Using Amazon for business can greatly improve your company’s reach and revenues. But at the same time, it adds new risks, variables, and costs. Will it help your business grow, or go down in the books as an enormous mistake?
Last updated 10/5/2018.
The Basics of Competing on Amazon
Whether Amazon is your business’s first foray into ecommerce or just one more step in expanding your online presence, you’ll need to think differently about how you compete.
Unless you have a new product, you won’t create your own listing. Amazon will simply add your offer to the list of other sellers’ offers for the same product. This saves time, but prevents you from competing on the quality of marketing materials like photos and product descriptions.
That means that you’ll have to think outside the box with your marketing. Rather than competing on grabbing the customer’s attention, most effective Amazon selling strategies involve competing on price, options, and quality of service. (If you do plan to list your own unique products, read these Amazon seller tips on creating competitive listings.)
You also can’t use Amazon to drive traffic to your other selling channels. Everything you put up on Amazon and every interaction with your customers there has to be designed to make more sales on Amazon itself.
Finally, Amazon gains some control over your pricing on other platforms. Section S-4 of the Amazon Services Business Solutions Agreement (previously known as the General Pricing rule) states that you can never sell anything online at a lower price than you offer on Amazon. So if you ever raise your price on Amazon, you have to raise it on your own site as well.
Fees and Expenses
The cost to sell on Amazon is notoriously high, typically making it more expensive than eBay or just about any other online marketplace. These high fees and the intense competition even lead many to ask, “Can you make money selling on Amazon?”
The answer, of course, is that you can—with about 3 million sellers, Amazon hosts a horde of successful businesses. You just need to take the time to learn Amazon’s complex fee structure (which typically eats up about one-third of your selling price) in addition to standard ecommerce expenses like packaging costs and shipping and handling costs.
Keep these fees and expenses in mind when deciding what to sell on Amazon. You can only sell items with healthy margins; anything with a narrow margin in a brick-and-mortar store will sell at a loss after shipping, handling, and Amazon fees.
Using Amazon for Business
With all of these issues, it can be difficult to make money selling on Amazon. Yet the immense benefits of selling there ensure you’ll make huge profits if you can figure it out. This is the web’s largest marketplace and the home of many of its most affluent buyers, after all!
Here are a few ways to ensure that Amazon will work for your business:
Cherry-Pick Your Products
Ignore the temptation to list your entire selection on Amazon. As mentioned earlier, low-margin products will only cost you money. You’ll also want to avoid selling low-quality products that could incite negative reviews and expensive returns.
Sell only good products with good profit margins. This will ensure Amazon stays a source of profits rather than becoming a drain on your business.
Automate As Much As Possible
Selling on Amazon can be a labor-intensive mess of micromanagement and constant fiddling. Considering how much it already eats into your margins, letting it also consume your time can take away any value it has for your business. Let software pick up the slack so you can stay focused on the big picture.
Amazon repricing software can save you from getting manually and emotionally involved in price wars. It can undercut your opponents when appropriate, raise your price when customers are willing to pay more, and improve your odds of winning the Buy Box. Your inventory will always sell at the best possible price without taking up your valuable time.
Using a powerful CRM like Freshdesk or Zendesk can make customer service for Amazon easier. Not only do they include useful automation features, they let your team handle customer requests from Amazon, eBay, and your own website in one place—if you use the right Amazon integration.
With a major retail operation, any one of these programs can easily save you the work of a full-time employee—or even the majority of a department. They let you capitalize more and more on operational efficiencies.
The end result? Rather than becoming slower and clumsier as it gets bigger, your company will only grow more agile.
Use It as Just One Branch
If you want to really succeed online, don’t limit yourself to Amazon. Selling on eBay and Amazon simultaneously can greatly expand your audience. It can be equally beneficial to create an online store rather than depending entirely on the marketplaces.
Most of the aforementioned automation software can manage all three of these channels. Selling on more than one therefore requires a fraction of the work you’d normally expect. Once you have the infrastructure up, there’s no reason to limit yourself to one place.
Using Amazon for business can take a lot of research and setup work at first. But once you get there, it can become a river of revenue that requires minimal management. Expanding to sell there could be one of the best decisions your company ever makes.