Pros and Cons of Selling On Amazon (Explained)

Amazon is the world’s largest online marketplace. It offers great opportunities for small and medium-sized businesses to reach out to customers beyond boundaries. Individuals around the world find Amazon’s first choice as their selling marketplace.

Selling on the largest online marketplace comes with certain advantages. It also presents challenging scenarios, such as beating the competition.

Let us explore a few Pros and Cons of selling on Amazon.

Pros – Getting Started Is Easy

Getting started with Amazon is easier than you think. Your seller account will be approved in a few steps. For some products, it may need specific seller requirements to meet before approval.

Compare the costs and time of starting an e-commerce site of your own. Many e-commerce building platforms offer ready-to-use templates, but it needs time to build a customer base. You can start selling on Amazon straight away.

Unless you want to sell a product that is unique and has a good customer base otherwise, your costs for starting an e-commerce site will be higher.

Pros – Wider Customer Reach

It goes without saying though. Selling on Amazon means, you’re reaching out to a global customer base. Millions of shoppers go through Amazon daily.

Amazon has dedicated geographical store sites. Appealing to a customer base in a specific region through its dedicated stores is fairly easy. If you appeal to the right customer base, you can skim the competition as well. Taking your brick-n-mortar business to the online world would be a wiser option through Amazon.

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Pros- Fulfilment by Amazon A Two-Edged Sword

Amazon’s FBA program offers a great deal to its partners. You can outsource shipping and packaging to Amazon through its FBA program. All you need to do is send the products to an Amazon warehouse, properly labeled, and entered correctly in the database.

It serves as a great advantage for businesses short of warehouse space and logistics. At the same time, it becomes a risky option for small businesses. You get a reach to the millions of Prime Amazon customers, their refunds, and customer support. Contrarily, the FBA costs can be too high for many small businesses to remain competitive.

Pros- Sell at Your Pricing

Amazon doesn’t decide the product prices. You do. You sell at your prices at your own e-commerce site as well. If you sell a unique product or brand, it may sell through your e-commerce site at any pricing. Unfortunately, many businesses are resellers. Amazon customer loyalty means your pricing wouldn’t be an issue for you.

All you have to take care of is to stay competitive in pricing. If you can create a balance between profitability and sales maximization, you can set the prices you want.

Cons – High Commissions

Selling on Amazon doesn’t come cheap. They charge you hefty commissions ranging from anything around 15-20%. In a fiercely competitive market that much of commission means, you can’t stay inexpensive. If you are using the FBA program, you’ll incur further costs of warehouse storage and shipping.

High commission and service fees mean your profitability drops. Large businesses can afford to buy in bulk and lower the costs. Small businesses can’t do that with ease.

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Cons – Counterfeit Products

Selling counterfeit products on Amazon and other e-commerce platforms has been a big nuisance. Even if you are selling a unique product with patents, crooks will create low-quality counterfeits to damage your business.

The problem gets further complicated when you are a reseller. Even if you add your brand warranty to products and resell, the chances of your products getting stolen are very high.

It also means there is no brand reputation for your products. Once your brand gets bad reviews due to someone else’s mischief, you can’t remove it. Amazon has lingered for too long to reduce counterfeit product selling.

Cons- No Customer Loyalty

When you get started on Amazon, your biggest advantage is to reach out to millions of worldwide customers. In reality, that customer base is for Amazon, NOT for your brand. Customers do not search for your brand on Amazon. They search for products. Unless, of course, you own a company like HP or Microsoft. You can’t build customer loyalty on Amazon easily. It will take immense costs and time to get a loyal customer base through Amazon.

Cons- Standing Out Of the Crowd Is Difficult

The cost of not doing business on Amazon is too high to ignore. Someone can start selling your products as a middleman and drive more sales on Amazon than you do. At the same time, standing out of the crowd at Amazon is difficult. Whatever you plan to sell on Amazon, chances are you’ll find stern competition. Amazon being the world’s largest online marketplace, presents significant benefits to sellers. You reach millions of customers with ease. Yet, the competition and commission costs are something to look for before getting things started on Amazon.

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