Over 2 million Amazon sellers are selling on the platform, and the number of third-party sellers increases by 3,500 every day. Imagine the high demand for third-party sellers and products, the heavy competition, and the chances of getting good profits selling on the platform!
Due to Amazon’s popularity and reputable dominance in the eCommerce industry, it is the top destination for most entrepreneurs and new sellers.
According to statistics, 60% of new sellers achieve a good profitable rate within one year of starting their selling business. 35% of Amazon sellers with more than 2 years of experience in Amazon selling earn over $100,000 annually.
However, making profits on Amazon isn’t easy as it sounds. As a new seller, you might have come across several challenges while trying to reach your target profit.
Let’s discuss some of these challenges and how you can tackle them, to create a sustainable & profitable business in the long run!
Heavy Competition
It is obvious in the beginning, that with the high number of sellers on the platform, there is bound to be heavy competition as well.
If you are planning to sell a popular high-ranking product, then you can expect more competition. When you sell products from reputed or established brands, there can be high competition, and chances of getting the products sold are less because buyers rely on listings that have good rankings and reviews to buy a product.
Therefore, you need to understand your competition before selling a product and figure out how to beat it.
How To Tackle Heavy Competition On Amazon?
You can overcome high competition and make your selling business profitable by:
Build your brand – Take your time to research and understand your ideal customer’s pain points, choose products that will satisfy their needs, and fulfill their problems.
By centering your brand and products around your customer’s needs and business target goals, you’ll be able to build a loyal customer base and profitable business in the long run.
If you are into online arbitrage, you can get profitable products or deal lists easily without having to spend more time on research.
Market your products rigorously – Do thorough keyword research for your listings and improvise them accordingly whenever needed. This will help drive more traffic, engagement, and conversions to your business. Hence, you’ll be able to rank higher organically on search engines.
You can also try Amazon’s PPC advertising to bring traffic and improve your product rankings.
Offer better value than your competition – Study your competition and analyze what they are doing to increase sales as well as what they are offering.
This will help you get an idea of where and how you can improvise your listings, as well as help you offer better value than them such as complimentary gifts, discounts, or better customer experience.
Exorbitant Selling Fees & Costs
One of the major challenges that most Amazon sellers face when starting out is the high fees and costs required for selling on Amazon.
Amazon provides two plans for sellers – the individual plan and the professional plan. The individual plan, designed for low-selling volumes, is best for sellers who consider the business as a side hustle. It has certain limitations to it and a basic set of listing and management tools.
However, the professional plan, designed for high volumes sales, has advanced tools for inventory management and listings and includes a monthly subscription fee.
Sellers also have to pay a referral or commission fee on every item they sell, and it varies depending on the product category and retail price.
A significant amount of the costs come from fulfillment, where Amazon charges you for the entire fulfillment process. The charges will be based on the size, weight, product category, inventory storage space, as well as shipping and delivery costs.
In case you wish to fulfill the orders yourself, you will have to only incur shipping costs based on the category you are selling in and the shipping services chosen by the customer.
How To Reduce Amazon Seller Fees?
Switch to the professional plan – If you are a seller who’s selling more than 50 items per month, then it’s best to opt for the professional plan so that you don’t have to pay the $0.99 fee per item that comes with an individual account.
Cut down shipping costs – You can cut down on shipping and packaging costs and save a lot of money by fulfilling the orders yourself. This only works best if you do not have a rush of orders all the time.
Reduce the referral fees – Consider the items which you are planning to sell and choose to sell the ones that have a lower referral fee.
Increase your ROI – Improve your listings, offer better customer service, drive more traffic and engagement, and increase conversions, so that you can ensure that you stay on top of your profit margins without Amazon’s fees taking up everything.
Product Returns
As you know, Amazon is a customer-centric marketplace and allows customers to return products. This would simply waste sellers’ time, effort, and money. The ratings and reviews might also dip low if the buyers have complaints regarding the product.
