Amazon marketplace is one of the world’s most famous e-commerce marketplace by the number of sales. An e-commerce marketplace is a set of tools and technology that connect online buyers and online vendors. Basically, the argument is simple rather than opening your physical store, or a self-hosted online store, and face all the challenges that come with running a business, join the Amazon marketplace and forget about most of your worries.
Actually, on Amazon marketplace, you start selling from day one, if you are all set with your inventory. Amazon marketplace aims at alleviating more than 70% of the seller’s pain. In fact, think of a mall or your typical local Sunday market and picture it online instead.
How it works
Indeed, with over 150 Million monthly active shoppers looking to buy a product on amazon (Statista,2019), Amazon is definitely a go-to if you want to sell at scale.
People browsing the giant marketplace already have a buying intend they are just looking for the right product. That means as a business owner, you don’t have to worry about driving potential customers to your store, whether is an online store or a brick and mortar. That is because, Amazon does that for you.
More, for shipping, if you wish, after you package your products, just send them to Amazon warehouse and they will take care of the fulfillment on your behalf. Amazon calls that fulfillment by Amazon. Simple right, well actually there are some subtilities you need to understand and get familiar with before you start selling on Amazon marketplace.
How to start selling on Amazon:
Typically, you source a cheaper good, you ship it to Amazon warehouse, list on Amazon marketplace, run promotion, the customer finds the product, buy it, Amazon does the shipping, you get paid. However, you can also manufacture your own exclusive product known as private label, capitalize on amazon as one of your sales channels. If you choose to do the later you need to be trademarked to protect your brand.
Usually, it is a pretty straight forward process no major technical skill required. The marketplace outreach is deep and large. In addition, you can easily integrate with many third-party software applications to facilitate your operations.
How to start selling on Amazon:
It is important to weigh in your options because selling on Amazon marketplace might not actually work for you. That is why before jumping in, you need to do a comparative analysis to find out if Amazon marketplace is the right fit. Three main approaches are available should you decide to do online business. Each of them with its unique advantages and inconveniences comparatively to selling on Amazon.
- Amazon marketplace vs dropshipping
- Amazon vs your self-hosted e-commerce site
Amazon marketplace vs others
This is a pretty straight forward process. You open an online store, customers buy, and the vendor ships the product.
Clearly, you don’t manage or own any inventories. Thus, limited options in assessing product quality. However, you are responsible for customer satisfaction. The later include managing a high volume of unsatisfied customers.
If well done with high-value ticket products or fast-moving products of high value it can be very lucrative. On the flip side if the products are poorly manufactured it could quickly turn into a nightmare. This approach will get you banned on Amazon marketplace.
We are talking about a self-hosted online store. Everything is controlled by you from the technical aspect of your site to shipping your products. In addition, to inventory management.
However, you can outsource some activities including fulfillment operations so you can focus on your core business. Driving traffics, managing fulfillment, taxes, payment processing, etc… Even though it comes with many advantages, this is very demanding and requires a lot of commitments
Many alternatives to Amazon exist in the marketplace. In some cases cheaper and with a larger potential customer base. For instance, Facebook Marketplace is a great illustration.
In conclusion, take your time and evaluate your options. Do your due diligences about other options and alternatives. You can either have full control of your business, control part of your business process or join a marketplace. Nonetheless if Amazon marketplace is your go to here are some challenges you need to take into consideration.
Selling on Amazon comes with its set of challenges and risks. Therefore, it is necessary to acknowledge and be ready to dealt with them.
- Stock rotation
Keep in mind if you decide to work with Amazon fulfillment program, your inventory cannot be warehoused at Amazon for a long time. In fact, if your rotation stock is low chances are you cost are going to go up. Therefore the quicker its sales the better you are. But, you cannot also run out too often. So, inventory management is a critical component of your Amazon store.
2. Estimate the real cost of joining amazon marketplace
Many people just jump directly onto joining Amazon marketplace as a seller without actually spending time asking the right questions. How much would Amazon marketplace really cost me? Breakdown all your cost structure to its granular level.
Challenges of selling on Amazon marketplace
Marketing on Amazon marketplace is not easy and cost money. You have to learn how to market on the platform so you can drive traffic to your store.
To get your figures right, I recommend an empathy map. Certainly, this tool might be new to you but it effective. So, draft an empathy map from your perspective as a seller. Then, do another empathy map from your customers’ perspectives.
4. Business plan
At the end of the day,you are building a business.Even if, for you at this moment it is just an hobby.Regardless, make sure to put in some ground work. Because, you want to avoid a financial disaster.
Be aware of returns. Consequently, include that in your plan. Approximately,10% of your stock. Returns are of your responsibility, you bear the cost.
6. Amazon private label
This is a killer for most Amazon stores. Amazon owns brands in the marketplace. Chances are you will be competing against those in addition to others.
Amazon might not be for everyone. Specially when you want to start a local business.
Typically, Amazon marketplace should be considered as an additional channel for your business. It should be included in your omnichannel mix.
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