Ahhh, the beauty of instant gratification.
Seems like you are here because there seems to be a fire under your arse (very British of me isn’t it?), and you feel that you are ready to start selling online with big dollar signs in your eyes. You have a product that no one else has and you want the audience of a Multi-Billion dollar conglomerate that has built so many “Amazon Millionaires”.
Sounds great doesn’t it?
So is it worth it to sell on Amazon? Let’s go into the details:
Amazon retail. I’d like to sum it up in one saying.
“What the Machine Giveth, The Machine Taketh Away”.
This reworked statement holds immense meaning for those that are looking to sell online with Amazon. Now before I break it down I want everyone to know, that this information is from experience of both myself and others that found out what pleasures ” the machine” can give, and the pains it could inflict for their retailers (or potential retailers).
Amazon Seller Instance 1
You have a great product that you sourced from somewhere. Maybe you flew to the ends of the earth (literally) and found the “thingymabob” you think will be hotter than a Easybake oven at girls sleepover party.
You jump through immense hoops to import, package, and market it according to “Amazon seller requirements”. You imported a rather large quantity (perhaps between 500-1000 units) and you are a selling machine! You setup your Amazon account in minutes, and you have about another 30 minutes to begin your online sales ventures. You literally sell anywhere between 10 and 20 a day. You have a decent margin (this is of course subject to opinion), and no one else owns the “Amazon Buy Box” on it and overall you are a happy camper, because you are making money and your hard work paid off (currently at the moment of course).
Fast forward 3-6 months of positive selling. You feel like you’ve cornered the market. No one has distribution rights, and you are continuing to sell on Amazon like a champ.
What is this? You log into your Amazon account and magically your orders have went from 20 units today, to Zero! Now you sit there and scratch your head, and wonder that maybe everyone on the internet turned into Zombies, or perhaps you “violated a Terms of Service” that you never knew existed.
However the problem actually is none of these.
You click out onto your live product page, and BAM.. you see your exact product being sold by none other than Amazon themselves.
So how do you feel now. And how in the world can this happen? Why would your “partner in e-commerce” become your mortal enemy? The answer is very simple.
They don’t care about your business, your online brand or your well being. They are a machine and the machine did the following:
– The kept track of all of your sales data.
– They forced you to put in all manufacturer details.
– They had seen almost 6 months of sales data from you and your margins.
– Your web product listing drove traffic to their site
– They made the smart business move to source the product themselves.
Well, what are you going to do now? (We will discuss your solutions later)
But here is what Amazon will do:
– The will continue to source the product at a lower price than you because of their immense buying power
– They will make sure that their price is lower than yours. (Especially if they are sitting on stock) For every moment you lower price, you may have it for a day or 2 before their power house of a system detects the price difference and automatically drops it accordingly. Making them look like a bunch of heroes.
– They will look like online brand heroes for having such an awesome product at a lower price. And if you decide to rip yours off thei site, and put up your own ecommerce site to sell it, you will have given them all the rank power they need to outplace you for months in search engines.
– They will laugh all the way to the bank.
And you will most likely wind up with stock that you will have to liquidate because your cash flow is not infinitely backed by investor dollars and need to be sold sometime in the not so distant future.
Selling on Amazon Instance 2
Ok, so you are a great guy. You have “connections in an industry” and you want to sell your goods on a platform that provides instant results (instant obviously isn’t always good, remember..easy come, easy go). You spend a ton of money on inventory, and start selling.
You price competitively on Amazon because of your “wholesale connections” and in no time you are doing more business than you can personally handle. With that in mind you hire some personnel. You get some pickers/packers and order processors.
Perhaps you even get a few full time customer service reps, data entry and even data management people to handle this growing monster of a business. (but wait, who’s monster is this?)
You work 12-14 hours retail days to meet the needs of the “A to Z Guarantee”. You are scaling your business and are doing perhaps 200% more in less than 6 months from when you started.
But for some reason, you aren’t making any money? In fact, your bookkeeper has just realized that you are floating a negative balance (that you didn’t know existed) after expenses. A similar business instance on how the US government works with the deficit however the only difference is that you can’t print money, and then eventually your Net 30 or Net 60 (and if you are really lucky Net 90) terms will come due and you’ll be left with little or no income for yourself after your “Mega Amazon Seller Business”.
So once again, how did this all happen on Amazon?
– Your Sales Totals After Fees Weren’t Transparent on the Amazon Backend
– You Gave up 15-18% (From your perhaps 30% margin) to Amazon Just for Being Amazon
– Amazon Snuck a Few “A to Z Guarantees” in their your were responsible for.
– Amazon Held Your “Sales Dispersal” For An Additional 2 Weeks For a Total of a Month for 2 “Questionable Transactions”
– You Hired Everyone To Scale Your Amazon Business But It Didn’t Help Profit
– More Sales Did Not Equal More Profit
There are of course probably a few other issues at hand that happened based on the type of products being sold, however at the end of the day both you and your hard work, as well as the staff you hired are actually “Remote Amazon Employees”. And the worst part about it, is that you don’t even get the perks and benefits of working there .
Is It Worth Selling on Amazon Instance 3
I’d say this is the most destructive of all instances. Since you are essentially giving away brand equity to Amazon.
Here’s how it can go.
You start a great little Amazon store with the bright future of making it a flourishing full time business. You name the store name the same as your business name. You spruce up the listings with all of your branded logos, product images and company information. Your business is doing well. and you decided that you want to start your own retail e-commerce website.
You name your website the same as the Amazon seller store that you started some time ago. You love the name, and you’ve put alot of hard work into the product shots, logo and perhaps even custom product descriptions. You’ve even gotten some SEO lessons and start to see some movement on your product pages.
But WAIT! You Google your “own business name” and your Amazon store comes up before your own URL!
How could this possibly happen?
In fact you notice that many of your “unique products and descriptions” are coming up higher in Google search engine results pages than your own e-commerce website store again! You sit there and wonder how in the world can this be? And you even notice that some repeat customers are purchasing still directly on Amazon as opposed to your shiny new webstore.
And the answer to how this occurred has several parts to it for why Amazon is ranking higher than your own webstore.
1: Amazon is a powerhouse of a online entity and have thousands of affiliates. They have years of link equity. domain age and SEO pros that could spin you silly.
2: You gave them ALL of your unique product data (see previous “Amazon selling instance”) and now you actually may look like duplicate data to Google. Which inherently will reduce your page rankings.
3: Potential customers are lazy. They are already signed into Amazon from a previous purchase a week ago, and all they need to do buy it from your Amazon store is click one button. Everything is saved from their billing information and shipping preferences.
4: They trust Amazon’s “Seller Guarantees” more than yours. They ultimately feel more secure buying from the Amazon version of your business.
Those are the main factors on why you may still be doing more business on the Amazon version of your business as opposed to your shiny new e-commerce website.
So as we circle back to the question “Is It Worth Selling on Amazon“, these points mentioned should ring clear with any business owner. It’s not to be said that you shouldn’t sell on Amazon at all, but it needs to be done in a totally different fashion.
If you want to do business online and need a quick starting solution, then Amazon may be the turnkey option for you, however if you want value, brand-ability and continue to build a strong customer base around your products and services, then you need your own web presence and most of all, it needs to be done the right way.
So err on the side of caution my fellow entrepreneurs, because what the Machine Giveth, the Machine can Taketh Away.