re a small brand just starting out, Amazon should be your first in e-commerce platforms. The best thing you can do for your business is to test out a few items on the platform and see how you sell.

At just $0.99 per item, you have far more to gain than lose. If you’re wondering if your brand is ready, contact us for a free 30-minute brand assessment and we’ll tell you how to use the platform to your advantage. Get on Amazon and make your business amazing.