Online sellers constantly search for new opportunities to break into a larger market. Amazon is among the numerous eCommerce sites attracting millions of online sellers worldwide.
The Amazon marketplace is one of the most active eCommerce marketplaces, with around 1.9 million active sellers. Its established online presence and vast reach make Amazon highly attractive to online sellers. Furthermore, Amazon as a brand has a large and loyal following online.
Amazon in Numbers – What Makes Amazon Marketplace Attractive for Sellers
Amazon is a top destination for retail eCommerce because of its consistent growth and attractive sales performance. The following performance data persuades online sellers to become Amazon third-party merchants.
Third-party Amazon sellers now account for almost 60% of Amazon sales since they were allowed to join the marketplace back in 1999. Amazon is an ideal starting point for those building their brands, for around 52% of online shoppers are willing to purchase items from unfamiliar brands. Online sellers flock to Amazon because 75% of online shoppers use the website to discover new brands and products. Independent third-party merchants all over the globe have experienced increased sales by more than 55% from April 15, 2020, to January 15, 2021.Amazon offers a brand analytics tool to help third-party sellers accelerate their brands. Over 500,000 sellers are using this tool for brand and product discovery. Online sellers turn to Amazon to take advantage of the company’s far-reaching influence. Currently, Amazon operates 16 stores worldwide, which allows more avenues for business growth.
Amazon Marketplace Challenges A Newbie Seller May Encounter
The information mentioned in the preceding discussion encourages many online sellers worldwide to venture into Amazon. However, beyond sales and numbers, newbie Amazon sellers should consider the challenges they could face when selling on Amazon.
To help you prepare your Amazon campaign, here are some critical insights concerning the potential challenges you may face when selling on Amazon.
Cash flow refers to the amount of cash going in and out of your Amazon business. It is crucial for your business to maintain a positive cash flow to keep it running. A study revealed that 29% of eCommerce businesses fail due to insufficient cash flow.
One of the common challenges Amazon sellers face during their business’s early stage is the negative cash flow. A negative cash flow means more cash is going out of your business operation than coming in.
Every online seller knows that negative cash flow can stifle your business operation. Cash flow is crucial for scaling your Amazon business; without it, you are at risk of discontinuing your business operation.
To help you avoid negative cash flow and to keep your business afloat, you should create a monthly budget for your expenses and operations. Learn to negotiate with suppliers for potential discounts or improved payment terms. Furthermore, you may also consider external financing.
The influx of sellers has made the Amazon marketplace highly competitive, which is why newbie Amazon sellers face the challenge of outselling their competitors.
Selling on Amazon means facing aggressive competitors, so newbie Amazon sellers should utilize Amazon seller tools to maximize their earning potential. Amazon Seller tools such as repricers and keyword research tools can provide a competitive advantage over other third-party sellers.
Amazon Price Wars
If you are new to Amazon, you should familiarize yourself with the Amazon Buy Box. Third-party merchants compete for the Amazon Buy Box, which often leads to price wars.
Amazon price wars refer to the repeated price slashing of competitors to reduce their listing prices. This action stems from the belief that the lower the price, the greater the chances of winning the Amazon Buy Box. However, such a belief is invalid and detrimental to your profit margin.
In order to increase your chances of winning the Amazon Buy Box without sacrificing your profit margin, you can use Amazon AI repricing software to automate the repricing process.
Another challenge newbie sellers will encounter when selling on Amazon is product returns. Like any other retail industry, product returns are inevitable when selling on Amazon.
To resolve product concerns, Amazon introduced Amazon Returns to shoppers. It is a solution that allows Amazon customers to return or exchange products having legitimate problems, either in quality or quantity. Sometimes, an Amazon refund is the likely solution when product exchange is impossible.
Amazon returns or refunds will definitely require time and effort, not to mention restocking fees for returned items outside of Amazon’s return policy.
To lessen the resources spent on product returns, newbie sellers should have proper record keeping and familiarize the Amazon returns process. Moreover, knowing the reasons for returns can also help decrease the likelihood of product returns in the future.
Amazon has been quite strict regarding specific products, listings, or categories. Category, product, and listings restrictions are among the challenges newbie sellers might encounter when selling on Amazon.
Amazon implemented these restrictions to safeguard its customers from purchasing counterfeit or illegal items. The very essence of category restriction is for Amazon to provide a safe and pleasant shopping experience for online shoppers.
To avoid dealing with restrictions and penalties from Amazon, it is best first to check the restricted category, product, or listings. It is highly suggested that newbie sellers avoid products that Amazon subjects to further scrutiny and additional requirements due to legal and regulatory restrictions.
Maximizing Your Business Potential
It is inevitable for newbie sellers to encounter challenges when selling on Amazon. Like any other form of business, a challenge means an opportunity for growth.
One of the reasons why Amazon is an ideal place for sellers looking to grow their eCommerce retail business is the availability of seller tools that help you efficiently overcome business challenges.
From product research, repricing, advertising, and data analytics, Amazon seller tools can streamline and optimize your Amazon business practices. These seller tools are designed to provide you with the help you need to maximize your business potential.