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Should You Sell on Amazon?
The idea of selling on Amazon is a dream of many people. Perhaps you’re an Amazon customer and you’ve always had a great experience, so you decide you want to sell on Amazon… what could possibly go wrong.
Maybe you’ve watched youtube videos of people who talk about how easy it is to make big money by selling on Amazon.
Quite often there’s some guru who raves about how much money they made with a certain product, and perhaps they’ll even offer to teach you (for a price) how you can sign up to their course and repeat that success for yourself.
But should you sell on Amazon in 2021?
As an Amazon seller myself for the last 10 years, I’m in a good position to tell you the facts.
However, before I start, I want to make one thing very clear.
I’m not going to sugar coat this or tell you what you want to hear. I’m going to be honest, perhaps even brutal, so that you are fully aware of what selling on Amazon involves. After all you’d rather hear the truth wouldn’t you?
Ok, so now that you’re aware of that lets get into it.
Selling on Amazon is not for the faint hearted
Many people sign up to sell on Amazon without reading their policies first. This is a big mistake. Amazon has a lot of policies and it’s very easy to fall foul of them if you are just starting out.
If you mess up, it might be very difficult (and in some cases even impossible) to get your account back. Amazon won’t let you start over with a new account so you really need to make sure you comply with their policies and not upset them.
The Amazon seller account sign-up process
The first thing you need to be aware of is that once you sign up for an Amazon seller account, Amazon will automatically put you on a professional seller plan whether you want it or not. This means you’ll have to provide a credit card and pay a seller subscription fee (currently $39.99 per month on Amazon.com).
Having taken your money, Amazon will then instantly suspend your account and ask you provide verification documents. This mean you won’t be able to sell anything until you are verified.
Unfortunately the verification team is quite useless at the best of times, however because of the events of 2020 more people than ever have been signing up for an Amazon seller account. This means that verification is taking many, many months.
I’ve heard of plenty of cases where a new seller has supplied the correct verification documents but has had them rejected many months later because they weren’t dated within the last three months. The fact is that they were within date when the seller supplied them, but by the time Amazon got round to looking at them they were out of date.
So potentially you could spend forever and a day just trying to get your account verified because Amazon are so slow.
The other problem with the Amazon sign-up process is that while Amazon is keeping you hanging around unable to sell anything, they are still charging you the $39.99 seller subscription fee EVERY month!
In order to prevent that happening, once you have signed up and been charge the first months fee, you need to immediately down-grade your account from a professional Amazon seller account to a personal one. You’ll still have to pay the first months fee but at least you won’t have to pay anymore while you’re waiting to be verified.
During the waiting process don’t just sit and twiddle your thumbs. I highly recommend you go through Amazon’s ‘Seller University’ and educate yourself on their processes. I also recommend you go in the seller forums and ask questions. They have a special section in the forum for new sellers so be sure to take advantage of that.
One thing you should know is that you have ever tried to sign up for an Amazon seller account in the past, DON’T try to open a new seller account. Amazon will only allow ONE seller account and unless you have their permission for another one, they will ban both accounts.
Aside from the monthly seller fee you’ll also be charged additional fees each time you make a sale. These vary from category to category so check carefully before making your first sale. There are also other fees depending on whether you ship the goods yourself or if you get Amazon to do it for you.
It’s not unusual for Amazon to take as much as 30% – 50% of the sale (or even more) in fees, so you’ll find that many products are just not profitable. Be careful you don’t loose out.
Many new sellers also make the mistake of looking at the headline fees without taking into consideration other charges and losses. For example, if a customer decides to return an item, Amazon will charge you a return fee. However, this isn’t the only additional fee they have so you need to watch your numbers very carefully.
Amazon’s inventory management system also leaves a lot to be desired, so if you send your stock to their warehouse for them to ship, don’t be surprised if things go missing or aren’t accounted for properly. They also have some very convoluted reimbursement procedures which are prone to error.
Another thing you need to bear in mind is that in most cases (especially if your create a new listing with your own product) you will need to advertise your product on Amazon. Just because you’ve created a listing doesn’t mean you’ll suddenly get a flood of buyers.
Amazon is like any other search engine. When someone searches for a product, Amazon will bring up the most popular results. So if you’ve just created a new listing it’s unlikely to show very high in search results unless you pay Amazon to advertise your product on the site.
