Last Updated on March 7, 2021 by Filip Poutintsev
Amazon is the 3rd largest company by market share in 2019. Its founder Jeff Bezos is the person with the highest net worth value in the world. Amazon.com was established in 1994 in Washington and was an inline marketplace for selling and buying books. Since then Amazon has come a long way to be the force it is today.
With the time since its inception, Amazon has experienced an evolution of which it has been a part of since its inception, selling items in Amazon has both good and bad side of it.
So, we have prepared some pros and cons of selling on Amazon so that your decision has a proper base for reasoning.
Pros of Selling on Amazon
For any entrepreneurs looking to expand or start their business in the online market, Amazon is surely going to be on the top of their list.
1. No Need to Build a Website and Customers
One of the biggest hurdles for people looking to start a business is making a new website or buying one. Professionals are needed that do need to be paid and it isn’t cheap. Not just the website, but also its look, design and even the color palate are in your hand. Similarly, finding an audience with an interest in your product is also difficult if you are starting at first.
Amazon is a well-established website that allows you to only display and sell your product. You don’t have to create your own platform to start something big. Selling on Amazon solves a lot of problems.
Amazon in a single month has visits of approximately 2.1 billion in number. Few of these people are surely going to look into your product and consider buying them.
2. The Mileage You Get and the Volume You can Potentially Sell
Looking at the statistics, Amazon prime day in 2018 sold 100 million products in a single day. That is staggering numbers of sales in a single day. On any given average day, Amazon sells millions of products to anyone of their 300 million customers. According to Statista, Amazon had a 232.89 billion dollars in the year 2018. It’s a no brainer that you will have a higher chance of selling your product on websites with such high sales revenue.
If you open your own website it is not technically impossible to generate that amount traffic and sales but it will clearly take a lifetime to get even close to where Amazon is and to be honest luck must play a huge part for you.
3. Amazon Takes Care of Your Package
Amazon can store your product in any one of their many warehouses across the world. Amazon takes the responsibility of storing your package, stocking them, and even delivering them. It is one big problem to not worry about.
Amazon has a wide integrated system of deliveries. It can ship to almost all countries of the world. It has a separate unit which works as the logistics department of Amazon. It even has its own cargo jets based in various hub airports around the world. This allows for parcels to be shipped very fast and efficiently.
Amazon can do one-day shipments when required, which is really convenient for the buyer. Whereas, the sellers can just focus on their product, quality control and does not have to worry about the logistics.
Cons Of Selling on Amazon
Because Amazon is so lucrative the way it works, there are bound to be some bad side of it for sellers as well. Here are a few you should consider and be prepared for before start selling on Amazon.
1. High Competition Among the Sellers
With all the staggering numbers of sales, there is also going to be many competitors. Having an open platform comes with a disadvantage for an individual. Many people are trying to sell their products to customers in Amazon. Even big retailers and companies sell their products and competing with them gets challenging.
Amazon has this system of Amazon buy box where the prices, quantity, shipping time is displayed along with a product. If you are featured in the buy box and someone buys the product then you get the sell. So, getting in buy box for a particular product is vital if you are looking to sell in large order.
Amazon has a complicated system for choosing a primary seller for the buy box. You may need to have high customer satisfaction, on-time shipping, and quick replying to customer inquiry to get featured.
2. Low Profit Margin? Maybe…
Amazon charges a lot of commission to sellers using their website. One has to pay a lot of fees and tax and what is left is quite a small quantity of money. Amazon CPA fees are in the range of 8% to 15% of each sale. That means you earn money only after each sale. Not for each visit to your products.
If you have your own website, you only have to pay the tax on the sales and all the money goes to you. You can then pay for your costs and keep the money. Furthermore, ad revenue also brings you money. Each visit by customers to your website generates ad revenue from the advertisers on your website whether you sell a product or not.
3. Amazon Takes all the Credit
One major drawback of selling on Amazon is that Amazon will gain a lot of credit for your products. People refer to a product bought from Amazon as “bought from Amazon”. Your own identity may get lost somewhere in the mix. Word of mouth is crucial for any seller that wants to gain customer satisfaction. That credit goes to Amazon, not you.
If you have your own website, it is easier to build a brand with your name on it. You have the full control of your own image. You can decide on your own websites, the offers and sales. You can also set your own restrictions on the products you make and you won’t have to worry about meeting the restrictions of the Amazon or any other such websites for that matter.
Amazon is a well-established company that can oversee everything about your product except making the product itself. It has a high number of customers and high sales. You will be entering into a site with a well-proven formula for sales. You may have to compete for your place, but once you do succeed it’s a huge marketplace for you.
On the other hand, making a website and selling on it takes a leap of faith. You must have an entrepreneur inside you and must take control of each and every decision you make. If successful, you can make a name for yourself, and reap the fruit it bears. While succeeding on Amazon has its share of price.