The 4 Biggest Hurdles To Selling On Amazon (And How To Overcome Them)
If you’ve been paying attention to the growth and development of eCommerce, you know that it’s no longer enough to simply operate an online store. “Multichannel” is becoming the industry’s biggest buzzword. And in order to successfully compete with large businesses, you’ll need to explore expanding your shop across multiple selling platforms.
One of the quickest ways to take your online store into the multichannel world is to begin selling on Amazon. Accounting for a total 43% of all US online retail transactions, Amazon is one of the largest players in the eCommerce world. Listing your products on the marketplace can increase the visibility of your merchandise and can be a boon to your traffic.
In addition, selling on a marketplace in addition to your online store has been proven to boost revenue. On average, merchants who add just one marketplace to their online store experience a 38% increase in annual revenue.
But, while adding Amazon to your current online store can certainly be beneficial, it is by no means easy. You’re bound to encounter a handful of new challenges as you take this new step.
We recently reached out to merchants like you to learn more about their experiences adding Amazon to an online store, and we found a few common factors in their stories. Here are a few of the hurdles you can anticipate as you begin selling on Amazon (and a few ways you can overcome them).
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Anyone who has considered selling on Amazon knows that the marketplace comes with its own rules, regulations, and restrictions. And in the past year, Amazon has implemented even more rules in an attempt to reduce the number of fraudulent sellers in the marketplace.
These rules are crucial to Amazon’s success, but they can certainly be frustrating for newcomers. It’s often difficult to know what products you’re allowed to sell and how you’re required to list those products.
Ryan O’Conner, owner of One Tribe Apparel, expressed to us his frustrations with Amazon’s regulations:
“The first [challenge] is it’s an entirely new system with very specific and strict rules so you and your team have to take time to learn the system and policies. Some processes like creating your product files with child & parent SKU and ASIN numbers are extremely technical and I recommend you hire someone with experience to help you get setup as it will save you lots of time and headaches.”
Justin Laxton, Sales Manager for Weiner Ltd., has experienced similar difficulties with Amazon’s new rules designed to keep out phony merchants. He says:
“Thanks to many ‘scammers’ Amazon now requires certain information to be able to sell products in certain categories. […] we had and still need to provide vendor invoices, letters of authorizations, and other documents to Amazon.“
And if you decide to fulfill using Amazon’s FBA, things get even more complicated. Dustin Montgomery from Shippers Supplies says that the fee structure is one of the most difficult-to-understand aspects of selling on Amazon. (And after taking a look at Amazon’s explanation of fees, I’m inclined to agree.) Montgomery writes:
“One of the biggest challenges with selling on Amazon is simply understanding their fee structure. Different categories can have different fees, they collect the money paying out every 2 weeks, and Fulfillment by Amazon has its own world of seemingly random fees.”
In order to best approach Amazon, Montgomery recommends that merchants extensively research Amazon’s rules and fees. In addition, he says:
“Have someone on your team committed to making Amazon part of their job. You will need to stay on top of ratings and messages daily to gain a good reputation with users and amazon alike.”
I think Montgomery hits the nail on the head here. With so many elements to consider, you can’t expect your Amazon seller’s account to take care of itself. You’ll need to invest significant time and energy into understanding Amazon and complying with their rules and regulations.
One of the largest and most discussed hurdles of selling on multiple channels is making sure your stock information is accurate at every point of sale. Otherwise, you may end up selling products you don’t have on hand, which leads to upset customers and can potentially get you suspended from Amazon.
In order to resolve this issue, merchants often try to integrate their eCommerce platform with their Amazon account. While in many cases these integrations work great, unfortunately, they aren’t always a perfect solution.
The Suite Depot’s Esther Babayov can relate. According to Babayov:
“The inventory integration between the two online platforms is one of the most challenging parts when you’re just starting out. Also, Amazon has their own system in place, so as you’re integrating your inventory, there will be all sorts of errors and other technical issues that you’ll have to deal with, something that you likely don’t have to contend with on your own site.”
While Babayov had difficulty with Amazon’s end of the integration, Justin Laxton couldn’t get his systems to integrate in the first place:
“Our current inventory control system does not integrate directly with Amazon. As such, we aren’t able to offer ‘real-time’ inventory. As of today, we’re only offering a small percentage of our products on Amazon and we’re only listing a small quantity of each product that we know we’ll always have.”
Clearly, integration isn’t always as easy as you might hope.
At Merchant Maverick we believe an ounce of prevention is worth a pound of cure. The best way you can avoid integration issues is by choosing an eCommerce platform that already provides a tried-and-true integration with the marketplace of your choice.
eCommerce expert Krista Fabregas of Fit Small Business has similar advice:
“To overcome this challenge, you can use top online store platforms like Shopify and BigCommerce which have a built-in Amazon sales channel. This connects your online store data directly to Amazon so you can manage all of your product listings, sales, inventory, and shipping for both Amazon and your website from one central hub.”
Of course, at this point, you may not have the option to switch platforms. That’s perfectly understandable, albeit a bit of a hindrance. Fabregas recommends that, in this case, you use a third-party integration to connect your platforms:
“If you use a store platform that doesn’t directly integrate with Amazon, third-party inventory and shipping solutions like Ordoro will tie your web sales, Amazon sales, inventory, and shipping together in one place.”
