Whenever you tell somebody you sell on Amazon you either receive an intense curiosity or somebody already knows a friend of a friend who sells too. Explaining how it works is the part where people either snooze or they look at you in bemusement, usually after explaining how high the fees are for selling on the website. They are astronomical, Amazon will take a hefty 30% to 60% of your revenue before advertising costs; this is your trade-off for a built-in customer base.
It is yin and yang when begin your Amazon venture, you are of course having your shipping done for you with the FBA (fulfilled by Amazon) scheme and customer service is also managed by them. You are simply the product designer and ads manager; arguably doing more for Amazon than you are for yourself.
When you first enter the space, you are brimming with optimism and product ideas, hoping to jump on the digital nomad bandwagon. You can run your business from anywhere and watch the capital accumulate – this is extremely misleading. Amazon must be treated as a fully-fledged business model and not as a source of passive income, without a full focus, you cannot plan for growth.
One of the biggest issues I have encountered are low margin products; Amazon are currently taking around 85% of the net profit after my PPC costs are considered. Early in the game, you would not be wrong to call it a Ponzi scheme, pay per click advertising, arguably the only way to increase visibility of your product, annihilates profit margin. Even the most experienced PPC marketers will struggle to keep costs down. You must stay relevant in the search results so any attempts to cut costs will lead your product to a certain death if nobody can find them.
Starting off in a competitive market was my own doing but when you innovate and bring out a new product to Amazon, which could arguably serve customers a better purpose, you wonder if Amazon can continue to grow if established products hold their dominance purely through longevity. To survive and thrive on Amazon in 2021, a diversified product portfolio is required alongside constant optimisation of your advertising campaign keywords.
As a platform, Amazon is not perfect, and many self-proclaimed gurus are constantly agreeable with any changes Amazon throws at them, but this is a poor way to run your business. When Amazon eventually takes it too far and eliminates the small fry sellers, they lose their originality. Sellers must adhere to certain standards and will obviously have to improve as Amazon grows but keeping costs low is pivotal for new competition to enter the market.
Amazon clearly wants to avoid becoming an Alibaba since the introduction of brand registry, the opportunity, if you have a trademark, to become a protected name; preventing copycat sellers and giving you the opportunity to promote differently to unregistered brands. It feels like a logical step in keeping Amazon in the mainstream but likewise, this should not come at the expense of purging smaller sellers who arguably pay far more attention to detail and drive the continued existence of Amazon as a platform for sellers and buyers alike.
Harry Allen 