Even when you have a very well established product you’ll find that in most cases you’ll still need to keep advertising it because there is now so much competition from other sellers. If you don’t keep advertising, your listing will drop rank and your sales will follow suit.
Advertising on Amazon is probably going to be a very large part of your selling costs and to give you and idea of how large that cost is likely to be, I’ve heard that Amazon now makes more money from sellers paying for advertising than they do in actual seller fees.
Finally, don’t forget to take into account other business expenses such as the cost of your stock, shipping costs, packaging costs, damaged stock, buyer losses or damages, taxes, etc, etc
What you should know before sourcing products to sell on Amazon
Once you eventually start getting sales, Amazon will ask you to give them some supplier receipts. They do this to ensure you are getting products from legitimate sources. However, don’t think that you can buy some discounted products in the local supermarket and then resell them on Amazon. Amazon won’t accept retail receipts and if you try it you are very likely to get your account shut down. You have been warned!
The other thing you need to be aware of is that Amazon aren’t the trustworthy company that most people think they are. Amazon ‘use’ their sellers in order to source profitable products. If you find an amazing product that sells really well, Amazon might decided they want a piece of the action.
They have been know to take the receipts that sellers have supplied and then go to those suppliers and source the product themselves. Obviously with their huge buying power they can often get better wholesale prices than you can and then cut you out of the picture. I know quite a number of sellers who have had this happen to them.
Unless you are making the product yourself, my advice is to source a few products from fairly well known wholesaler to begin with and then when they ask for receipts you’re not going to be giving too much away. After that you can find better suppliers. However, be aware that even after the initial check, at any time Amazon could ask for receipts, especially if their is some sort of problem with your product.
Branded, unbranded or private label products?
There are basically three sorts of products you can sell. Branded is obviously any product that has a brand name, such as Nike or Kellogg’s. Unbranded is any product with no brand markings, and private label (or white label) is any product where you create your own product with your own private brand label.
Unbranded products are probably the easiest to sell on Amazon because you can create your own listing and you don’t have to worry about any branding issues such as buyers claiming your items are fake. The down side is that you’ll more than likely have to spend money on advertising to get that listing ranked within the Amazon search engine.
The other problem is that with no brand associated with it, other sellers with the same (or a very similar) unbranded product will jump on the same listing. If what they are selling is not quite the same but is in fact a cheaper version they can undercut you, and since Amazon is very price focused they could suck up nearly all of the sales leaving you with nothing.
As for branded products these can be a good option especially if you are just getting started. Of course you don’t have to go for very large brands and it’s probably best to begin with if you go for smaller less well known brands.
Large brands are very protective of their brand names and some of them won’t even allow their products to be sold on Amazon, so check first. Some large brands do allow their products to be sold on Amazon but only by approved sellers. If you try selling a product that you are not approved to sell, not only could you get your account shut down but you could be facing legal action from the brand owner.
Whatever you do, DON’T source big brand items from China and try to sell them on Amazon. The vast majority of the big brand stuff from China is fake and if you are found out you will have you account shut down without question.
The good thing about selling branded products is that quite often they are already being sold on Amazon, so you don’t even have to create a new listing. In fact, if there is already a listing for a product and it’s EXACTLY the same as the item you want to sell you should NOT create a new listing. It’s against Amazon policy.
The problem is that since you have to join the same listing as everyone else, if there are a lot of sellers selling the same product, you may end up getting no sales. Usually (but not always) the cheapest price gets 99% of the sales. Because of this there is what’s known amongst Amazon sellers as ‘a race to the bottom’.
Basically sellers will undercut each other in a desperate attempt to get sales. Unfortunately this often results in a situation where the price becomes so cheap that no profit can be made. When that happens you could be stuck with thousands of dollars worth of stock that you can’t sell.
One of the biggest mistakes made by new sellers is to join this race to the bottom. Quite often they are not fully aware of all the costs involved in running an Amazon business. They still think they are making a profit, when in fact they are running at a loss.
Private label products
These can be one of the best ways to make money on Amazon and this is the one I use. However, they generally involve more work than the branded and unbranded products. Basically you are creating your own product under your own brand name.
Now when I say creating your own product, this doesn’t necessarily mean that you have to make it yourself. You could for example just buy a generic unbranded product and then brand it under your own name. That’s the easiest way.
However, don’t choose the easy way… and here’s why.