But, if you’re in the beginning stages of setting up an online store, you might want to check out some all-in-one SaaS solutions. They offer as many integrations as you could ever need, and they’re often quite reasonably priced. Take a look at our top recommended eCommerce platforms for more recommendations and our Beginner’s Guide to Starting an Online Store for step-by-step advice on getting started.
When you sell on Amazon, you must comply with Amazon’s rules. And those rules make it very difficult for you to promote your brand. You are not allowed to include much information about your business on your product pages, and if you choose to use FBA, you won’t be able to include any branded inserts in your shipments.
Eli Williams, the owner of Foundry35, lays out for us exactly how Amazon makes marketing difficult:
“Amazon’s seller policies prevent sellers from capturing email addresses, marketing to customers, or even including promotional materials inside shipments. This can make it difficult to connect with your customers, and many customers don’t even understand that they’re purchasing from a 3rd party at all.”
In fact, if you’re shipping with FBA, your products will be shipped in Amazon’s branded boxes, which can be even more confusing for your customers. Your only alternative is to pay extra to ship using blank, unbranded boxes.
Williams suggests tackling this restriction by doing everything you can to promote your brand while staying squarely within Amazon’s regulations. His advice:
“Getting a suspension isn’t worth the risk, but you should still include packing slips with your logo and send follow-up emails (to customers who haven’t opted out) to ensure the transaction and delivery went smoothly. Introduce yourself in the follow-up outreach, and create brand awareness with excellent customer service. That’s the best way to ensure lots of positive feedback and increase overall brand awareness while avoiding a costly suspension.”
In addition, you should make sure that your online store fills in all the information you can’t include on your Amazon product listings. Write an engaging “About Us” page, answer any product questions on a FAQs page, and make all of your promotions and discounts loud and clear. Many Amazon sellers find that customers navigate to their online stores from Amazon to find out more before they purchase. You’ll want to make sure the information you provide on your website is as clear and engaging as possible.
In short, you should do what you can to promote your brand on Amazon and use your online store to fill in the gaps.
Lower Profit Margins
Competition is both a blessing and a curse. In exchange for increased traffic on Amazon, you’ll have to sacrifice some of your profit margins. Not only will you have to continually change your prices to compete with other sellers (who are potentially selling identical products), but you’ll also have to pay a portion of your profits to Amazon.
Montgomery of Shippers Supplies spells it out:
“It can be a challenge to try and price your products competitively with other sellers on Amazon. You probably have a pretty comfortable price in your own store, but selling with Amazon a good chunk of that profit goes to them. You may have to raise your prices to sell there at all. You may have to raise your prices again to offer the “Free” 2 Day Shipping that everyone enjoys as well.”
Prime shipping is a huge draw for customers, and you may find that customers prefer to purchase on Amazon in order to take advantage of free shipping. Robert Lomax of RSL Educational says:
“The main challenge of selling on Amazon and through a website is that people who like the products on our site tend to migrate across to Amazon to purchase – where our margin is considerably lower. This has become more and more of a trend, the more widespread Amazon Prime has become.”
Of all of these complaints, lower profit margins are perhaps the most worrisome, especially if you’re losing your online store traffic to Amazon.
Sadly, our “solution” to this dilemma is more of a consolation. If you’re going to sell on Amazon, you’re going to have to accept lower profit margins. That’s just how the marketplace works. However, you should keep in mind that Amazon allows you to make more sales than you would otherwise make with just an online store.
In addition, you should work to make your online store as inviting as possible for any customers who may be debating where they should purchase your products. A strong sense of brand can encourage customers to buy on your site instead of on Amazon.
Lomax solved his profit problems by creating an appealing shopfront with plenty of free materials, videos, and blog posts. He says that customers who view his online store often make additional purchases. However, he goes on to say:
“My main advice for merchants thinking of moving to Amazon is to make sure that their finances and structures can cope with an increase in sales volume and a squeeze on their margins; also be ready for a decrease in direct website sales. It’s also wise to be as diversified as possible (and fight to keep this diversity alive): try to avoid becoming too dependent on the Amazon revenue stream.”
In short, keep selling on Amazon (even despite those pesky lower profit margins), but do what you can to beef up your own online store to make it more appealing to potential customers.
Take a look at my article on Startup Nation, “3 Ways to Build an Engaging Website and Reduce Bounce Rates” to learn more.
Taking the Plunge
With so many challenges to overcome, selling on Amazon may seem like more trouble than it’s worth. However, all of the merchants we talked to agreed on one thing: the added traffic and revenue from Amazon is worth the effort.
Babayov sums it up nicely:
“From a marketing perspective, it makes sense. Although you’re paying hefty fees to Amazon, at the end of the day Amazon is driving sales that you would otherwise not make.”
In every case, some sales are better than no sales. So, if you’re considering adding Amazon to your online store, I say, “Go ahead!” It’ll take research, effort, and (likely) a bit of coding, but it’ll be well worth the investment.