The year 2023 marked a major success for Amazon, with global net sales reaching nearly $575 billion. This statistic highlights Amazon’s dominance, making it one of the most valuable brands worldwide In the US alone, Amazon sellers moved over 4.5 billion items last year, averaging 8,600 items sold per minute.
Given these numbers, Amazon’s support and opportunities for sellers are extensive. However, these benefits come with risks, such as intense competition, policy strictness, and high fees. According to recent Amazon statistics, understanding the platform’s dynamics is crucial for sellers looking to succeed.
In this article, we will explore if selling on Amazon is worth it by exploring the pros and cons of selling on the platform and share insights and tips for managing these factors effectively. Let’s dive in!
Table of Contents
Understanding Amazon’s Marketplace
Amazon started out as an online bookstore back in 1995. Founder Jeff Bezos always had a bigger vision for it, though. He saw Amazon becoming an “everything store.” Within the first years of its operation, it was just an online store selling books exclusively, but as time went by, more categories of products were included.
As early as the 2000s, it became apparent that Amazon had its own distribution centers. The company did not enter delivery services with the same vigor until the mid-2000s. These changes laid the foundation for Amazon to become one of the largest e-commerce companies it is today.
Source: Statista
In 2023, Amazon was the top online retailer in the United States, holding 37.6% of the market and being the third largest by revenue. It was also the fourth tech company to hit a $1 trillion market cap, and as of June 2024, Amazon’s net worth was $1,944.89 billion.
Seller Demographics
Amazon’s diverse marketplace has a wide range of sellers and products. Here’s a breakdown of the types of sellers you’ll find on Amazon:
- Individuals: Many people start selling on Amazon as a side hustle. They often sell niche or handcrafted items.
- Small Businesses: These sellers range from mom-and-pop shops to growing startups. They often use Amazon to reach a larger audience.
- Large Brands: Big companies also sell on Amazon. They use the platform to exploit its vast customer base and advanced logistics.
Popular categories of products on Amazon marketplace include:
Product Category |
Description |
| Electronics | Gadgets, accessories, and smart devices |
| Books | Physical books, eBooks, and audiobooks |
| Home & Kitchen | Appliances, furniture, kitchenware, and home decor |
| Clothing | Apparel for men, women, and children |
| Toys & Games | Children’s toys, board games, and puzzles |
| Beauty & Personal Care | Skincare, hair care, and cosmetic products |
| Health & Household | Vitamins, supplements, and household supplies |
| Sports & Outdoors | Fitness equipment, outdoor gear, and sporting goods |
5 Major Pros of Selling on Amazon
Let’s review the most prominent benefits of selling on Amazon marketplace:
1. Massive Customer Base
One of the major merits of selling on Amazon is getting exposure to many customers.
Today, the platform has over 310 million customers, which means the online Amazon store you create has the potential to reach millions of people. In April 2023 alone, Amazon received 2.2 billion visits, showcasing just how many people frequent the site.
This sheer volume of traffic can make you wonder, is selling on Amazon worth it, given the potential for high visibility and sales? The answer is definitely yes. According to Amazon statistics, this massive traffic can help you boost your sales and online presence.
Also, sellers are in a position to harness customers’ strong brand perception of Amazon, which can assure them of a good deal as they are buying from a reputable seller.
2. Access to Fulfillment by Amazon
One key merit of selling on Amazon is the ease and efficiency of the Fulfillment by Amazon feature. With FBA, you simply send your products to Amazon’s Fulfillment Centers, and Amazon takes care of the rest. They handle storage, packing, shipping, and delivery, utilizing their strong logistics network for fast and reliable service.
In 2022, the Fulfillment by Amazon model gained popularity. Consequently, 64% of merchants opted to use Amazon’s logistics for the fulfillment of their orders.
Additionally, your products become Prime-eligible, increasing their visibility and appeal to millions of Prime members who enjoy benefits like same-day or next-day delivery. Amazon also manages customer service on your behalf, including handling returns and addressing customer inquiries.
As a newbie seller on Amazon, you can simply focus on growing your business while Amazon handles all the logistics and customer care. This removes the operational burden and helps you provide a seamless experience for your customers.
3. Marketing and SEO Benefits
Among the many advantages of using Amazon to sell your products, one that stands out is the marketing and Search Engine Optimization facilities available.
As an Amazon seller, you must use Amazon SEO services, which increase the organic discovery of your products on the platform. These services optimize your product feeds with relevant keywords, meta tags, descriptions, and more.
