Navigating The eCommerce Giant: How To Sell on Amazon
Hosting over 1.5 million visitors a day, Amazon.com has developed so formidable an ecommerce presence that it effectively absorbs its competition, trading high-profile exposure for its share of the overall revenue carried through this portal. The massive market potential tempts many ecommerce retailers to sell on Amazon. And while many companies do operate profitably on Amazon.com, as with any sales channel, it is essential that online merchants go to market correctly on this behemoth of a sales medium. (In fact, one of the key choices to make in deciding to use this medium is whether, in the end, it peforms as well or better than what a merchant can do independently with their own website and a suitable third party shopping cart like UltraCart.)
The 900 pound gorilla of online marketplaces, Amazon.com has surpassed eBay, Sears and other online venues for merchants wishing to sell their products through a third party portal. However, as with all online options, Amazon needs to be approached carefully if a digital merchants is to be successful in making a profit.
How To Sell On Amazon
The key to profitably selling on Amazon (like other portals) is balancing the many fees with the potential profits. For example, online retailers who sell on Amazon at the level of at least forty products a month can sign up for a Professional Merchant Account. After one free month, this will cost $40 a month plus referral fees ranging from 6-20% commission per product and item closing fees up to $1.35 (not counting shipping closing fees). The professional plan offers many supplemental tools to sell on Amazon such as special listing features and promotions, inventory tools, and the Fulfillment by Amazon program. Amazon provides four different listing tools for their products:
Add a Product
This tool is for businesses selling less than fifty different products.
The Loader is helpful for merchants with many products to sell on Amazon that are already available in the marketplace catalogue.
This Excel template is best for merchants with products to sell on Amazon that are not listed in the marketplace catalogue.
Amazon Seller Desktop
Merchants can use this application to work offline to list products they want to sell on Amazon.
Merchants manage what they sell on Amazon at Seller Central, a website that supplies several different order management options, website integrations, sales reports, and customized policies related to their business. (Ultracart offers direct integration with Amazon Seller Central. This relieves order processing duties for what could make up a substantial part of their business and it allows the merchant to directly manage other functions like accounting, pricing, inventory management all from within the UltraCart shopping cart back end.)
Ultracart helps an online merchant sell on Amazon by automatically downloading orders and sending them to their fulfillment house or shipping department. Ultracart works seamlessly with Amazon to update inventory changes and help an online merchant efficiently manage their eCommerce business.
A key strategy is to select products tosell on Amazon with the potential for reaping high profits to offset the fees Amazon charges. In practice this means listing items with profit margins as high as 40%.
With product ads, an online merchant can still access the massive Amazon audience, but an online merchant can dodge the monthly fees. Product ads drive traffic to their own merchant website. Amazon runs a pay-per-click system that ranges from $0.10-$1.00 based on the price and category of the advertised product. As with other pay per click networks like Google Adwords, an online merchant sets the maximum bid they are willing to pay per click, and their product is placed accordingly. Higher bids ensure more prominent and more frequent product ad placement.
Much like Google's Adwords content network, Amazon offers merchants pay per click ad real estate on their site. This product ad is featured on a "related searches" page. Anything an online merchant can sell on Amazon can also appear on detail pages, buy boxes, and tower ads.
Checkout By Amazon
eCommerce businesses can take advantage of the confidence Amazon has built with its clients by implementing Checkout by Amazon. This program allows Amazon customers to use their Amazon account shipping and billing information to purchase products on their website. The Amazon name at their checkout gives customers confidence and combats shopping cart abandonment. Checkout by Amazon offers fraud-detection capabilities, a mobile-optimized checkout, and multiple custom options to match the style of their website.
Fulfillment By Amazon
If an online merchant wants to sell on Amazon, but bypass the hassle of order processing, "Fulfillment by Amazon" is a welcome alternative. This service allows ecommerce businesses to store products in an Amazon fulfillment center. Orders are directed to the center for packing and shipping. Their products are also eligible for Amazon's Super Saver Shipping. Once an order is placed, their work is finished. Amazon even provides customer service for these products. Again, there are variable fees for their business associated with packing and shipping items of different sizes and weights.However, Amazon's fulfillment service is not often the best option for merchants who already have (or wish to establish) their own fulfillment system. The advantages of this can be many including:
- Lower fees
- More control
- Ability to leverage shipping volume from sales outside of the Amazon.com marketplace
- Ability to customize or add value to the fulfillment process (such as kitting, customizing products or even adding features such as QR or near field identification codes for upselling, adding product manuals or offering incentives)
In the above instance, Amazon does offer integrations with other fulfillment organizations and shopping cart providers. For example, as one of many fulfillment options, Ultracart provides Fulfillment by Amazon to help launch the success of their ecommerce sales strategy. (However, if a merchant wishes to use a third party fulfillment house, often to consolidate operations as noted above, UltraCart also integrates with nearly a hundred different organizations, offering similar benefits to Amazon's direct fulfillment options.)
