Last Updated on November 4, 2022
Amazon ships about 1.6 million packages every single day. That is 66,000 orders per order or 1.85 per second. Think about that if you are an online business.
Linking your products with Amazon is an easy way to increase your profits and retire somewhere tropical with an umbrella in a cool drink while reclining on a beach. However, it is not as easy as all the social media gurus would make you think.
Here is an overview of the different pros and cons of selling on Amazon.
Amazon Marketplace Overview
There were more than 150.6 million mobile users on the Amazon app just in September of 2019. That does not include the millions of users on their PC, laptops, and Macs scrolling through the latest shoes, tech gadgets, and pet accessories.
Amazon is a global brand that ships over 45 million items to over 100 countries and regions outside the U.S. That is because there are over 1.9 million sellers currently offering products across all business niches imaginable.
All of the business amounted to $314 billion in net sales, the US was Amazon’s biggest market in 2021. Germany was ranked second with $37.3 billion followed by the UK with $31.9 billion.
This is a company with an incredible reach. The annual revenue is worth more than most countries’ gross domestic product, and the availability of items has revolutionized the global market.
You can access Amazon from pretty much anywhere you travel and have items shipped to your hotel, Airbnb, hostel, or wherever you are staying.
Selling on Amazon Fees Breakdown
Amazon eCommerce is available through two different types of selling plans – individual and pro. The individual seller plan charges a $0.99 fee per item sold and is meant for users that sell less than 40 items per month. The pro plan is designed for bigger shops and charges a flat rate of $39.99 per month.
There are also shipping fees depending on the category of item and whether or not you are shipping domestically or internationally. For example, a book shipped domestically at a standard delivery time of 4-14 days will incur a $3.99 shipping fee.
An often overlooked fee for finding out is selling on Amazon worth it is the category fee. This is a percentage of the total price to cover shipping, handling, gift-wrapping, and similar items. If you want to sell a new camera, you should expect to pay an 8% category referral fee that is at a minimum of $0.30.
The easiest way to find out how much your fees will be by the time you make a sale is to use the automated Amazon Revenue Calculator located here. You can enter an existing product or define something new, and the algorithm will do the work for you.
The Pros of Selling on Amazon
There are many benefits of selling on Amazon, even with the different fee structures. This is probably the most popular online marketplace, making it the best place to find customers. Some of the other advantages include:
For years, consumers have been using Amazon for everything from a last-minute birthday gift to finding car parts for their 1998 Mazda.
There are more people using Amazon than in any other market. That includes countries you would never be able to reach any other way. You could post your custom sunglasses in Arizona and sell them to consumers in Paris, France, without ever having to market to them specifically.
Low Upfront Costs
It takes very little to set up a seller account. Besides the small fees we’ve discussed, you get a considerable profit margin for your different items.
As long as it is legal, you can probably sell it on Amazon. They allow everything from a handmade fresco of Hulk Hogan to the latest Lego set. You need approval for some categories, but otherwise are good to go.
No Barrier to Entry
If you can create a Facebook account, you can set up an Amazon seller account. You can be up and running in a single day and start to sell your items to people everywhere.
Fulfillment by Amazon makes selling incredibly smooth. You ship all your items to a single location, and Amazon does the rest. That means you can earn money in your sleep without having to manage inventory or customer-specific logistics.
Big Amazon Selling Community
There are many social media groups, including subreddits, that explain how best to sell on Amazon. You could set up your store and become an expert in a very short period of time.
You can choose from 3 different types of selling businesses:
- Dropshipping – you handle the orders, but some other company fulfills the actual items and sends them to the customer on your behalf.
- Wholesaling – you purchase a large quantity of an item at a discount price and then sell each individual item for a markup.
- Retail Arbitrate – you purchase an item from a big box store, yard sale, discount store, etc., at a low price and then sell the same item to someone else at a higher price.
The Cons of Selling on Amazon
Not everything is bright and shiny with starting an Amazon business. There are disadvantages of Amazon that you need to keep in mind when setting up your seller account.
You have to be careful with the fee schedule for a sold item. If you do not calculate your pricing correctly, you could end up losing money each sale.
FBA is a powerful tool, but it can start accruing more fees (e.g. storage fees) if your items do not sell within a certain time period.
Some sellers have reported getting little support from Amazon. This is like technical issues, customer complaints, and similar items that Amazon should be able to clear up quickly. This is probably because Amazon is so popular and does not need to work closely with individual sellers.
Risk of Closure
Amazon can suspend or close your account with little to no warning. This shuts off a revenue stream for people who are reliant on their seller account for their income.
Sellers do not have direct communication with customers. That means if someone leaves a bad review on your items for something outside of your control, like a delivery person throwing the box, your reputation will still go down.
It is easy to start an Amazon seller’s account. That is a double-edged sword. It means there are a lot of other sellers on the platform looking to promote their items over yours.
No Fall Back
You cannot promote an email list on Amazon. If your account gets suspended or shut down, that is probably the end of your store.
It may not be ethical, but the company is known for copying some products and selling its own “Amazon Basics” version. This could be anything from iPhone charging cables to art easels.
Change the Rules
There is no independent governing body controlling the rules of Amazon. They have complete power over their own platform. If they want to change the rules, you have no repercussion.
If someone returns an item, Amazon will not refund or relist the item. You can either destroy it or ship it back to yourself. Either way, you will end up paying another fee.
- Amazon Seller University
- Amazon Seller Forum
- Reddit subreddits
Selling on Your Own Website
If you are concerned about your ability to make money on Amazon, you can also opt to sell your products on your own website.
This way, you avoid any of the distractions from the platform and focus on your own marketing. All the money you save from the fees can be poured into simple Google or social media ad campaigns directing traffic to your website.
This allows you to communicate and build relationships with your customers. There are no restrictions to collecting emails and sending out promotions whenever you want.
You have complete control of your own store and can develop a customer list to rely on for future revenue.
Alternatives to Amazon for Ecommerce Businesses
- Google Shopping
You can definitely make money as an Amazon seller. There are some tactics to increase your visibility, and if you can find a supply of low-cost products you sell at a markup, then you tend to earn a decent income.
There are complications and challenges just like any other platform, so some sellers choose to use their own website. Either way, we hope this information helps you develop an excellent online business.