How To Decide if Amazon
is the Right Sales Channel for You
An invisible giant towers above the antiquated repositories of old. Their foundations of brick and mortar leave them unmovable, while the imperceptible titan maneuvers with the grace and fluidity of a ballerina. Only 25 years old, the humble beginnings of this behemoth seem like centuries ago. It has conjoined itself to its surroundings in such an intricate manner that many of the local inhabitants can no longer recall a world without its influence. Whether they desire its presence or not no longer matters, as it has enveloped too much of their world to simply be removed. They call this beast, Amazon!
Moving beyond the dramatics, Amazon’s meteoric rise can be seen in some truly amazing statistics:
Amazon’s statistical triumphs don’t just stop at raw sales numbers. They practically own e-commerce traffic in the US and shape what users expect when making online purchases.
- In 2018, Amazon’s share of the US ecommerce market hit 49%.
- In 2018, Amazon accounted for 5% of all retail sales across the US.
- Nearly two-thirds of Americans have bought something from Amazon.
- Per a 2019 Feedvisor survey, 89% of US customers state they’re more likely to buy products from Amazon than other e-commerce sites.
- In September of 2019, 150.6 million mobile users accessed the Amazon app.
- Comparatively, the second-most ranked shopping app, Walmart, had a September 2019 audience of only 76.45 million users.
- More than 4,000 items are sold per minute from SMBs (small and medium sized businesses) on Amazon.
Businesses already selling on Amazon likely know most of this, but it’s never too late to join in on the party or see if another venue is better suited for your profit and sales. Several companies in the last 2 years have left Amazon because of the extra costs and issues associated with selling on it. Examples of this are Nike, Vans, Birkenstock, and Popsockets. These companies all have one thing in common, though: they are easily recognizable brands with a solid national awareness. For the average SMB, the impact of not selling on Amazon will be felt much more than the above examples.
Amazon is an online store front that draws 30.7% of all US internet traffic looking for e-commerce shopping. These users are looking to buy.
This circles back to the original thought, is Amazon right for your business? The simple answer for a vast majority of SMBs is, yes.* Why the asterisk? That’s because like all business investments, the math must make sense.
The largest costs that factor into selling on Amazon:
- The cut amazon takes of every sale
- Referral Fee (varies by product category)
- Subscription or listing fees
- The associated costs of enrolling in Seller Fulfilled Prime or Fulfilled By Amazon
- Are these requirements? No, but increasing sales will likely move at a snail’s pace without them.
- Fulfilled By Amazon is recommended for businesses selling smaller items that have close to a 35% gross profit margin.
- Seller Fulfilled Prime is recommended for businesses selling larger items, items of any size with a staff available to fulfill orders and/or items of any size with lower gross profit margins.
- The associated costs of enrolling in the Early Review Program with Amazon
- There is no possible way to overstate how vital a role user reviews play into Amazon buyer decisions and Amazon’s SEO rankings
- The cost and/or time associated with creating Amazon listings
- This isn’t exceptionally difficult, but failure to create quality listings with professional images can completely tank an item’s sales before even getting off the runway
- The associated costs of keeping items in stock on the Amazon marketplace
- This is often harder than anticipated for successful SMBs on Amazon.
Most SMBs that operate with product gross profit margins of around 20% can find a path to success on Amazon.
Some business owners may be looking at the above costs and wondering why they should sell on Amazon. The answer to this is simple: Amazon is an online store front that draws 30.7% of all US internet traffic looking for e-commerce shopping. These users are looking to buy. Neither a simple Shopify store or custom-built e-commerce masterpiece are going to match Amazon’s natural user base – a base that continues to grow and increase in affinity for the Amazon experience. Selling on Amazon gives your products and brand an association with Amazon, which helps lessen buyer resistance. For most brands, selling on Amazon makes financial sense.
Keep in mind, Amazon isn’t charging these fees for no reason. Creating a company site for your brand costs money as well. If your company site would feature an e-commerce aspect reminiscent of Amazon’s, this also comes with additional costs. Lastly, there’s the cost and constant effort of playing the SEO game to increase traffic and potential customers. Meanwhile, listing your products on Amazon circumvents and expedites all of this.
Most of the early efforts of deciding to list products on Amazon or not are simple mathematical equations. The above links should help save you an hour or so scouring Google for your variables. If the math works out in your favor, get your products on Amazon ASAP. Working with a reputable agency like Defero can help increase the revenue volume and profitability of your efforts. The longer you wait, however, the greater the potential for market trends to shift against your favor. As the former dotcom businessman Seth Godin once said, “there’s no shortage of remarkable ideas, what’s missing is the will to execute them.”