As a small business owner or manager, you are responsible for determining the course of your company and making the most practical decisions about marketing strategies and venues. Determining whether selling on Amazon is the right option for you and your company can be a real challenge.
As the senior director of marketing for a company that designs, creates and sells gift baskets for a diverse audience, I understand the pros and cons of selling on Amazon. Our company maintains a robust web presence that includes marketing our products through Amazon. Here are some of the most important pros and cons we have experienced by expanding our marketing venues to include this online marketplace.
Amazon can definitely give your brand a boost by putting your name and your products in front of more people every day. This can result in improved name recognition for your company and increased chances for sales for your products in this online venue. In some cases, you may be able to leverage your sales on Amazon to increase direct sales from your company’s website.
Unfortunately, the added visibility Amazon can provide comes at a cost. The comparison shopping made possible by Amazon’s interface can allow competitors to undercut your prices with inferior products. While quality is a primary concern for most people in the market for gift baskets, companies looking to market other products should be wary of price wars on this online retailer.
Making sure your products stand out from the crowd can also be a challenge on Amazon. With hundreds or even thousands of items in competition with yours, finding the right way to present your products can make the difference between profitability and lost sales.
A Larger Customer Base
According to figures released by Amazon in January 2018, the company shipped more than 5 billion items through its Amazon Prime service in 2017. This represents a significant number of transactions and a sizable pool of customers for your products. More customers can add up to increased sales for your products and can allow you to achieve greater reach in the competitive marketplace.
Driving Business to Your Website
Establishing a presence on Amazon by advertising your products can sometimes lead consumers to your website. This can help you to establish a lasting relationship with clients that can last beyond your one-time sale on Amazon.
Making sure that your inventory for Amazon sales syncs up with your available products in stock can present a significant challenge for many companies. This is especially important for perishable items like gift baskets that have a limited shelf life.
Fulfillment by Amazon
Opting for Fulfillment by Amazon (FBA) offers certain benefits for your company, including the following:
- The ability to offer free Prime shipping for your products
- Storage of your products in Amazon fulfillment centers
- Outsourcing your picking, packing and shipping activities to Amazon staff
These services come at a price, however, that may be fairly steep for companies with a lower profit margin.
The Cost of Selling on Amazon
Amazon assesses a number of fees for businesses that sell their products through its platform. These fees may include some or all of the following:
- Monthly subscription fees for professional sellers who plan to sell more than 40 items per month
- Per-item fees for individuals who sell through Amazon
- Referral fees that can be as high as 20 percent of the sale price of the item and any shipping costs you assess
- Storage fees for FBA items
To remain profitable, you will need to factor these fees into the price you charge for your items on Amazon. This can sometimes price companies out of the market, especially for items that are already extensively represented on the Amazon website.
Which Choice Is Right for Me?
A number of factors will determine whether Amazon is a profitable option for your company:
The amount of competition already present on the website
- The cost of your products compared with those of your competitors
- The profit margin for your products after Amazon fees are deducted
- The marketing strategies you employ
For our company, Amazon made sense as an added venue for attracting customers and publicizing our products. We still have to track inventory carefully and monitor FBA transactions to ensure adequate products in stock. For durable items with no expiration dates, this process would be much easier to manage.
Before taking the plunge into marketing on Amazon, I recommend taking a hard look at the potential profits and costs of this sales venue. Amazon is not a practical choice for every company. If you can deal with the intense competition while making a positive impression on consumers, however, it may be the right solution for your business.
Patrick Ahrendt, Sr. Director of Marketing, Wine Country Gift Baskets
Patrick Ahrendt is Senior Director of Marketing at Wine Country Gift Baskets. After graduating from Rutgers University Business School, he worked in data-driven marketing at several growth oriented companies before joining Wine Country Gift Baskets in 2000.