Amazon is now the number one go-to marketplace for many online shoppers. Since Amazon handmade was launched in 2015, many Etsy sellers have expanded their business to Amazon. The huge traffic on Amazon is very attractive. However, only a small percentage of sellers on Amazon are really successful. We are going to talk about a few secrets of Amazon marketplaces.
If you do a quick search about “How to sell on Amazon”, you will see a large number of so-called “experts” teaching people how to get rich quick on Amazon. Many of those “experts” have none to very little real experiences of selling on Amazon. What they sell is the “Amazon dream” or “Get rich quick dream” and charge thousands of dollars for their online/offline courses. It’s a far better business than selling on Amazon. The result? Flooded new sellers on Amazon! The competition is fierce!
Flooded Unsuccessful Sellers
According to Marketplacepuls.com, there are 7.8 million sellers on Amazon. About 3 million sellers are active sellers. However, there are over 1 million new sellers joined in 2019. Also, as per Amazon’s inside notes, there is only 200,000 seller who can sell more than $100,000 per year. That means 93.4% of the active sellers or 97.5% of all sellers are unsuccessful. For those new sellers that flooded in, most of them are taught by the same kind of Amazon experts. So they source their products from very limited same sources, like Alibaba.com. They sell on Amazon in the same way that they have been taught. We ended up seeing tons of the same products with no or very little difference competing with each other on the price. It’s not surprised many of them will fail. What happened after they realized their Amazon get rich dream is just a dream? They start liquidating on Amazon! Have you wondered why some sellers are selling at a price that is impossible to make money? The truth is they are not making money, they just try to get their money back or part of their money back and move on with their life. This creates a toxic environment for the other sellers.
Who are your competitors?
First, flooded new sellers that force you to bring the price down. Not to mention those who are liquidating their inventory.
Second, oversea manufactures. Yes, you hear that right! The manufactures. They ship the full container of merchandise from China to the Amazon FBA warehouse and mark it as the wholesale price that no one else can compete with. Not even American wholesalers.
Last, Amazon! Yes, Amazon is your competitor too. Amazon has big data, they know very well which product is selling well. If you don’t have patent protection, they will turn around and make the same and even better version of your product and sell it at a lower price. Ever heard of the “Amazon Basics” brand? Amazon is not a fair playground for third-party sellers.
FBA pros and cons
First, let’s talk about the positives of FBA. FBA saves your time to manage inventory, save your storage space, and customer service headaches. Also, your sales will be benefited from FBA. On average, you can see around 15% sales increase when you switched to FBA fulfillment.
Now let's talk about the cons. We all heard the FBA warehouse is the most sophisticated and technologically advanced warehouse. From our customer’s real-life experiences, you will find many problems within the FBA warehouse. We have one customer lost the entire box of jewelry containing nearly 100 units after UPS tracking shows it’s delivered and signed by FBA staff. Amazon claims the box they received is empty and refuses to take any responsibility for that loss. It sounds pretty scary, right? If you search online, this is not one isolated incident.
Another issue is Amazon return. It’s free to the customer, but Amazon will charge you, the seller, for the return cost. Sometimes, they don’t select the most cost-effective return method. We have seen they charge $8 return cost for a $10 product. To make money from FBA, it’s critical to make sure your return rate is as low as possible. When you have Amazon taking care of your returns, you lost the first-hand information of your returns. Another of our customer who sells on Amazon has one product experiences a very high return rate in a very short period of time and don’t know why. After the product performance is damaged and quite some money is lost from the returns, they finally received all the returned products from Amazon FBA warehouse one month later. It turns out the silver jewelry is all tarnished due to the new jewelry boxes they used. This problem can be easily solved with very little damage if you have first-hand information about your return products.
Any chance for small third-party sellers on Amazon?
Definitely. We have seen some of our customers have great success on Amazon. After all, Amazon has the traffic volume that no other marketplaces can compare with. All the success sellers all have one thing in common, their product or services are original and not easy to be copied. If you source your product like everyone else and hope you can make money by reselling them on Amazon? I am sorry, it’s not going to work.
So, be original with your jewelry design. Keep improving your packaging and customer services. Consider having your original design protected. You can make your own key component of your design or have jewelry manufacture make it for you. Speak to AZ Findings of any custom made items to make your jewelry unique and hard for others to copy. A jewelry design can also be protected by a design patent. However, it will cost you a couple of thousands of dollars and a lengthy process. Another option is to have your jewelry key component graphic design copyright protected, it only cost $35 to file if you do it by yourself. You can read more about copyright application at https://info.legalzoom.com/apply-copyright-20238.html
I hope you find this article helpful and feel free to share your thought and experiences on Amazon marketplaces in the comments below.