Amazon has been quite easy; get a fast moving product with good margins, list and smile all the way to the bank! Amazon’s vast reach and audience makes business easy for you, right? Countless beginners have learnt how to use Internet Retailers to get that starting boost. They have narrated of selling tens of units in the first few weeks with only less than 5 items listed and zero reviews on Amazon. That is right, that is how powerful Amazon is. But here is the thing; if it’s that easy to get started on this platform, it means that there is a flood of “me too” vendors.
What Amazon does is get you addicted to their marketplace and wholly dependent on their systems. Sure, they are working now what about in the long term? A good number of ecommerce business owners think that it is wise to promote your own branded site even as you ride the Amazon wave for as long as it lasts. This is because one little change in Amazon’s system can kick you out of business, so you need a backup plan.
Fulfillment by Amazon (FBA) is a business model whereby the ecommerce platform handles storage of your stock, packing, shipping and the necessary customer support for each item. All you need to do is list your items on the platform and Amazon handles the rest for you. Some of the reported common issues with FBA are listed below.
Amazon is known to private-label best sellers and competes with merchants who have enlisted on the platform. Most products that were listed on the Amazon Basic Program are now being sold directly by Amazon as private label documents. This means that Amazon uses you as a guinea pig. Once they establish that there is indeed a good market for your niche, they are not afraid of introducing their own products in that niche to compete with you.
There are a myriad or reasons why Amazon bans accounts. In most cases, you may not get a chance to explain or stop the banning. This means that if you are depending entirely on Amazon to make sales, you would be in trouble if your account gets banned. Here is a perfect example; Peters Vs Amazon - legal case accusing Amazon of suspending accounts and holding on to money. Therefore, it is advisable to work on having another platform on which you can sell your items.
Here’s the thing; some merchants offer their items for free in exchange for reviews. This has caught the attention of the platform. Sooner than later, there might be a crackdown on these fake reviews. This is likely to be sorted out by a simple algorithm, more or less like Google’s penguin. If this happens and the algorithm sweeps in, how much of your reviews will remain on your account? Since they are not manual, the algorithm can sweep way even genuine reviews that may not meet the set requirements. As such, you may be one algorithm change away from lower sales. There have been cases, however, of accounts blocked on Amazon over some bad reviews. Needless to say, Amazon has become stricter on several issues than it was two years ago.
One thing about Amazon is that if you are out of stock, your sales ranking drop significantly. Te truth is, people who make purchases on Amazon usually search the product they want as opposed to specific brands. Therefore, if your sales rnking drops, this means that your competition will get the clients. It might take you some work to gt back your sales ranking after restocking. With your own platform, however, nothing changes. You simply take pre-orders and extend the shipping time with a few days to cover your operations. With Amazon, you have to stick to set service level windows or get banned.
To access Amazon’s vast customer base, as a retailer, you are required to pay 15%. That doesn’t sound like too much, especially since you will get access to one of the world’s biggest platforms. But before you get all excited, consider how much your margins are. In most cases, the profit margins are about 20%, at most, 30%. Imagine giving Amazon 15% when you have a 20% profit margin? That is three times what you’ll get in profits! Additionally, there have been several cases of delayed payments to sellers. We’ve seen a number of sellers sue Amazon in a class action for delayed disbursements. Amazon is a great platform to market your brand. However, if you are looking for profitability and cash flow, it is best to have your own platform.
Amazon, despite the current and potential pitfalls, is still a river of revenue! Retailers who are on Amazon can attest to the massive gains of being on the platform. Truth is, with little marketing, you will be selling loads of units just because of tapping into the platform’s enormous reach, especially with new features such as Program with Amazon Business being launched frequently to improve how business is done. But don’t get carried away; remember to grow your own platform as well. This is essential in mitigating the risks associated with selling on Amazon.
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