Lets say for example you buy a standard unbranded generic product such as a yoga mat. There’s nothing special about it, it’s the same as any other, but then you decide to make it special by putting your own brand on it. But is that enough?
About five years ago, you could have got away with this on Amazon. However, in 2021 that’s no longer viable anymore. There are literally thousands of yoga mats on Amazon and you if you are a new brand that no one has ever heard, it’s just not going to cut it.
Besides your brand name, what you really need is a unique product that no one else has. It needs to have special features that no one else has, in short it needs to stand out as different, unique.
In my own eComm business I sell sports bags, but I don’t just sell any sports bag. The bags are made to my own design, my own specs, and all using high quality materials. Of course they have my own branded labels on and are packaged in my own branded bags, but the branding isn’t the only thing that makes them different.
This is important if you sell on Amazon because not only does it make your product stand out because it’s unique, it also helps to prevent other sellers causing problems for you.
Unfortunately, even if you have your own branded product it won’t stop other sellers from hi-jacking your listing and selling a similar (and often cheaper) product on there. The more similar the product, the more chance there is of your listing being hi-jacked. That’s why you need to make your product unique.
The sad news is that even if you go to all this trouble and you do get a hi-jacker, it can be very difficult to get rid of them. Amazon have what they call ‘Brand Registry’ which in theory is supposed to give more protection to trademarked and branded products. In reality though Amazon often aren’t very helpful even if your brand is registered with them.
Amazon is a jungle
As I’ve just touched on, hi-jacking can be a huge issue, however that isn’t the only problem. Amazon.com in particular is very competitive and some niches are especially cut throat.
This often means that if your product becomes very popular, you can find yourself as a target from other unscrupulous sellers. I won’t go into all the problems here, but suffice to say that there are a lot of dirty tactics that you might be subjected to.
Amazon do have algorithms that detect some of these unethical practices and they will throw people off the site for policy violations, however they can’t prevent all problems.
Unfortunately, even when they do manage to stop a particular issue, the unethical sellers will always find another way to get one over on others.
Another problem that has arisen in recent years is that some Amazon staff have taken bribes to help certain sellers.
The reality is that whenever there is a lot of money at stake, there will always be bad apples trying to destroy your business in some way.
Although you might face issues with other sellers, the vast majority of the problems you encounter will be created by Amazon themselves. That might come as a surprise to some of you who are Amazon buyers, but it’s a fact.
In order of priority, Amazon looks after themselves first, then buyers, and then sellers come a very poor third.
While Amazon’s customer service for their buyers is generally pretty good, don’t let that fool you into thinking you’ll get the same level of service as a seller. The seller support is world’s apart.
When I first started selling on Amazon 10 years ago I was highly impressed. They were always very professional and helpful in the way they treated their sellers and their seller support was excellent. Fast forward to now and I can’t believe I’m even dealing with the same company.
At one time there were very few problems, and when you did have a problem you could pick up the phone and speak to someone who would use logic and common sense. The problem would often be resolved within 10 minutes.
Today, you often cannot speak directly to anyone and you have to resort to email or live chat. Much of their support is now driven by AI instead of a real human. Sadly this AI isn’t always that intelligent and it’s not unusual to get an answer that is totally unrelated to the problem you have.
Most of the time you’ll receive copy & paste answers that don’t address the real problem and you’ll often go round and round in circles having to repeat yourself over and over again, as they never seem to read your case properly.
It seems that rather than actually help you, their support reps appear to be on a mission to close as many cases as possible in the shortest amount of time, whether they are answered properly or not.
If you ever do get the chance to speak to a human it will usually be someone half way round the world who’s first language isn’t English. Apart from the language problems the person answering the phone often won’t have the expertise to deal with your issue.
What they will do then is tell you that they’ll have to transfer it to a different department. At this point they will end the call and tell you they’ll be in touch.
Sometimes you’ll never hear from anyone again and other times you may have to wait many months before getting an email reply. They will almost never phone you back.
The good, the bad, and the ugly
Amazon is by far the largest market place on Earth and dwarfs other online and marketplaces by a long way. If you get the right product with relatively ‘low’ competition it can be very easy to make a lot of money very quickly.
I myself have made quite a good living with basically just one product.
Because Amazon is trusted by so many people, and because so many of them already have an Amazon account (or even a Prime membership), many people will ONLY ever shop on Amazon. They don’t even bother to look at other online marketplaces at all.
