How does Amazon generate so many sales

The pros and cons of selling on Amazon


More sales

It's a no-brainer. Millions of active customers visit the Amazon store each month looking for products.

The numbers don't lie: with more than 300 million active customer accounts and 170 million unique monthly visitors, the company has an income of $ 100 billion, making Amazon the number one choice for most buyers.

Every retailer gains credibility and trust when they list their products on Amazon. This is because some customers are more likely to buy products from Amazon than from other shops. Amazon’s promise of excellent quality and the best service entices many shoppers to buy the products on their website.

In countries where online shopping is not very well known, most people trust Amazon before any other store.

 

Source: http://www.kurtsalmon.com/en-us/Retail/vertical-insight/1144/Surviving-the-Flood

 


International expansion

Since Amazon is one of the largest and most trusted global sales platforms, it is very easy to sell in different sales areas.

Magneto has many store visits; most shopping cart systems require that a new shop be created for an additional language; a lot of work if you don't know whether the product will establish itself on the market at all.

With Amazon, every retailer can test whether their products are also appealing to a global audience by creating a listing for the local Amazon. You don't have to struggle with local payment systems, logistics, and transactions.


Low Marketing Costs

Amazon already attracts millions of customers to their website every day and you get access to them.

Depending on your niche and how crowded the market is right now, you can start selling from day one without any obvious marketing effort.

Of course, the competition is fierce and you will need to stand out from the crowd, a supervised presence can help you with hotlinking efforts on Amazon's huge customer platform.

 


No warehouse

With more than 100 distribution warehouses around the world, you can send your products in bulk to Amazon, where they will be stored, packaged and shipped.

Amazon FBA (Fulfillment By Amazon) is your inventory, management and shipping for little money (compared to the cost you would have without FBA). Not only will you be relieved of the shipping hassle, but your products will also automatically qualify for Amazon Prime and Buy Box Priority, which will have a huge impact on your overall sales.

 


Cons of Amazon

Even if nobody can speak against the enormous advantages of selling your products on Amazon, there are also downsides. There are many things to consider before taking the plunge. Fierce competition, high sales fees, and order management will all have an impact on your strategy and price, which you need to consider.

 


Competition

You've probably foreseen this, yes, the competition is fierce. You need a long-term strategy otherwise you will end up in the low races for price

If you sell the same products as other retailers, you are competing for the Buy Box. Unlike Google Shopping, Amazon does not organize the product pages according to retailer but according to the products themselves.

So when several retailers sell the same product. Amazon decides which seller suits best. When the customer clicks on the “Add to shopping cart” button, the retailer's displayed product is placed in the shopping cart.

Other dealers are shown in the “more buying choices box”, but the winner gets everything. With the rise of mobile shopping, the “profit” of the “buy box” is particularly important.

Cracking the Buy Box code is almost impossible because Amazon is constantly changing the variables that determine the Buy Box winner. However, there are some things you can control and make sure you have them under control: great feedback and best shipping times, quick response to customer inquiries, FBA, a good price and always correct inventory.

 


Commissions

Of course, all the advantages that we have listed before are not free. The merchants are charged hefty commissions for every product sold by Amazon.

While you pay for every click in shopping channels, regardless of whether it results in a sale, Amazon charges you a percentage of your sale. Because of this, you need to make sure that your profit margin is large enough to be successful. Depending on the category the Amazon CPA fees range from 8% to 15%.

If you sell products with low profit margins, you should rather go to other platforms, because you will not benefit from them.

 


Order management

If you sell your goods in several markets, you must first think about the timing of your orders. You have to make sure that Amazon orders get directly into your system to ensure a management and central system that is constantly up to date.

Fortunately, there are some tools on the market that will help you ensure that the number of items that are available is always compared with the inventory.

At DataFeedWatch, we offer Order Management for our Magneto and Shopify users in Amazon. It ensures that merchants do not advertise products that are out of stock or waste money on clicks. We are preparing to publish an order management system for other shopping cart systems in the near future.

In summary, Amazon is profitable for some merchants, and it won't work out of the box for others. Whether you sell on Amazon or not, you should split your income streams and never just bet on one market.