Is It Worth It to Sell on Amazon?
Is it worth it to sell on Amazon?
New sellers that are looking to make some income on the side or build a business are often confused with a ton of information on which platform is best to get started selling with. Popular options for sellers include selling on marketplaces like Amazon, eBay and more. Sellers may be wondering if it’s worth it to sell on Amazon for because they may have heard things like Amazon has high fees or they are super strict. Let’s take a look at the criticisms people have regarding selling on Amazon and how valid they are.
Criticisms
Payments:
The payment schedule for Amazon is a valid reason why sellers may think it’s not worth it to sell on Amazon. Sellers who are used to other ecommerce platforms like eBay often complain about Amazon’s payment schedule. On other platforms, you can get paid relatively quickly after you make a sale. In contrast, Amazon sellers have to wait 14 days to get the payment for the sales they have generated. This is a valid critique of Amazon, but what people often don’t mention is the difference in sales volume between Amazon and other ecommerce platforms. Although you might get quick sales on other platforms, Amazon payouts are generally much larger because Amazon sellers make a lot more money on average. Amazon payouts for sellers are often hundreds of dollars if not well into the thousands for full-time sellers. Can Amazon do better with payments? Yes, but sellers are not too worried with payouts being much better than any other platform.
Selling fees:
Another concern for sellers is the selling fees associated with Amazon. Depending on how you sell on Amazon (FBA or FBM), there may be a variety of fees you have to account for. This includes a professional selling plan, a referral fee, fulfillment fees and other fees like storage fees. Although you may not be charged with all of these fees for every product, it’s important to be aware of this because it can eat into your profits.
People who criticize Amazon for these selling fees often overlook the amount of fees other ecommerce platforms like eBay have. Amazon makes up for all of these fees by bringing demand to sellers and giving them access to Amazon Prime members. This allows sellers to charge higher prices and net a higher profit per item sold. Even with all of the selling fees mentioned, new Amazon sellers average $26,000 in profit in their first year of selling.
Complexity:
Many new sellers often complain about how complex Amazon is in comparison to other ecommerce platforms. For example, if you were selling on eBay, you can literally use your buyer account and list an item. Once it sells, you can ship it. This allows virtually any eBay customer to become a seller immediately.
In contrast, Amazon requires you to go through a stringent application process where they ask for your information like taxes and other documents. Additionally, Amazon has its own processes sellers have to follow regarding listing, shipping and more. This can be a deterrent for sellers who are interested in joining the platform.
Although this may be a con for some sellers, this is a benefit for both Amazon and existing sellers. Amazon’s processes are built to serve one demographic only: their customers. By having a stringent application process, they ensure they have real and serious sellers on their platform. The processes surrounding shipping allow them to get products to customers within 48 hours of purchase. This might be difficult for sellers to adjust initially for sellers, but everyone adjusts after their first few sales.
Strictness:
Strictness is a valid reason why some sellers think it’s not worth it to sell on Amazon. Amazon has a variety of metrics that sellers must meet in order to sell on Amazon. Some of these metrics include order defect rate, pre-fulfillment cancel rate and late shipment rate. Amazon expects sellers to meet certain thresholds for each of those metrics or the seller can be suspended.
There are a variety of ways that sellers’ accounts can be suspended and/or banned permanently. Generally, Amazon’s seller support is helpful with this and cooperates with sellers who are looking to learn from their mistakes. Repeating the same offense several times can legitimately result in your selling privileges being removed permanently.
The thought of having your entire Amazon business shut down is nerve-wracking to most sellers and this is a fair critique of Amazon. In order for your seller privileges to get reinstated, you must follow Amazon’s requirements word for word or you won’t be allowed to sell on Amazon again.
Branding:
On Amazon, sellers can build private label brands that can be wildly successful. Although the brands built by sellers on Amazon can generate great sales, Amazon forbids sellers from linking to personal websites or getting customers to sign up for their own personal email lists. Any seller with previous experience with branding knows it’ll be hard to build a brand without contacting your customers.
Sellers can build a brand on Amazon and have their own site, but there can be no linking or correlation between the two or Amazon will take the seller’s account down. Amazon rightfully views their customers as their own and not the sellers. It obviously doesn’t make sense on Amazon’s end for sellers to leverage their platform and take their customers away.
Other ecommerce platforms allow sellers to do this, but Amazon takes this extremely seriously. On the other hand, Amazon accelerates how successful a brand can be significantly. Since there are hundreds of millions of customers on Amazon every day, sellers can target their key demographics and advertise their brands. After establishing a brand, sellers can sell their entire brand to other Amazon sellers if they are looking for an exit. Building a brand may be a reason why some sellers might think it’s not worth it to sell on Amazon.
Competition:
Out of all the ecommerce platforms available, Amazon has the most competition amongst sellers by far. On platforms like eBay, each seller can create their own listing and competitors can’t list on their listing. On Amazon, the vast majority of listings have many sellers competing on price and quality.
