Major Problems With Selling on Amazon and Advice for New Sellers
For many years eBay was the only online selling platform. Since its inception in 1996, millions of sellers around the world have bought and sold items with ease and confidence. Amazon entered the selling scene in the early 2000s, and people could use the platform to sell books, CDs, and DVDs. Over the years, Amazon has proliferated, opening numerous (and different kinds of) fulfillment centers around the world. As efficient and attractive as Amazon seems, it still has its problems.
Barriers to Entry
You can't just to jump on Amazon and start selling. As the platform has become inundated with sellers who don't follow the rules, Amazon has had to become more strict in allowing who can sell, and what can be sold.
Sellers must be approved to sell clothing, shoes, handbags, automotive items, and many more types of inventory. The list of categories requiring approval keeps growing. And it isn't that easy to be approved. This doesn't happen on eBay. There are no barriers to entry, and anyone can sell any item that isn't on eBay's restricted list.
Amazon Sellers Only Get Their Money Every Two Weeks
When you sell an item on Amazon, payment is made by direct deposit to your checking account every 14 days. Amazon does not accept PayPal from buyers. That can be a problem if you are using the revenue from your sales to purchase more inventory to sell. There are ways to work around the two-week payment system, but you must apply and be approved by Amazon. With eBay, you get paid every day, even multiple times a day.
Competition is Brutal
Many Amazon sellers don't sell one-of-a-kind items. They sell items purchased from wholesalers or suppliers in bulk. This begs the question, if you can buy it in bulk, then any number of other people can too, so why engage in so much competition for the same items?
Sellers who grow their bottom-line profits year-over-year faster than their top-line sales tend to fare better. With many sellers using re-pricers, as soon as one seller out-prices another, it sets off everyone's re-pricers, and a downward pricing spiral begins. The only winner is the Amazon buyer who gets items at a very low cost.
It's Difficult and Time-consuming to Build a Positive Feedback Profile
If you think eBay customers are bad about leaving feedback, Amazon customers are worse. Only about 1-in-30 buyers leave feedback on Amazon, so you have to sell a lot of products to build up your feedback. About 1-in-3 eBay customers leave feedback.
Your Products Can Become Restricted and Unsellable at Any Time
Amazon works closely with manufacturers and brands. If a brand decides they don't want third-party sellers listing items on Amazon, they can deem them restricted at any time. I experienced this numerous times on Amazon. For example, I was selling Dunkin Donuts coffee that I was purchasing at grocery stores and Target. I had about 40 bags in a Fulfillment by Amazon (FBA) warehouse. One day I received an email that Amazon had partnered with Dunkin Donuts and third-party sellers could no longer sell this brand.
I had to pay to get the coffee out of the warehouse and sent back to me.
Amazon is Complicated and Expensive
This is especially true if you sell on the FBA program. With Amazon, fulfillment is when you send your items to a warehouse, and they sit there until a customer buys them. After that, Amazon ships the item. The problem is, learning the prep system isn't easy, and a lot can go wrong with damaged items, lost items, and other warehouse issues. Amazon fees are about 1/3 of the sale price of the item, which doesn't include the monthly fee of $39.99, and the ever-increasing warehouse storage fees. eBay is approximately 15 percent of the sale price, which is about half as Amazon.
Despite the pitfalls, many people prefer Amazon to the competition. For starters, they are familiar with Amazon, so it feels like home. In addition to the issues above, there are some things that even large or long-term Amazon sellers haven't figured out. The good news is, I can help with that.
Especially if you're new to Amazon, here are three tips that will make selling easier and more lucrative.
It’s a little shocking how many sellers never set up state tax collection options on Amazon.
People seem to think that Amazon somehow automatically takes care of all sales tax issues from sales on the Amazon marketplace. That's a common misconception.
While Amazon is happy to collect state sales tax for you (for a small fee), it’s up to every seller to indicate from which state it wants Amazon to collect a tax, and to manage the remittance of the taxes to the appropriate tax jurisdictions across the country.
Many tax remittance services are available for online sellers. Four that I like are Taxjar.com, Avalara.com, Taxify.com, and Vertexsmb.com. Just remember that the seller ultimately has the responsibility of paying its taxes.
A seller may choose not to collect state sales tax. Instead, choosing to absorb that as a cost of doing business. The responsibility of remitting the tax is not optional.
Too many sellers focus on top-line sales numbers rather than bottom-line profits. Typically, sellers will say, “I want to sell $1 million a year on Amazon” or “If only I could get to be a $10 million-per-year seller on Amazon.”
However, there's little long-term benefit to being a big seller on Amazon. It's much smarter to focus on bottom growth and account for all costs upfront. Sellers who grow their bottom-line profits year-over-year faster than their top-line sales tend to fare better.
This typically requires an SKU-level understanding of profitability, incorporating overhead, and incurring some indirect costs into each SKU’s profit calculation.
You can't average everything out and look only at your overall sales numbers and margins. You need to think about every SKU you sell on Amazon as having its P&L, its market forces, and its level and types of competitions.
You can use some sources of data available within Seller Central to improve the listing quality of your catalog. For many sellers, the process of building and optimizing listings is a one-time deal, as they understandably turn their focus to other operational matters. The first thing you want to do is use Amazon's Sponsored Product Ad campaign reports. A significant opportunity, however, lies in using the reports from the Sponsored Product ad campaigns. In these reports, you can see the exact keywords that were connected to Amazon customers buying your products.
By examining these reports periodically (specifically for automatic targeting campaigns), you’ll find some keywords leading to sales that you never anticipated being effective. Lifting those terms directly into your generic keywords will improve the SEO discoverability of your listings. I suggest repeating this process every three months to make sure customers’ behavior specific to certain words haven’t changed.
As someone who has sold on eBay since 2003, and on Amazon since 2009, eBay is a better fit for me. However, if you're an Amazon fan, be sure to pay attention to the potential problems. eBay isn't for everyone, and neither is Amazon. It is just a matter of determining which is a better fit for your particular business.