Thinking about selling products on Amazon? They’re a prolific company and scores of online shoppers flock to them every day. But before you start listing items on their platform, familiarize yourself with the quirks of retailing on Amazon.
How does Amazon discover what products it should sell itself?
Amazon often lets sellers take the risk. It watches what sells and then considers the successful products to decide whether to create an Amazon-distributed listing or point others to your listing.
Your successful Amazon listing suddenly gets lots of competition and often Amazon itself appears listing the same or a similar product. Your volumes then may go down.
Amazon wants to start direct shipment, but too many sellers are shipping the product themselves.
Amazon presents slight differences about shipping expectations for direct ship sellers while making Amazon-fulfilled alternatives appear just a little bit better. The result is that more buyers may move to Amazon-fulfilled listings, especially when delivery deadlines are important.
For time-sensitive items, sellers now need to move to "Fulfilled-by-Amazon" (FBA) or lose sales. This complicates inventory forecasting. Product now needs to be shipped to Amazon, and then they move it to other distribution centers, often taking weeks to receive product you already have on hand.
Amazon makes less money on seller-listed items.
Amazon gives preferential treatment to Prime-eligible listings, thus creating the need for you to move to FBA if you wish to maximize your channel sales. And with FBA, Amazon receives more revenue than seller-fulfilled items.
If you do not advertise with Amazon, your listing slowly sinks down the offer page - often despite being the lowest-priced item. The logic behind this is a mystery to most sellers. And if the category is competitive, this added advertising can dramatically increase your Amazon costs.
Sellers complain when third-party sellers jump on listings, sell inferior products, and take over the prime seller box.
From a channel perspective, they aren’t too concerned. The prices get lowered, more product is sold, but you, the seller, take the hit on unsold inventory.
Amazon tries to solve the problem by introducing optional “transparency codes” that allow legitimate sellers to pay for a special label placed on each product. If you pay this extra money for the codes, Amazon can more aggressively keep your listing clear.
These scenarios do not mean you can't earn money by selling products on Amazon. By understanding the pros and cons of being an Amazon seller, you can more readily discover your path to profitability using this popular platform.