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Is selling on Amazon worth it in 2022?
Let’s look at the stats: Amazon generated $108.5 billion in revenue by Q1 and is expected to bring in a massive $488 billion by the end of the year.
56% of that revenue was generated by third-party sellers—a 50% increase from last year. This indicates that an increasing number of small to medium-sized businesses are the catalyst for much of Amazon’s explosive growth.
You too have an equal opportunity to set up a thriving online business on Amazon. But before you begin, there are a few things to consider before deciding to sell on the largest online marketplace on Earth.
Before jumping on the bandwagon, it’s imperative you understand how the marketplace functions. Knowing how businesses operate on the platform lets you:
There are two different types of sellers on Amazon: A first-party (or 1P) seller and a third-party (or 3P) seller. In first-party selling, you act as a wholesale supplier for Amazon which operates more or less like a retailer. This ‘off-hand’ method of selling lets you leverage Amazon’s brand name and maintain steady sales, albeit at low-profit margins.
In third-party selling, sellers have complete control over every facet of their business. You must manage and look after everything from product research all the way to customer support. 3P sellers have greater control over their businesses as well as bigger profit margins.
We recommend that you choose third-party selling. Not only do you get to eat a larger piece of the pie, but 1P selling is only possible after receiving a direct invite from Amazon.
Just as there are different types of sellers on Amazon, so are there different ways to sell. These ‘selling models’ are:
Private label is arguably the most popular selling model and the one you should opt for as well. It promises the greatest potential for growth as well as the ability to create a business that is truly your own.
This brings us to an important question.
As a general rule, it is not illegal to resell products on Amazon. Multiple sellers can offer the same product and by virtue, operate using a single product listing. With a level playing field, the buy box (to have all customer orders redirected towards you) rotates equally between sellers.
Factors that increase the chance of obtaining and keeping the buy box include price, fulfillment method, and seller performance. Because anyone can resell the same product, dozens or more sellers begin to compete on price resulting in long and drawn-out price wars. Soon, the business becomes unsustainable and simply not worth the time.
Sellers may also obtain exclusive sourcing rights or become authorized distributors. It frees them from the endless struggle to win the buy box. However, this route requires considerable effort, luck, and considering the advantages of private label selling, is an option best left forgotten.
Creating an Amazon seller central account is easy. You can sign up using a personal email account or your Amazon customer account to start selling. Make sure you have the following with you to successfully complete the onboarding process:
And that’s it.
The next step is to choose a selling plan. You have two options: Individual and Professional. If you’re new to online selling and don’t want to fully commit, choose the Individual plan. That way, Amazon will charge you $0.99 per sale instead of a fixed $39.99 per month fee as is the case with the Professional plan.
The Seller Central dashboard is filled with all sorts of helpful features. If there’s something you don’t understand, the search bar at the top right corner of the screen can help. Just type in whatever you want to know about and the relevant information will appear.
Amazon only allows one seller central account per person. Exploiting loopholes and creating multiple accounts may result in a permanent suspension of one or both of your accounts. Exceptions may be made in rare cases where there’s a legitimate business need. For more details on this you can get in touch with Amazon customer support.
A lot has been made about Amazon gating certain product categories. Given the increase in the number of counterfeit goods sold on the website, it’s hardly surprising that some categories require approval to sell. The ungating process can be long and tedious to some but worth the effort for others.
If you’re an established seller without an online sales channel and the goods that you sell are gated on Amazon, it’s definitely worth requesting approval. Product and category restrictions exist to prevent the sale of low-quality goods; however, Amazon is welcoming to reputable sellers that boast a successful track record—online or offline.
Take, for example, the Fine Jewelry category which is notorious for having an incredibly strict approval criteria. However, there are very few competitors but plenty of customers willing to purchase authentic products. The same applies to other restricted product categories like Sports collectibles, Watches, Coin collectibles, and more.
Note: Here’s an extensive guide on getting ungated on Amazon!
There is no one-size-fits-all category approval process. It differs from one category to the next. Details regarding the category ungating process can be viewed on Amazon’s official page. For ungating gated products, select the show limitations options when applying to sell a new product. Then, submit the required documents.
It doesn’t take long for someone to realize that running an online business is infinitely more convenient than a brick-and-mortar store. Create product listings, ship inventory, start advertising, and you’re good to go. But if that’s all there is to it, Amazon wouldn’t be too different from, let’s say, eBay or Shopify.
There are many things Amazon does better than other online marketplaces. However, what sets Amazon truly apart is the ace up its sleeve: FBA.
FBA or Fulfillment by Amazon is a service available to third-party sellers through which they essentially outsource the shipping process to Amazon. Selling via FBA lets you benefit from:
These advantages come at a cost, or rather a percentage-based FBA fee. You could, of course, fulfill orders yourself (also called FBM or Fulfilled by Merchant). However, it makes much more sense to let Amazon handle the heavy lifting while you manage and grow your business from the comfort of your home.
Logistics talk aside, selling via FBA also lets you leapfrog over FBM sellers and gain an extra bit of the limelight. We mentioned earlier how the choice of fulfillment method was a weighty factor for winning the buy box. Amazon gets to make more money via FBA and rewards such sellers with increased visibility.