Similarly, it also enhances your conversion and click-through rates, as when customers search for something similar to your product, your products can show up in search results since they have matching titles or descriptions. When customers find relevance in your product listing, they will click on it more often, thus increasing the CTR.
And the best part is, Amazon’s search algorithm actually rewards you for creating detailed and relevant product listings by helping your products rank better on the platform.
4. Ease of SetUp and Scalability
The next benefit of selling on Amazon is the ease of setup and scalability. Getting started is simple, and Amazon’s platform supports your business growth
Steps for Account Setup:
- Visit the Amazon Seller Central website.
- Click “Register Now” and fill in your details.
- Provide necessary information, like bank account and tax details.
- List your products and start selling.
Amazon’s large customer base helps your business reach more buyers. To scale your business, you can easily add more products in existing categories or explore new ones.
You can expand to other Amazon marketplaces, like Germany or Japan. Amazon’s strong infrastructure allows you to start small and scale up quickly.
5. Access to Analytics and Tools
Lastly, as a seller on Amazon, you get access to the Seller Central Dashboard. The Seller Central Dashboard provides valuable insights and performance tracking, helping you monitor sales, track customer behavior, and identify growth opportunities. As a seller, your Seller Central Dashboard will show you the following metrics:
- Sales metrics like units sold, total sales, and order count.
- Traffic and conversion metrics like page views, sessions, and conversion rate.
- Performance metrics like Order Defect Rate, late shipment rate, and pre-fulfillment cancellation rate.
- Customer service metrics like return rate and customer feedback.
- Advertising metrics like Advertising Cost of Sales, Click-Through Rate, Cost per Click, and impressions
- Inventory metrics like inventory levels, restock recommendations, and fulfillment metrics.
- BuyBox metrics
Moreover, Amazon also synchronizes with many third-party solutions perfectly well while working hand in hand with many third-party applications. Those marketing tools help in inventory management, pricing techniques, and keeping track of reviews so you do not get left behind by your competitors.
5 Major Cons of Selling on Amazon
Now let’s look at the cons of selling on Amazon:
1. Fierce Competition
Popular categories on Amazon such as home and kitchen (35% of total sellers sell under this category) and beauty and personal care (26% of sellers) face marketplace saturation due to large number of sellers. This leads to price wars, where intense competition drives down profit margins as sellers undercut each other to attract customers.
Similarly, maintaining visibility amidst countless listings requires strategic marketing efforts and investment in ads, which can increase Amazon advertising costs if not managed carefully.
Amazon, without giving exact figures, suggests that approximately one million new sellers join the platform every year.
Currently, Amazon hosts over 9 million sellers worldwide, with 5 million operating from the US alone. This immense seller base contributes to the competitive environment, where differentiation and effective selling strategies are crucial for success.
2. High Fees and Costs Associated with Selling on Amazon
The second major disadvantage of selling through Amazon is the relatively high fees and the cost of operating within the marketplace.
Amazon charges sellers dedicated fees, referral fees based on product categories, fulfillment fees if the sellers choose to use FBA, and many more additional charges for other services, such as advertising.
It also offers two selling plans: an individual plan (costs $0.99/item sold) and a professional plan (costs $39.9 per month). With a professional plan, sellers can access basic features, post and manage their products in bulk, add multiple users to the account, set dynamic pricing, access all the optional Amazon programs, and more.
Understanding these costs is crucial because it makes you ask, is it worth selling on Amazon, given their impact on profit?
Further, there are some unknown charges, including warehousing charges if the product is stored for a long time or for removing product inventory that did not sell on the marketplace.
3. Very Strict Policies and Regulations
Amazon is a highly reputable platform known for its strict adherence to guidelines. Sellers who fail to comply risk account suspension. However, navigating these policies can be very cumbersome for new and seasoned sellers, and they might risk account suspensions.
Common grounds for account suspension include:
- Violating Amazon’s product listing policies (e.g., incorrect categorization)
- Poor seller performance metrics
- Violating Amazon’s review policies (e.g., offering incentives for reviews)
- Misuse of product reviews or manipulating customer feedback
- Price gouging or misleading pricing on the platform
- Violating Amazon’s communication policies with buyers
- Having multiple seller accounts without proper authorization
Moreover, Amazon frequently updates its policies, which can impact sellers’ operations and strategies. These changes may involve adjustments in product listing requirements, shipping practices, or seller performance metrics.
4. Limited Branding Opportunities for Sellers
Amazon imposes restrictions on how brands can be presented, limiting customization and brand control. Sellers have less flexibility in shaping their brand identity and customer experience compared to selling through their own platforms.
