7 Ways to Know if Selling on Amazon is Good For Your E-Comm Strategy

This is the first in a series of articles to outline the Amazon landscape and make sense of it for you as an entrepreneur or business owner selling physical products.

This short series will cover the benefits of selling on Amazon as well as the traps for new players.

This article profiles the different types of Amazon seller which is an important part of understanding this competitive landscape. Before launching your own product on Amazon you need to know not only what the competing products are, but who the other sellers of those products are.

Amazon

On Amazon you will see Amazon selling their own ‘home brand’ line of products. If you see Amazon selling products substantially similar to yours be careful of entering a price war you cannot win! Amazon’s buying power is such that anything cheap, made in China and generic in nature is probably not a good long term strategy for you as a small business owner.

Big Brands

Many large brands upload their entire catalogue of products and have been encouraged and helped by Amazon to do so. The Wal-Mart / Amazon battle for market share is fascinating to watch and great for consumers. The household brands that customers are searching for by name are those that Amazon is desperate to have available on its platform.

Many of these listings are not well prepared so it is possible for individuals with private labelled brands or small/medium sized businesses with similar products to rank higher and outsell on Amazon, especially when it is clear there has been a huge upload of products but with little tailoring for the Amazon format. Doing the basics well on your own listing (great images, title, the right keywords) can see you outcompete even the big brands who aren’t taking Amazon seriously – just be sure to invest in great listings, optimized advertising and customer service.

Private Label or Third Party Sellers

Over 70,000 sellers on Amazon are making over $100,000 USD a year and many of these are private label sellers, often trained on courses such as Amazing Selling Machine. These sellers can be very aggressive and generally follow the model of buying cheap overseas (usually China), creating a basic brand and selling the product at a premium as a unique brand on Amazon. This means they do not need to compete for the buy box are there are no other sellers under their brand name.

However due to spy tools and sophisticated software, if someone is selling 100 units a day with a private labeled product they can be pretty sure of a wave of copycat me-too sellers diluting their traffic and undercutting their top selling products will turn up to enjoy the party.

However due to spy tools and sophisticated software, if someone is selling 100 units a day with a private labeled product they can be pretty sure of a wave of copycat me-too sellers diluting their traffic and undercutting their top selling products will turn up to enjoy the party.

Amazon is reaching into the original manufacturers of many of these high volume, Chinese made products and selling them under their own name, quickly excluding the original private label seller through exclusive supplier agreements.

There is a whole ecosystem of tools, courses and online communities supporting this business model. It is very attractive to entrepreneurs as they can tap into Amazon’s customer access, use the Amazon platform and trusted brand, and best of all use the warehousing and fulfilment by Amazon. These Amazon private label sellers can also sell globally using Amazon’s services beyond North America and also sell in the UK, Europe, Japan, China, Mexico and India.

As many products and categories reach saturation point on Amazon with tough competition on similar products, smart entrepreneurs are spending more time creating or sourcing truly unique products that are impossible to copy. However, the “Amazon crack” addiction is hard for many sellers to give up.

Sellers enjoy free search engine traffic with high buyer intent, conversion rates well into double figures and incredible logistics support. Sellers are spoiled and struggle to face Facebook paid traffic and ecommerce’s typical 3% conversion rate on similar products when they start to move onto new platforms and channels to sell online.

(N.B. The author has created one 7-figure and several six figure Amazon businesses in the past three years, selling one of these for 7-figures USD when the account was 18 months old, had no debt or significant overheads, was run from New Zealand and had been profitable every month. All products are unique and mostly not made in China)

Retail Arbitrage and Online Arbitrage

Rather like the entrepreneurs starting their own private labels, there is another ‘scene’ on Amazon which is a lower risk and lower return model –retail arbitrage. This involves scouting out bargains from local stores (retail arbitrage) or online (online arbitrage) and listing existing branded products for resale on Amazon, for example Johnson’s baby oil. This tough gig means the sellers have to compete to win the Buy Box to make the sale, which is the contest Amazon runs for sellers of the same product to drive prices down. Although it’s a lower capital outlay, there is still a lot of leg work, packaging, shipping, labelling and sometimes haulage involved. There is also sophisticated repricing software meaning sellers will take a few cents profit to win the Buy Box, so need thousands of products which very soon become a full time packaging and labelling job.

Check out the 25+ sellers ratcheting down the price to sell this 4-pack of Colgate toothpaste.

Entrepreneurs and Small / Medium Business Owners

This article was written for you! The Amazon market place is not for every type of product (more on how to assess your products’ suitability for Amazon in the next article of this series) but if you fall in the sweet spot of high search traffic, low competition and hard to copy products then Amazon could quickly become your best stream of automated sales. The author has helped export businesses set up their existing products on their Amazon seller accounts and hit six-figures a month in the first quarter of selling. And at a far higher price point than the home market!

Many businesses list their products on Amazon, whether an individual selling a pet project beard oil or a larger business listing their full line of supplements, for example. This can work well as part of a broader ecommerce strategy to sell physical products and can be the single biggest source of sales and revenue if done correctly. The risk is businesses underestimate what it takes to succeed on Amazon and think they can “set and forget” or have a junior marketing manager look after the Amazon account. This is a market place to give your full attention to, or outsource it to someone who specializes in optimizing and managing Amazon accounts.

Given the maturity and experience of the sellers on Amazon, especially private label sellers who are always looking to expand their product lines, there is not much room for businesses with a low converting listing on a high traffic keyword. There are literally tens of thousands of individuals who have been trained to scour every corner of Amazon and who can reverse engineer a product that has plenty of buyers and low competition. They will turn out a world class listing, launch like a pro and leave a business with a superior and original product dead in the water if they are not operating at the same level of proficiency.

Summary

If your product is a good match for Amazon’s customers it could well be the cheapest traffic and highest converting sales stream in your business. Get it wrong though and you’ll be picking up long term storage fees, have the PPC ad campaigns run away on you and have missed the mark with your lifestyle images or keyword research.