Is Doing Business on Amazon Right for Me?
Doing business on Amazon is very compelling to companies based on the sheer amount of customers that it attracts. Read on to know why Amazon is one of the e-commerce platforms that startups and small businesses can’t ignore.
Companies, large and small, are doing business on Amazon. For many startups and small-size retailing, funding and resources are usually tight. Gaining the funds and infrastructure in the early stages of a startup or small business enterprise (SME) is very hard. Amazon and other e-commerce sites removed the need for these traditional infrastructures to reach thousands of customers.
By removing the brick-and-mortar requirements, startups and SMEs will be able to allocate their limited resources to sales and marketing activities. This is why e-commerce platforms such as Amazon are very attractive to SMEs.
Doing Business on Amazon
However, even with these advantages on these online selling platforms, startups and small businesses still have to compete with larger companies and corporations. Startups and SMEs will have to work hard to draw customers around the web. Also, small companies still have to deal with the cost of inventory, shipping, and operations.
The platform has many programs to help smaller businesses and startups selling on Amazon. Here are some of them:
Low Barrier of Entry
The cost of selling on Amazon is quite low. Any retail startup or small business can either sign up with a Professional or Individual seller account. Each account has its advantages. If your company can sell more than 40 units every month, the $39.99 per month Professional seller account is the best fit and you won’t charged with a per-item fee.
However, Amazon also charges other fees. It’s for the best that you check out the pricing plans and pricing calculator when you set the prices for your products.
For a small business enterprise and startups, it may take years and more investments in search engine optimization (SEO) for their websites to get a high rank in Google. With Amazon, startups and SMEs can tap the platform’s over 213 million unique monthly visitors. This gives your business immediate access to introduce your products to millions of potential customers.
Startups and SMEs can use Amazon to present their products to increase both sales and marketing. This will also help them boost the traffic to their websites as potential buyers check their offerings.
Directing Traffic to Your Websites
Sellers can also do marketing on Amazon. With the platform’s advertising programs, startups and SMEs will be able to do more targeted marketing campaigns. Users (both Professional and Individual account holders) can target visitors (buyers) that fit their target market profile by analyzing the data gathered from their buying behavior to product and pricing preference. This targeted marketing will help startups and SMEs like you ensure that your advertising investments result in a sales increase.
The Best Buyers
Amazon has over 100 million Prime members. They are buyers who pay an annual membership fee in exchange for perks, such as Prime-exclusive deals, special prices, free shipping, and more. Prime members spend an average of $1,400 per year on various Amazon products.
That is great news for sellers like you. You can target these customers and invest more in your marketing budget, knowing that they are willing spenders.
Amazon’s Fulfillment Centers
One of the advantages for startups and small business enterprises that are doing business on Amazon is the platform’s Fulfillment Centers. Referred to as Fulfillment by Amazon (FBA), the program enables small companies to do business without investing in storage or warehouse facilities. The FBA lets startups store their products in the center where Amazon will pack, pick, and deliver them to customers.
The FBA speeds up the turnover process for startups with little infrastructure or delivery system. Doing business on Amazon will help your startup; however, you have to remember that Amazon is also a business, and there is a cost in selling on the platform.
How Much Will It Cost You Doing Business on Amazon?
Doing business on Amazon is not free. Aside from the monthly subscription fees, the online marketplace also charges businesses for their services. Here’s a breakdown:
As explained above, the marketplace offers two kinds of seller accounts-Professional and Individual. The Professional account comes with a $39.99 monthly fee, no per-item sales fee, reports and sheets for order management, and more.
Meanwhile, the Individual account will not have a monthly subscription fee. Instead, sellers will pay $0.99 for every sold item. Amazon will also set the shipping rates for each item and exclusion from listing items on categories such as Shoes, Handbags, Jewelry, Luggage, Food, and more.
Other Sales-Related Fees
There are three sales-related fees when selling on Amazon:
- Referral Fees – Amazon charges a commission fee for every sold item.
- Variable Closing Fees – This $1.80 charge is only for items sold under the Media category.
- Refund Administration Fees – A $5.00 or 20% of the refunded referral fee will be charged to the seller when a buyer returns an item.
These include order and fulfillment fees that will depend on each item’s size and weight and storage fees. Also, Amazon lets sellers use its warehouse for a monthly storage fee.
Fulfilled by Merchant fees are charged to sellers for items that are for overseas shipping. The fee is lower than the FBA fees as the seller will pay for the delivery.
These are charges for various categories like dangerous items, high-volume storage, rentals, and more.
If you are doing business on Amazon, it is very important to know these costs so that you can set competitive prices for your products. The online marketplace thoroughly explains these fees on their website.
Just like in other business ventures, you have to weigh in the pros and cons of doing business on Amazon. You have to decide if your startup is capable of shouldering the risks involved in selling on the online marketplace. Or if the benefits that your business can get will help your SME grow. By doing a study and analysis, you can decide whether doing business on Amazon is right for you.
Fullscale is ready to help you! Our talented pool of developers, marketers, and other specialists is experienced in helping startups and SMEs grow. You will also get to work with our founders who are notable entrepreneurs, Matt DeCoursey and MattWatson. They are willing to mentor and coach fellow entrepreneurs.
Contact us and let us start presenting your products and services to the world!