Amazon has done a lot to democratize online retail, and it can provide a low barrier to entry to startups wanting to move inventory. However, business on Amazon isn’t as simple as many people believe.
The first thing that people don’t realize about Amazon is the power dynamic. Amazon has a lot of control over sellers, and unless you abide strictly by their rules, you run the risk of facing repercussions. They also tend to have a client-first approach, which is not always the most beneficial for sellers. Let’s take a look at some of the gurus won’t tell you about doing business with Amazon.
Working with Amazon is a Privilege
One thing that you should understand is that Amazon doesn’t need you. What it needs are happy customers. So, the customer will always be king with Amazon, and that’s that. That also means that returns can turn into complaints, and complaints can lead to investigations. And in some cases, these can turn into suspensions.
Suspensions can be scary, but they aren’t necessarily definitive. One of the things you could do is write a letter of appeal to Amazon. If you want to learn the whole process and have someone help you get your account back, you can work with teams like Thompson and Holt. They’re a good resource if you want to learn how to make an Amazon plan of action, which will outline your plans to correct the situation and help you escalate your appeal with a second Amazon appeal letter if your first one happens to get rejected. Having the right team in your corner could make the difference between keeping your account or losing it forever, so consider consulting a third-party if you have any questions about the process.
Competitors Might Play Dirty
Another thing people don’t tell you about Amazon is how dirty some competitors can be. Some will have armies of fake buyers, all with verified accounts. Others will try to undercut your price or use their marketing dollars to draw attention away from your products. It’s a war out there, and unless you’re ready to fight, your business will end up being just another casualty.
Revenue is Not Profit
Gurus love to show off with crazy looking revenue screenshots, and people just eat it up. But what they often don’t mention is the gap between their revenue and their profit. They don’t account for shipping and inventory fees, Amazon FBA fees, advertising costs, etc. In reality, most Amazon sellers make around a 30% margin on their products; and this is when traffic is coming organically.
Another thing that people don’t say is that you may not be able to turn a profit in your first month. That’s because you’ll need to build sales velocity to gain more attention, and one of the only ways to do so is to spend money on a campaign, which may end up eating into your margin.
Amazon is the world’s biggest e-commerce platform. But it does have its fair share of challenges, and the competition is tough, so be prepared.
Ingrid Maldine is a business writer, editor and management consultant with extensive experience writing and consulting for both start-ups and long established companies. She has ten years management and leadership experience gained at BSkyB in London and Viva Travel Guides in Quito, Ecuador, giving her a depth of insight into innovation in international business. With an MBA from the University of Hull and many years of experience running her own business consultancy, Ingrid’s background allows her to connect with a diverse range of clients, including cutting edge technology and web-based start-ups but also multinationals in need of assistance. Ingrid has played a defining role in shaping organizational strategy for a wide range of different organizations, including for-profit, NGOs and charities. Ingrid has also served on the Board of Directors for the South American Explorers Club in Quito, Ecuador.
