If you’re going to sell products online, one of the first decisions you have to make is which platform to use. Many sellers choose to use Amazon because of its popularity and its many features and benefits. Other choices include eBay, Etsy, and Alibaba. Of course, you can also use a shopping cart such as Shopify and sell products independently. In this article, we’re going to focus on the pros and cons of Amazon, which is the most popular choice. To some extent, the issues we discuss here also apply to other large platforms such as eBay and Alibaba, though each has its own rules and fees.
There are many good reasons that Amazon is the world’s biggest online retailer. A great deal of the volume is driven by third-party sellers who use Amazon to sell their own products as well as items that are bought wholesale or drop shipped. Let’s look at some of the main benefits of selling on Amazon.
- Size of the marketplace. Amazon is the first place many customers look when they’re searching for a product. There are over 300 million active accounts with more people signing up every day. If you’re looking for the largest volume of potential customers, you can’t beat Amazon.
- Instant credibility. Even if you’ve just set up your Amazon store yesterday, you gain the automatic credibility of being affiliated with the retail giant. Of course, individual sellers have to establish their own trustworthiness and they have to sell products that are well rated. But having a place on Amazon is a powerful first step towards building trust.
- Sell globally. Amazon provides the simplest way to start selling your products in different countries. With established marketplaces in many countries, you can increase your profits without much extra effort.
- Benefits of using FBA. Fulfillment by Amazon lets you stock products with Amazon (if you have a professional seller’s account). This is especially good for selling to Amazon Prime customers, who can receive items very fast from one of Amazon’s many distribution centers.
These are some great reasons to sell your products on Amazon. So why doesn’t everyone do this? There are some drawbacks as well.
- Commissions. The benefit of Amazon’s vast resources and marketing comes at a price. Commissions vary depending on products and categories (and these change over time) but you can expect to pay between 8% and 15%, which cuts into your profits.
- Competition. Chances are, whatever you’re selling on Amazon, others are selling as well. This means that you’re competing directly against other sellers. Getting your items featured isn’t easy, especially when many people are selling the same item.
- Hijackers. This is a growing problem on Amazon. Unscrupulous sellers will find successful products, copy the names, descriptions, and photos and sell knockoffs at a lower price. This can happen anywhere, but it’s most common on Amazon. You can report this and Amazon is trying to put a stop to it, but it’s an ongoing issue.
- Limited branding. Selling on a major marketplace like Amazon is a double-edged sword. On the one hand, you have the trust, authority, and traffic. On the other hand, people are visiting Amazon, not your personal site. They can comparison shop and buy from a competitor. Even if they do buy from you, they may only remember that they bought something on Amazon rather than from you.
Is it Better to Have Your Own Ecommerce Site?
Some people believe that the disadvantages of Amazon and other large sites outweigh the benefits. However, there are also pros and cons to creating your own personal site. When you do this, the pros and cons are essentially reversed. You lose the advantage of selling on an established, high traffic website that everyone trusts. On the other hand, you save money on fees and you have the opportunity to build your own brand.
Of course, it’s not quite that simple. If you sell on Amazon, there are ways to build your brand. Just as power sellers on eBay go to great lengths to get loyal customers returning to their store, successful Amazon sellers do the same. One big advantage to selling from your own site is that you can build a customer email list, which Amazon prevents you from doing. This is a major branding tactic that is very useful for building a long-term business. However, you can still create a strong brand on Amazon with a memorable name and logo and providing great products and customer services. There are definitely Amazon sellers with loyal customers. There’s no doubt, however, that you can take brand building to much greater lengths with your own site.
Still another factor to consider is that it takes more planning and work to set up your own website. With Amazon, you can start off with a highly professional look (though even with Amazon, you have to choose the right layouts, designs, and colors). With your own website, you’re building from scratch. On the other hand, with templates provided by Shopify and other shopping carts, this is now much easier than ever before. But it’s still a bit more work than simply setting up on Amazon.
Should You Sell on Amazon?
There’s no one right answer to whether you should sell on Amazon, another third-party platform or on your own website. Every seller has to weigh the pros and cons. One thing to keep in mind is that no decision requires a lifetime committment. Many sellers find that Amazon is the best place to start. You can get some targeted traffic with limited marketing and gain experience. It’s always possible later on to build your own ecommerce website. Then, there are also highly successful sellers who start with Amazon and never look back!
It really comes down to your personal preferences. If you’re just starting out, the one caveat to keep in mind with Amazon is to make sure your profit margins are workable after factoring in Amazon’s fees. This puts some additional pressure on you to find items at low prices if you buy them wholesale or drop ship them. In conclusion, it’s up to you to carefully consider your options. In some cases, you have to experiment and find out for yourself what the best solution is for your particular business. It’s best, however, to start off with a clear idea of the pros and cons of Amazon.