Amazon may offer sellers access to millions of active buyers, but that doesn’t mean the e-commerce giant is a one-off solution for every business.
With over 100 million Prime members, Amazon is the 800-pound gorilla of the e-commerce world. From its acquisition of Whole Foods to its pioneering research into drone delivery services, Jeff Bezos’ online marketplace has reshaped the way consumers make purchases — and the way business owners turn a profit.
For online retailers hoping to get in on the e-commerce action, participating in the wider Amazon ecosystem may seem simultaneously attractive and daunting. The wide reach of approved sellers is certainly appealing for some, but there are factors that might make the platform less than ideal for others. If you’re wondering how you’d fare on the platform, read on for the pros and cons of small business selling on Amazon.
1) A Large Customer Base
Even if visitors aren’t Prime subscribers, the Amazon community is massive: by the end of 2016, the online marketplace had reported well over 300 million active users. For small business owners who are trying to reach a larger audience, this level of reach can be game-changing. Rather than just selling within your limited geographic area or on sites that don’t receive much organic traffic, Amazon empowers you to meet as many potential customers as possible.
2) Ease of Use for Buyers and Sellers
One of the main reasons so many people love shopping on Amazon is because it’s so easy to use. Because most internet users have interacted with the platform at some point, they trust Amazon, as well as its sellers, to deliver quality products in a reliable, professional way.
Plus, Amazon can be as easy to use for sellers as it is for buyers. You won’t need to build and manage your own website or worry about driving traffic to the site. Instead, you can rely on Amazon’s own services, such as Amazon FBA, to help get your operation up and running.
3) Fulfillment By Amazon
Amazon takes product fulfillment one step further by allowing sellers to pick, pack, and ship their orders to customers within the platform. With Fulfillment by Amazon (FBA), retailers can send their inventory to an Amazon distribution center and let them take care of the rest. While sellers who choose to make use of FBA will still need to package their products properly when sending them to Amazon’s facilities, the service can be a great opportunity for scaling businesses to rely on existing infrastructure that might be too expensive for them to manage on their own.
1) High Selling Fees
The bad news about this highly convenient platform: selling on Amazon isn’t free. Whether you choose to use FBA or opt for Fulfillment by Merchant (FBM), the platform is going to take a bite out of your profits one way or another. FBA can be especially tricky, particularly for businesses that are new on the scene, because sellers are charged for the storage space necessary to maintain inventory in Amazon’s facilities. The longer your stock stays on their shelves, the more you have to pay. For businesses whose items have longer shelf lives, this can become a serious financial drain.
2) Limited Control Over the Customer Experience
Amazon Marketplace doesn’t give sellers complete control over their online shop, either. For example, when selling on Amazon, you can’t capture customer emails as you would on your own website. Because this makes it difficult to contact customers directly, this can be a sticking point for sellers trying to build customer loyalty.
Amazon also offers built-in comparison shopping that shows customers similar products at higher and lower prices. While this can be a boon to you if your products offer the highest quality at the most competitive price, it does put you in direct competition with other sellers in a way that you have little control over.
3) Copycats and Hackers
Although Amazon is a trusted online retailer, there are always going to be copycats and counterfeits out there that may claim to sell products of the same caliber as yours. They may even hijack your branding and attempt to fill the same market niche. Amazon does have controls in place to limit this kind of malicious behavior, but it’s a risk that sellers face on the platform.