This means that selling on Amazon has a huge advantage over other platforms, and because Amazon has so many customers, with the right product you can often get a very large volume of sales.
If you use their FBA program (fulfillment by Amazon) this can allow you to scale your business beyond what you would be able to do by yourself.
The way it works is that you send your products to an Amazon warehouse and then when a customer makes a purchase, Amazon ships the product out on your behalf.
This saves you a huge amount of time because you don’t have to pack and send the orders yourself. With the time you have saved you can then source more products and scale your business faster.
I’ve already touched on some of the bad points but there are plenty more.
Amazon has a bewildering number of policies that are hard to keep up with. Quite often their policies are somewhat vague or even contradictory, so it’s sometimes difficult to know exactly where you stand.
Additionally they have a habit of introducing a major new policy change without any notice. This means that suddenly, without any warning, you have to make some major adjustment to your business very quickly, or perhaps even have some of your products pulled from sale.
There have been many sellers I know who have suddenly found themselves left with huge amounts of stock that they can no longer sell because Amazon suddenly brought out a new policy overnight.
It’s not unusual for you to log in to your account one morning and find yourself having to drop everything in order to deal with some emergency problem that has been created by Amazon.
Amazon always shoot first and then ask questions later. So even if they only think you have caused some sort of problem they will suspend your listings or even suspend your account first and then leave you to pick up the pieces.
If you get your account suspended this can be a nightmare. Amazon will instantly freeze all your assets, so you won’t be able to remove your money or your stock from Amazon until you have sorted things out with them.
You’ll have to write what Amazon calls ‘a Plan of Action’. This is basically a statement admitting that you have been a naughty boy (or girl). Even if it was Amazon’s fault, you’ll have to admit that it was your fault.
You’ll also need to explain how the problem occurred and what measures you have put in place to make sure it never happens again.
Thankfully I’ve never had any of my Amazon seller accounts suspended so I’ve never had to do this. However, I do know plenty of sellers who have been in this situation and had to write a Plan of Action.
Unfortunately, Amazon are very picky about the exact wording that should be use in the Plan of Action. If it isn’t exactly to their liking they will reject it without even telling you what the problem is.
It may take months to get your account (and your assets) back, or you may never get them back at all.
Unfortunately the Amazon woes don’t end there. There is a very dark side to Amazon that most people aren’t aware of.
As I mentioned earlier, Amazon’s number one priority is Amazon. Although third party sellers on Amazon now generate more than half of all their eCommerce sales, as a seller you are still bottom of the pile.
They will think nothing of treading on you if it advances their own interests.
I spoke earlier about how Amazon will ‘use’ their sellers to source products.
They love sellers to expand their product range and they may even give you assistance to do this. On the face of it you might think they are being really helpful and are looking out for your interests.
In reality what they want is for you to be a guinea pig!
Basically they want you to do all the product sourcing and introduce new additions to their catalogue. Obviously because it’s a new product, you may be taking somewhat of a risk.
If the risk doesn’t pay off and the product flops, Amazon have lost nothing because you’ve taken the hit. However, if the product is a success Amazon will want some of the action.
At first you may do very well, but if it’s a really hot seller then Amazon will either introduce their own version of the product and sell it cheaper…
OR… Even worse…
They will hi-jack your listing (even if it’s your own private label brand) throw you off the listing, and then sell their own product on your listing.
You may be thinking I’m exaggerating here, but sadly I’m not. This has happened to quite a few sellers over the years.
This isn’t the only unethical practice that Amazon engages in either.
On a personal level I once sent in three cartons of stock to Amazon and one of them disappeared. Quite by chance I happened to notice that my product was for sale on an Amazon site in a different country. Since the product was my own brand and I didn’t sell it in that other country, I was interested to see who was selling my product.
Imagine my horror to see that it was Amazon themselves who were selling it and the number of units they had in stock in that country were almost identical to the number of units that had gone missing from their warehouse just weeks earlier.
They had stolen my stock and were selling it in another country!
When I confronted Amazon with screen shots of their crime, they denied all knowledge and refused to pay for the stolen stock.
I pursued the matter with them for many months and eventually they reimbursed me for most of it, but I think some of it is still unaccounted for.
Either way, this an unacceptable way to treat people and no one should have to go through this.
