It’s impossible to use the internet in 2021 and not interact with Amazon at some point. The company accounts for nearly 50% of all e-commerce sales each year, more than eBay, Walmart, and Apple combined. At first glance, it may seem like a no-brainer that e-commerce brands should sell on Amazon. However, hidden in those figures are a number of obstacles that could make selling on Amazon more hassle than it’s worth, both in the short term and the long run. Let’s run through the most important pros and cons to answer the question, “Is selling on Amazon worth it?”
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The Reasons for Selling on Amazon
Amazon has a massive base of consistent shoppers
It’s almost impossible to overstate the presence of Amazon in the world of online shopping. According to CNBC, it’s a common stop for most consumers, even if they don’t end up buying on Amazon — 9 of 10 shoppers report using Amazon to price-check items before they make the buying decision. It’s the first place many shoppers visit when they realize they need or want a product, in part because Amazon’s size allows it to offer many products at a lower price than other retailers.
Additionally, Amazon boasts over 100 million Prime members, who have paid a premium for the ability to shop on Amazon with fast and free shipping. Simply put, Amazon is the busiest marketplace on the internet.
Gain visibility for smaller or newer e-commerce brands
Creating a brand store on Amazon for your e-commerce business can help generate exposure, bringing your brand and products to a broader audience than you might find with your site alone. Additionally, you can gain access to an international audience, thanks to Amazon’s status as a trusted retailer worldwide.
Control your brand’s presence online
One issue that some e-commerce brands face in the age of Amazon is third-party sellers buying up products at wholesale prices to sell at a premium on Amazon. Brands that don’t directly control their distribution can find themselves undercut by their products available at a better price on Amazon. If you get ahead of the game and start selling on Amazon early, you’ll already own your brand on the platform — no pretenders to siphon away your profits.
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Low marketing costs within the Amazon market
When asking yourself, “Is selling on Amazon worth it?” you should consider the marketing opportunities that Amazon provides its sellers to advertise within the marketplace. It’s possible to create sponsored products that appear at the top of search results pages and on product pages for similar items, which can go a long way toward increasing your products and brand visibility.
The Reasons Against Selling on Amazon
Sellers can’t leverage Amazon customer relationships
When you sell an item directly from your e-commerce storefront on your brand website, you usually have the opportunity to collect that customer’s information, which you can use for remarketing and retargeting down the line. Unfortunately, when you sell a product on Amazon, this is not the case. Customers who buy on Amazon remain Amazon customers, even if they purchase from your brand shop. This means you don’t get the chance to manage and grow that customer relationship like you can with your own customers.
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Fees and commissions can be detrimental
Amazon does impose fees on sales you make through their platform, which can cost up to 15-20% of the sale amount. This can be harmful to smaller brands, as those fees result in lower profits on every sale. The same is true of Amazon’s free shipping promises, which are often kept at the brand’s expense. Many e-commerce brands simply can’t afford to sacrifice their profit margins, especially if they offer a very niche product with high up-front production costs or small margins. It does you no good to sell a product on Amazon if you can only break even on each sale.
Unless you offer a one-of-a-kind product that isn’t provided in any form by another brand, you’re virtually guaranteed to face serious competition in the Amazon marketplace. With so many brands all assembled in one place, the chances of a customer finding your brand and choosing your version of a product is inherently low — especially with the sheer array of lookalikes and imitators hoping to take sales away from your brand.
Inventory and order management can be a hassle for smaller brands
Don’t forget that selling on Amazon will create more complexity in your inventory and order management. Sellers don’t actually manage the shipping for orders placed on Amazon. Instead, brands must ship a portion of inventory to Amazon, who will fulfill any orders out of their own warehouses. In some ways, this could be an advantage, but for smaller brands that rely on one or two people for inventory and order processing, it adds another task and separates the order stream into two lanes, each of which needs management.
Don’t Rush Into It
For many e-commerce brands, especially larger retailers, selling on Amazon makes a lot of sense — it offers more sales, greater visibility, and simple, affordable tools for marketing within the platform. However, several drawbacks can be incredibly challenging for smaller or younger brands trying to establish themselves without sacrificing profit. If you’re wondering, “Is selling on Amazon worth it?” take into account all of the pros and cons before you get started.
Wilson is the Sr. SEO Marketing Manager at AdRoll.