Additionally, Amazon retains ownership of customer data, limiting sellers’ access to valuable insights about their customers. This lack of direct customer relationships hinders targeted marketing efforts and personalized customer interactions. Consequently, this impacts the seller’s long-term brand-building and customer loyalty strategies.
5. Dependency on Amazon
Lastly and most importantly, the biggest concern for sellers on Amazon is their dependency on the platform for revenue. As much as Amazon gives sellers a massive outlet to customers, being limited to a single marketplace has its disadvantages.
Changes in its algorithms and operating policies result in sudden shifts in visibility and/or sales, which have an unpredictable impact on revenues. For example, changes in ranking factors might influence product visibility, while changes in policies might modify the criteria for product listing or the interactions with buyers.
To curb dependency risks, sellers often diversify their sales channels, including establishing their own e-commerce websites or selling through other online marketplaces.
How to Balance the Pros and Cons of Selling on Amazon as a New Seller?
“By understanding a problem thoroughly, you are halfway to solving it!”
In the same way, it is important to understand the pros and cons of selling on Amazon. To start, understand the benefits and challenges clearly.
Amazon’s vast customer base offers significant sales potential, and using Fulfillment by Amazon can simplify logistics and enhance customer satisfaction. However, high competition, fees, and strict policies are real challenges. Thus, whenever you are starting out with launching new products, begin with a few products to minimize risk and learn the platform’s dynamics.
Start with a small budget and use both automatic and manual campaigns to find effective keywords. Optimize your product listings with detailed descriptions, keyword-rich titles, and high-quality images to improve visibility and conversions. And monitor your pricing to stay competitive without hurting profit margins.
At last, always work towards diversifying your sales channels to avoid dependency on Amazon. To do so, explore platforms like eBay and Etsy or create your own website. Use the metrics from Amazon Seller Central to track performance and make informed decisions. By balancing these aspects, you can overcome all the challenges and build a successful business on Amazon.
Case Study: Rollie Shoes’ Amazon Success in Less Than 7 Months Using FBA
Vince Lebon, inspired by his flight attendant wife, created Rollie Shoes to offer comfortable footwear for long travel days. He launched the brand in 2012 and started selling on Amazon in Spring 2018. By October, Vince found that Amazon, their website, and dropshipping on Amazon with partners like Nordstrom each contributed equally to their online revenue.
Using Fulfillment by Amazon, Vince shipped select SKUs to Amazon, benefiting from its logistics and trusted customer base. Despite being new to the US. market, Rollie Shoes quickly gained traction. Vince’s experience with Amazon sales channels and strategic advertising helped Rollie Shoes achieve success on Amazon in less than seven months.
| Also read: Amazon 1P vs 3P: Which Selling Model Is Best for Your Business? How To Sell Furniture & Boost Your Earnings? |
Top 5 Tips for Success on Amazon
Tips always come in handy when you’re starting something new. Here are the top 5 tips you must know to be successful on Amazon as a seller:
Tip 1: Optimize Your Product Listings
You must always optimize your Amazon product listings with the following:
Effective Titles: Use clear, concise, and keyword-rich titles. Avoid adding irrelevant keywords and include key details like brand name, color, variant, quantity, etc in the title.
| Bonus: Learn more about Amazon Product Title Optimization |
Detailed Descriptions: Highlight key features and benefits in the product description. Use bullet points instead of lengthy paragraphs for better readability.
High-Quality Images: Use professional images that show the product from multiple angles.
Tip 2: Utilize Customer Ratings and Reviews
Make use of customer reviews and ratings to:
- Identify Product Issues: Identify the common issues customers are facing when using your product through reviews. Also, identify which aspect of the product the customers are most and least satisfied with.
- Manage Negative Feedback: Respond promptly and professionally to any negative feedback. Work on resolving issues to turn negative experiences into positive ones.
Tip 3: Use Advertising Wisely to Market Your Products
You can use advertising by investing in and implementing:
- Amazon PPC Campaigns: Target relevant keywords related to your product. Start with automatic campaigns to gather data and then refine with manual targeting. Regularly check campaign metrics like Advertising Cost of Sales, Click-Through Rate, and conversion rates.
- Budget Management Strategies: Monitor spending and adjust bids to maximize Return on Investment. Increase bids for high-converting keywords and reduce them for low-performing ones.
It is clearly visible that sponsored products are at the top of the search results.
Tip 4: Keep a Check on the Inventory
Always keep a check on your product inventory and maintain:
- Optimal Stock Levels: Regularly review sales data to forecast demand. It is advised to avoid overstock and stockouts.