To sellers who are unfamiliar with Amazon, this may be very unattractive. Sellers often know that more competition results in thinner margins and worse sales overall. On Amazon, sellers can manage competition and still have tremendous sales and profits.
The difference between Amazon and other ecommerce platforms is demand. Amazon has literally multiple times more demand than other ecommerce platforms. New sellers need to realize that if you are competing with other sellers on a listing, you will all likely get all of your products sold.
The sellers who undercut each other on price will make the sales first, but leave with lower margins. Smart sellers use FBA to charge higher prices and they can get sales on their own terms by simply waiting the competition out. With some experience on Amazon, the majority of sellers become good at managing competition.
Workload:
For sellers that are used to recreational reselling, Amazon may be difficult to adjust to. Amazon is built for sellers to scale their business and earn full-time incomes. That entails hours invested into learning about Amazon and hours actually working on the logistics of your business (ex. listing, shipping products, etc.). If you are looking to sell on Amazon for fun, you can do it, but it’s likely not the best way to spend your time.
There are different types of sellers on Amazon and their business models require a different kind of workload. For example, retail arbitrage sellers spend the bulk of their time sourcing products at local stores nearby to sell on Amazon. In contrast, private label sellers spend the majority of their time on product research and ensuring their products are still in stock. The workload required to succeed on Amazon at scale is a con, but only for sellers that are not looking to actually build a business.
Now that we’ve covered some of the major cons, let’s compare that to the benefits of selling on Amazon.
Benefits
Sales:
Sales is one of the primary reasons why it’s worth it to sell on Amazon. If you want to get sales, Amazon is the place to be. Although other ecommerce platforms may allow you to design a store or play around with features, they aren’t making you money. Most sellers need to be in the top percentile on other ecommerce platforms to make any significant sales. In contrast, Amazon’s demand is greater than its supply.
There are hundreds of thousands of new sellers joining each year and the revenues just keep increasing for both Amazon and sellers. Amazon is approaching $300 billion in revenue and over 50% of all products sold on Amazon are sold by sellers. Sellers literally cannot keep up with demand and the trends will continue to increase over the next decade.
Additionally, Amazon has a variety of resources to help sellers increase their sales on Amazon. This includes Amazon selling coach, prime fulfillment, hub by Amazon, promotions, advertising, international listings and more. Amazon will help sellers sell more because if sellers succeed, Amazon also succeeds. With all of these tools at your disposal, you can enter Amazon’s marketplace as a new seller and make significant sales.
Scalability:
Scalability is another reason why it’s worth it to sell on Amazon. Amazon is the one of the best ecommerce platforms for sellers that are looking to scale and focus on selling products. As a seller, you don’t want to deal with the overhead that comes along with having a successful ecommerce business. If you were to run an ecommerce business on eBay or any other platform, you’ll likely need employees and a ton of time to do the basic day to day operations like shipping and dealing with customer service. Not only is this slowing you down from growing your business, it will cut into your margins significantly.
Amazon allows sellers to leverage their infrastructure and their world-class fulfillment centers. Sellers can list a product on Amazon, send it into an Amazon warehouse and Amazon will take care of the rest. This means any returns, customer service and other operational overhead will be done by Amazon.
This is tremendous for sellers because it literally gives them one job: finding profitable products to send to Amazon. Imagine the difference between an eBay seller who sells 100 products a day vs an Amazon seller who sells 100 products per day. The Amazon seller has literally none of the operational responsibility while getting all of the sales benefits. This is a huge factor why sellers choose to sell on Amazon.
Proven track record for full-time income:
Amazon has proven time and time again that it helps its sellers succeed. Amazon’s track record for successful sellers is the single most appealing factor of selling on Amazon. Other ecommerce companies can’t even boast a fraction of Amazon’s success stories. There are over 200,000 sellers that make over $100,000 in annual sales. Additionally, there are over 23,000 sellers that make over $1 million in sales and there are nearly 1,000 sellers that make over $10 million in sales annually.
Amazon is basically an economy itself with how many households it supports. There’s no other ecommerce company that can say they have done for sellers what Amazon has done. These are not established brands that just decided to sell on Amazon. The vast majority of these sellers are normal people who invested time and money in building their Amazon business. It will be very hard for sellers to replicate this kind of success on any platform besides Amazon.
Sellers that start selling on Amazon today can scale their business and reach six figures within a year or two. The majority of sellers have reported they make between $26,000-$81,000 in profit off of Amazon. It’s important to note that this is the average, sellers that reinvest their profits back into their business can easily scale much higher and get higher sales and profit margins. You will not find a single ecommerce company that can say their sellers average nearly $30,000 in profit on the low end. This exhibits how powerful Amazon’s ecosystem is and how sellers are leveraging it to scale and grow their businesses.
I hope this blog post provided you with a good view of selling on Amazon and whether or not it’s worth it to sell on Amazon. There are very few opportunities today for everyday people to build six and seven figure businesses like selling on Amazon. If you would like more information about selling on Amazon, check out the stats that Amazon sellers generated in 2020 here.