Note: The FBA fees vary according to product size and weight. Check out this in-depth guide on Amazon seller fees if you want to know more.
In our opinion, the convenience offered by FBA is well worth the fees. FBM can prove to be the better alternative in specific situations. For example, if you’re selling large dimensional products, the FBA fees can run pretty high. Also, if you’ve already got a shipping logistics network that proves cheaper than FBA, go for self-fulfillment.
When you’re the largest online marketplace in the world (and also a part of Big Tech), you are bound to have your fair share of critics. These may include disgruntled former employees, sellers whose business went bust, or people just looking to rack up their YouTube subscriber count. In any case, let’s address some of the most popular arguments made against selling on Amazon.
A common argument we hear is that the high level of competition on Amazon nowadays makes it too difficult to succeed. That’s because Amazon has 1.5 million active sellers across almost every continent on earth. A large chunk of these sellers are in the US, making Amazon.com one of the most seller-saturated online marketplace.
Our Response: As experienced FBA sellers ourselves, we can confidently say that an abundance of sellers does not equal a lack of opportunity. Amazon has around 36 product categories that branch into sub-categories which further branch into more. Now, if you’re a new seller selling generic products and targeting broad keywords, carving out your own space will be difficult, to say the least.
A smart tactic is to begin by targeting a niche that has high demand, low competition, and requires a relatively low budget to start.
Once you begin to gain a foothold in your respective niche via advertising and listing optimization, you slowly begin to experience steady sales. Over time, your business becomes profitable as organic orders start to flow in. It’s at this stage you can consider expanding your product line to compete against more established sellers or venture into an entirely new niche.
And who’s to say you can or should only sell in your local marketplace? The new age of Amazon selling is witness to upstarts venturing into foreign marketplaces. Regions like Amazon Australia and India are great places to start building your empire. That’s because, at this moment, they have immense potential for demand and very few sellers to answer the call.
Note: before you dive in, make sure to partner up with a seller toolkit capable of offering complete functionality in these relatively new marketplaces. An ideal candidate is Zonguru--fully functional in 10 marketplaces including Amazon India and Australia.
Product reviews are hard to come by and selling on the most “customer-centric” company in the world works against you. Receiving negative feedback for something that may not necessarily be your fault results in harsh penalties. On the other hand, increasing your positive review count is far from easy. The problem becomes worse if the top sellers in your niche have thousands of 4.5 to 5-star average ratings.
Our Response: Increasing your product review count is easier today than it was a few years ago. For starters, the focus shouldn’t be so much on the number of positive reviews as it should be on sourcing and offering a quality product. If the product you’ve listed is superior to your competitors, positive reviews and ratings will soon follow.
Secondly, sellers also tend to make mistakes when it comes to creating product detail page content. Bold claims, inaccuracies, and incorrect product descriptions aren’t going to win you any favors with the customers—expect one to three-star ratings. Being transparent with the target audience is key to winning trust, not to mention responding to queries on time.
Finally, there are tools out there to help you increase your product review count, like Zonguru’s Review Automator, for example. It reminds buyers to leave behind a product review all while remaining within Amazon’s Terms of Service. A convenient solution to a seemingly insurmountable problem.
Amazon is one marketplace you don’t want to have a bad reputation on. There’s a whole list of seller guidelines you’re expected to abide by. What’s more, the set of rules are prone to change with little to no notifications given to sellers.
Our Response: It’s no secret that Amazon has what appears to be an endless list of dos and don’ts for both first and third-party sellers. However, this has little to do with Amazon wanting to impose a totalitarian rule and more to do with protecting the interests of both buyers and sellers. As a marketplace grows, it invites all types of sellers, some of which don’t really care about the code of conduct—they’re in it to make a quick buck.
The result is IP infringements, replicas, and counterfeit items flooding the market. To ensure both buyers and sellers are safe (and also protect its brand image in the process), Amazon imposes strict guidelines to prevent unethical behavior. As long as you’re not intentionally trying to break the law, Amazon has no reason to make your life difficult. After all, when the seller succeeds, so does Amazon.
Pro tip: Before you start selling on Amazon, go through its Seller Policies and Seller Code of Conduct page.
In summary, the reason why people tend to warn against selling on Amazon is either due to misinformation or their own negative experiences on the platform. Work smart, stick to the seller guidelines, leverage seller toolkits, and you’re good to go.
Here are answers to a few commonly asked questions regarding Amazon selling.
Selling on Amazon can be incredibly lucrative if you play your cards right. It also depends on the type of seller tools you’re using. This isn’t a plug; sellers who dominate their respective niches rely on insights provided by leading seller toolkits. Not being subscribed to one puts you at a severe disadvantage. That, and remaining up-to-date with best practices.
There are plenty of advantages when selling on Amazon. To name a few:
If the recent figures are anything to go by, now is the best time to start selling on Amazon. But before you begin, there are two things you’ll need to maximize your chances of success:
Whether you’re just starting your Amazon journey or been in the game for a while, ZonGuru has just what you need to improve your business. Sign up for a FREE trial today, cancel any time.
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