- Use Fulfillment By Amazon: Consider Fulfillment by Amazon for efficient storage and shipping.
Tip 5: Stay Informed
Make sure to stay updated about:
- Policy Changes: Regularly check Amazon’s updates and policy changes to stay compliant and avoid potential issues. For example, if you are running a supplement store then it’s important to stay updated on the policy changes to avoid getting delisted or suspended.
- Seller Forums and Resources: Participate in Amazon seller forums and use available resources to stay informed and connected with other sellers.
Is Selling on Amazon Worth It: Final Verdict
As discussed above, selling on Amazon offers significant advantages. These advantages include access to a huge customer base, organized and smooth logistics through FBA, and advanced advertising tools. However, it also comes with many demerits, like high competition, fees, and strict policies.
The question remains the same- is selling on Amazon worth it? The answer is not that simple. Whether Amazon is suitable for your business depends on your ability to balance these pros and cons.
Evaluate your business needs, capacity to handle competition, and willingness to adhere to Amazon’s guidelines. If you find the balance manageable, consider starting your journey on Amazon and utilizing this platform to grow your business.
FAQs
1. Are there any advantages of selling your product on Amazon?
By selling on Amazon, sellers gain the advantage of Amazon’s brand reputation, extensive customer base, and reliable logistic support through Fulfillment by Amazon. It provides sellers with a vast reach through streamlined logistics and prime eligibility.
2. What common challenges can sellers face while selling on Amazon?
Selling on Amazon presents several common challenges for sellers. First, the marketplace’s high level of competition necessitates strategic differentiation to stand out among numerous similar offerings.
Second, Amazon’s fee structure, encompassing referral, fulfillment, and storage fees, significantly impacts profit margins. Third, effective inventory management is critical to meeting fluctuating demand without overstocking or running out of popular items. Lastly, managing logistics and ensuring efficient order fulfillment are vital to meeting customer expectations and maintaining operational efficiency.
3. How does fulfillment by Amazon work?
Fulfillment by Amazon (FBA) is a comprehensive service provided to Amazon sellers, streamlining the process from storage to delivery. With FBA, sellers send their products to Amazon’s fulfillment centers.
From there, Amazon takes over, managing all aspects of storage, packaging, shipping, customer service, and returns. This allows sellers to focus on growing their businesses while Amazon handles the logistics and customer interactions.
4. What costs are incurred while selling on Amazon?
FBA fees, referral fees, Amazon’s platform fees, subscription charges for new professionals, and advertisement expenses are some of the major expenses incurred while selling on Amazon. The seller must calculate these expenses when listing their products to make steady profits.
5. How does Amazon handle customer service and returns?
Amazon manages customer service and returns for sellers using Fulfillment by Amazon (FBA). This service includes free product support for customers.
When a return is initiated, customers can drop off their items label-free and box-free at convenient locations such as Amazon Hub or partner post offices. Once the returned item reaches the facility, it undergoes inspection for any damage. Amazon may opt to resell or donate the item depending on its condition.
6. What is ‘BuyBox’ on Amazon, and why is it important?
The Amazon ‘BuyBox’ refers to the left-hand side of the Amazon website where the “Add to Cart” and “Buy Now” buttons are located within a certain product listing. If buyers don’t choose a specific seller, the seller in the Buy Box gets the sale. A seller must be in the Buy Box since about 80% of Amazon sales happen through it.
7. How can sellers optimize their listings on Amazon?
Sellers can optimize their listings by thoroughly searching for and using the best and most relevant keywords. Detailed descriptions of the product also help reach potential customers. Using a keyword-rich title and incorporating high-quality pictures also optimize sellers’ listings on Amazon.
8. What are the advantages and limitations of using Amazon advertising tools?
Amazon offers different advertising tools and solutions, such as sponsored products, brands, displays, stores, etc. Utilizing Amazon advertising tools has many advantages, including visibility, better product circulation, and Amazon’s reputation as a strong and trustworthy megastore.
9. How does selling on Amazon impact brand visibility and control?
Selling on Amazon gives sellers a vast reach, hence increasing the brand’s visibility. But reaching a vast market comes with great responsibilities like managing supply chains, high competition, optimum pricing as many sellers are selling the same product, etc.
10. Which product category or product type is best suited to sell for Amazon?
Amazon sells every product niche, and most products are highly successful, but some low-demanded products struggle. Therefore, the seller must thoroughly research the product’s market size before listing it on the platform. The most commonly sold product categories on Amazon are kitchen and home appliances, beauty and personal care, and clothing and jewelry.