Their are plenty of other horror stories I could relate but needless to say, Amazon aren’t the trustworthy company that people think they are.
So in answer to my original question….
As I said out the outset I wasn’t going to sugar coat this. There are far too many people already doing that and I wanted to present a more realistic view of what to expect.
A lot has changed on Amazon since I started selling 10 years ago and it’s nothing like the place I originally joined. I’m personally winding down my Amazon business because it’s become very competitive and I’ve also had enough of Amazon’s unethical practices.
However, if you are still determined to sell on Amazon that’s fine, just remember to use Amazon wisely.
Whatever you do, DO NOT rely on Amazon for you sole income. They can shut you down in an instant and overnight your whole livelihood will be gone. You don’t ever want to put yourself in a situation like that.
The best way to use Amazon is to have your own eComm store and your own brand, then just use Amazon to raise awareness of your brand.
Unfortunately Amazon is very strict about your communications with customers on their site. In Amazon’s eyes they are Amazon’s customers, not yours. So for example your not allowed to email buyers and say something like, “Hey thanks for buying check out my store…”
However, once you have established your brand on Amazon, people will naturally search online for your brand name to see if there are other products in your range. Then if you have your own eComm store people can find you and may buy direct from you.
Some products might not be very profitable on Amazon but you might do very well with them on your own eComm store. So make sure you select carefully which products are worth selling on Amazon and which products to sell only on your own store.
Going your own way
If eComm appeals to you then my recommendation is to start your own store. Selling on Amazon isn’t cheap and it’s getting more and more expensive every day.
The main thing that Amazon has going for it is traffic, basically an army of customers who are ready to buy. Obviously if you start your own eComm store you are going to have to somehow drive visitors to your site and then get them to buy.
The good news is that by the time you have factored in all the cost of Amazon fees and advertising on their platform, you can have you own store for a lot less fees. Then with the money you save you can spend it on advertising to drive customers to your site.
Often you can also charge higher prices on your own site because you’re not competing with other sellers on the same web page who are selling the same product for a lot less.
The real advantage to having your own store is that the customers you get are YOURS!
This is huge.
With Amazon you never really have a business. The customers are not yours and if Amazon pull the plug, your business is gone overnight.
However, with your own store you can collect customer emails and you can re-target those customers again and again for free. This means that the life-time value of a customer is much higher on your own store than it will ever be on Amazon.
Setting up your own eCommerce store
The best way to set up your own store is to use some sort of eCommerce store platform. They have store templates, shopping carts, payment processing and other features that you’ll need to run an eComm store.
The best one out there and the most widely known is Shopfiy. This is the Rolls Royce of eComm store platforms. They have tons of features and you can easily create a very professional looking store.
However, if you are just starting out, Shopify isn’t cheap. To begin with, for their basic starter plan it’s $29 per month before you even start. Then you’ll almost certainly need to buy certain plugins to make it work in the way you want, and then if you want to upgrade to the next level it’s $79 per month.
On the other hand, if you want to get started for free then you might want to consider a new eComm software called Groovekart. Although Groovekart is free it’s still very powerful and has a ton of features that other eComm store platforms don’t have.
For example, you can increase the amount that a customer spends on your site by using order bumps, up-sells and down-sells. Basically as the customer goes through the checkout they get shown other products and asked if they want to add them to their order. Once you’ve set it up it helps to increase the size of your customer orders without you having to do anything more.
Groovekart is quite new and although it’s quite good it’s still being developed, so you might experience an odd glitch now and then. Having said that it’s generally pretty stable and it is getting better all the time with new features constantly being added.
The good thing about Groovekart is that it’s not just an eComm store software. It’s actually part of a whole raft of apps that come under the ‘Groove‘ brand name.
You can create web pages or websites with Groovepages, create sales funnels with Groovefunnels, create an email service with Groovemail, start a blog with Grooveblog, start a membership site with Groovemember, create customer surveys with Groovesurvey, host videos with Groovevideo, create webinars with Groovewebinar, and on, and on…
Currently there are 19 apps in the Groove suit of tools and they all come under just ONE log in… for free.
Groove isn’t just a software though, it’s also a community of some of the best internet marketers in the world. They often do live training webinars where you can pick up some really valuable tips to help you succeed in any form of online business, including eCommerce.
You can sign up for a free Groove account here… Get Groove and Groovekart here.