Amazon is an enticing opportunity to create or further a business’s online retail presence. As one of the most popular ecommerce platforms, there’s a lot of space and potential for profitability. But before joining 1.9 million sellers in a marketplace whose revenue in 2019 exceeded $386 billion (which would rank it as the 39th top economy in today’s world), it’s important to evaluate if your business and product have what it takes to be successful on Amazon — and not all businesses do. Unfortunately, there’s no clear-cut algorithm that can determine whether selling on Amazon is a smart choice. That’s why you must examine a variety of key differentiators that can help you make an informed decision.
Are you a good fit for Amazon in your category?
One of the first things a business should do is understand its category and determine how it fits into it. We use multiple tools to analyze and understand unique category environments to help our clients identify their market opportunity, including researching consumer interest in the product and how much competition there is. There’s also a lot to be learned from the way the product is positioned, such as whether its price point is a hindrance or benefit, or simply what differentiates your product from a competitor’s product. We’ll also look into the existing power of your brand to predict whether that power can help you rise above lesser-known competitors.
There are a lot of moving pieces to be considered here. A great brand with a great reputation can still fail on Amazon if its niche is too narrow, or if the category is too broad (such as fashion). There are several ways to assess your category potential, including keyword research, listing frequency analyzation, and calculating the approximate number of Amazon Standard Identification Numbers (ASINs) you’ll need.
There’s perceived profitability, then there’s actual profitability.
Understanding profitability is vital to being successful on Amazon. A product with the potential to sell well on Amazon could still be cost prohibitive. There are a variety of ways to sell your product on Amazon, and it’s necessary to look at the different strategies that may apply to your business and model profitability across each one. For example, does it make sense to become an Amazon vendor, where your products are shown to be “sold by Amazon?” Or should you be an Amazon seller, which comes with extra effort on a business’s part but also gives you more control over how you manage pricing, customer service and fulfillment?
Your fulfillment decision can also affect your profitability. Fulfillment by Merchant, or FBM, puts you in complete control of how and when products are shipped out. Essentially, you’re handling your own fulfillment, while keeping up with Amazon’s stringent fulfillment policies. You could also opt for Fulfillment by Amazon (FBA), where Amazon packs and ships your orders for you. Both have their pros and cons, and both can deeply impact your overall profitability.
You also have to look at the cost of advertising your products on Amazon. Will the dollars spent on advertising translate to increased or decreased profits? Will you be able to achieve the sales velocity and in-stock numbers necessary to be favored by Amazon’s A9 algorithm? When you partner with us, you’ll have access to the tools you need to understand your profitability potential to help forecast your future success.
Is your business capable of serving Amazon customers from an operational point of view?
Another important factor to consider is your operational abilities. Amazon and its customers have very high expectations about your ability to serve them, so your operational capabilities must be assessed with honesty. Do you have the backend necessary to support your business goals on Amazon? What does your shipping strategy look like? If you plan on using an FBM strategy, are you prepared to stay on top of orders and returns?
In order to stay in Amazon’s good graces, you also need a clearly defined strategy for tackling customer service. This is something that needs to be established before you enter the Amazon market in order to maintain happy customers and positive feedback. With that being said, be sure to analyze your operational abilities to ensure you are fully prepared to handle the responsibility of taking your products into the world of Amazon.
Don’t think you’re ready for Amazon? Don’t walk away yet!
If after reading this you feel your business can’t be successful on Amazon, don’t turn your back on ecommerce in general. There’s always an Amazon competitor in your category that could prove to be a much better fit for your business. Take the time to investigate other ecommerce solutions to see if your business can shine elsewhere.
Ready to assess your business’s potential for success on Amazon?
With a robust toolbox and industry expertise, we’ll look at every aspect of your business to determine if it’s a good fit for ecommerce’s leading juggernaut. Let’s sort through the financial and time risks associated with selling on Amazon, ensuring that you make the smartest decision for your company.