The most common reasons why buyers return your products are:
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The product didn’t meet their needs or expectations
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The product was damaged, probably due to poor handling during shipping
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Some parts of the product were missing
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The product description and the product don’t match
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The product was defective or expired
There can also be unreasonable or unethical reasons why a customer decides to return the product. But sellers need to comply with Amazon’s guidelines for customer service. Most sellers are even forced to issue refunds and accept product returns simply to avoid getting their listing or account suspended.
Product returns can result in new problems. Once you have got the product returned, it might be difficult to resell it as buyers may claim that the product is used or the product might be damaged, thus making it difficult to compensate for the loss incurred.
How To Handle Product Returns On Amazon?
Do your research – Research your products thoroughly, test if they are in good condition, and confirm if they fit your target audience’s needs before selling. Partner with the right suppliers who will make your business and customers happy.
Provide accurate details – Include accurate and detailed descriptions of the product, mentioning the correct variations if any. Add clear images of the product and even mention if the color of the product in the picture is slightly different from what it actually looks like.
All these details might seem insignificant, but they make a lot of difference to customers who are purchasing them.
Resolve return requests immediately – In case you receive any requests for product returns, respond quickly, ideally within 24 hours. Issue a refund or provide a replacement within 48 hours and resolve the issue fully to the customer’s satisfaction so that there is no further action from Amazon or the customer.
Category/Brand Restrictions & Strict Policies
Amazon is known to provide millions of different categories and brands of products. Hence, an Amazon seller has a lot of options to choose from when it comes to selling.
But there’s a catch. Not all of these categories/brands are allowed for selling i.e., Amazon has “restricted” certain categories/brands from being sold to avoid counterfeited products on the platform.
How To Check If The Product Is Restricted Category?
To know whether the product belongs to a restricted or gated category, you can check using Amz Online Arbitrage – ASIN Checker, which is a chrome extension.
You will also be able to check whether the product falls under Hazmat (Hazardous Goods) category or not.
How To Get Approval For Selling Restricted Category Products on Amazon?
Sellers who want to sell products of these restricted or gated categories must get Amazon’s approval first, thus having to go through a difficult “ungating” process.
You can skip this tiresome process if you don’t have the time or resources and instead opt for ungating services like The Funnel Guru.
The Funnel Guru is an excellent ungating service that helps Amazon sellers get their restricted category products ungated in no time. You can check more about their ungating services here.
How To Prevent Amazon Account Suspension?
Amazon also has enforced strict policies regarding selling on Amazon which if not adhered to can lead to your account getting suspended.
Hence, it’s best to read through all the guidelines and policies, as well as do thorough research before selling a product. Also, make sure that you stay up to date with the updated changes and check your seller account notifications regularly.
You can check out here more Why Is My Amazon Account Suspended And How Can I Fix It ....?
Amazon Price Wars
Amazon price wars refer to when brands willingly lower the prices of their products to bring in more customers from their competitors. This also happens when they are selling similar products as their competitors and want to increase their sales, thus compromising on their profit margins.
This can be a risky strategy because there is already heavy competition on Amazon and there is no guarantee which sellers would benefit from it.
How To Avoid Amazon Price Wars?
Research profitable niches – Do your research on products where there are no price wars and you get a high chance of earning good profit margins.
Bring more value to the product – In case the products have pricing wars, instead of lowering the prices of the product you can try other ways such as adding more value to the product. Customers prefer better value and experience and wouldn’t mind paying extra for the same.
Use Amazon Reprisers – Another way to avoid Amazon price wars would be to use repricers to automate the pricing of the products while keeping an eye on your profit margins.
Final Words
Becoming an individual seller on Amazon is a great way to break into the e-commerce industry. However, certain challenges come with selling on the Amazon marketplace.
With this blog, you are now aware of these challenges and can prepare for the worst situation possible. There are more of these challenges that we will discuss later, so keep checking amz blog.