Selling On Amazon With The Affiliates Program
Amazon Associates allows an online merchant to earn money from other businesses that sell on Amazon. Both Amazon and non Amazon sellers can earn commission by referring their own customers to other Amazon products.
With the Amazon Associates program, an online merchant can earn a share of the profits made on their site by advertising and selling other's products, essentially by building links from their website that direct traffic to Amazon. Amazon pays a percentage of the purchase made after an affiliate link is clicked. The key to succeeding in this program is to choose the right links for related products in an appropriate context.
An online merchant can use specific product buttons that link to product pages, or an online merchant can use general banner ads that direct users to the home page or category pages. Online sellers can explore their website to see where these links might be most effective. For example, what products or services does an online merchant sell that have accessories available on Amazon? Savvy affiliates can actively track how their links are doing and adjust the product mix as necessary. For example, if a particular ad is working well in one place, they may try to duplicate it in another, similar content section of their website.
This ecommerce platform is for merchants just beginning to sell on Amazon or in any online venue. For $25 a month, plus a 2% transaction fee, the Webstore allows an online merchant to set up a customized site for their business. Retailers who already sell on Amazon get two years of the Webstore service free and then pay $15 a month after that.
This solution allows businesses to quickly customize a website with template design tools, custom navigation and product categories, customer review monitoring, merchandising widgets, credit card processing, and more.The Amazon Webstore offers plenty of web services such as the S3 (Simple Storage Service) in which companies can store files and content on Amazon's system and only pay when they access the information or use bandwidth. This might be useful if their ecommerce platform charges high rates for disk usage or bandwidth. The downside to this type of service is that the merchant must use the formats and services provided by Amazon, which can impeded expansion and later growth. In addition other limitations include:
- Limited ability to customize and execute targeted direct mail since the email client provided is limited and may not integrate with more capable third party programs (like A-Weber)
- Inability to transfer your customer's login information if you do transfer to another platform later, requiring your customers re-register which can be a daunting and often unsuccessful operation
- If your site is successful and your transactions increase dramatically, this platform may be much more expensive on a per sale basis than other options such as developing your own website
- No direct access to the product and promotion database meaning that any of the special promotional items, email templates or other assets created will not be directly exportable to other platforms
Amazon Versus Your Own Website
The issues noted above with the Amazon Webstore for those weighing use of Amazon's services can also apply if a merchant is weighing use of Amazon versus their own website. For example, if an online merchant is going to be a successful Amazon merchant, an online merchant may need to adopt Amazon's core values of offering a wide selection of products, maintaining highly competitive pricing, and promising expanded customer convenience. And, although Amazon provides an online merchant with an incredible customer base, acknowledge that there are some things Amazon can't help an online merchant with:
Establishing The Merchant's Brand as a Giant
Amazon can direct some traffic to their site through product ads; however, all of Amazon's integrations take place under the weighty Amazon name. Everything an online merchant does with Amazon will put that online merchant under its huge branded wing. If an online merchant is looking to compete with other brands, Amazon does little to build their business brand equity in an illustrious, enduring way.
Building a Brand-Specific Customer Relationship
With Fulfillment by Amazon, an online merchant may learn little about their customers. When an online merchant engages to sell on Amazon through this service, Amazon takes care of all customer service related to their orders. While this can be convenient, the merchant looses not only customer access but control. For instance, an online merchant wouldn't have the opportunity to customize a customer service program that keeps people coming back.
Maximizing Merchant Profits
While Amazon can provide an online merchant with constant revenue streams from their wide variety of online exposure options, their fees are a constant drain on their budget. Plus by its nature, Amazon's marketplace provides competitive pricing for all products carried, placing a direct cap on the price at which the product is sold. For those who sell on Amazon, they must be aware that Amazon isn't concerned with maximizing their profits. (Because of it's constant fee structure, Amazon will profit no matter who sells the product and is concerned with making a sale somewhere on its system.)
So, if an online seller decides to work with Amazon, remember that, as with any ecommerce business strategy, all Amazon integrations should be managed daily to keep up with orders. Always confirm shipping and maintain their inventory. More products will sell on Amazon if an online merchant nudges them to the top of the Amazon marketplace by achieving search listings with positive customer reviews, fewer cancellations, increased inventory, and competitive pricing.