Setting Up Shop on Amazon? Prepare to have your Heart Broken
We never encourage setting up your business on any marketplace other than your own property that you control. Let’s be clear about that. However, there are some great benefits to using other marketplaces to add sales and to even promote and grow your main business presence.
Amazon, eBay and many others are great platforms to use for those additional sales and promotion, but only for additional sales and promotion.
In this post I’ll be explaining our position specifically related to Amazon. If you are used to selling products on eBay then you are in for a rude awakening with how Amazon works, and the potential surprises that await you.
There is a significant difference between selling on eBay than on Amazon. When you create a product listing on eBay it becomes your ad selling only your item. You control the photo, the text, the title the price etc. However when you list an item to sell on Amazon it doesn’t become an ad for your item. It becomes a product detail page in their catalog. Yes, as you submit items for sale on Amazon you are building out their product catalog for them. Free of charge.
You still get to spend the same amount of time creating great product photography, eloquent product descriptions and well researched titles and bullet points. But unlike eBay, as soon as you press submit that product detail page belongs to the Amazon catalog.
Now that you’ve done all of the leg work and submitted all of the product details, what you get in return is the chance at being the lucky seller in the “buy box”. The buy box is the box to the right of the picture with the “Add to Cart” button. If you are the only seller of that item and you’re a Pro Merchant ($39.99/mo) then it’s not too hard to win the buy box. And your reward for all of your hard work is selling to Amazon’s traffic of buyers. That part is worth the labor. But, it’s important to know that there are a LOT of things that go into winning the buy box, most of which Amazon won’t tell you about. Price is just one of those things. We’ll talk about that in a sec.
But this is where the heartache comes in. There is a number attached to your product page called the sales rank. If your product does well and sells beyond your wildest dreams, you aren’t the only one paying attention to that. No, Amazon is as well. And just when you are wanting your success to remain hush hush, Amazon is out there kindly notifying other sellers about your new found wealth. Yes. They actually INVITE other sellers to compete with you on your successful product! Don’t cry yet, there’s more.
When those other competitors arrive (and they will), they don’t have to spend all of that time taking photos and writing descriptions, like you did. Nope, they just click the “Have one to sell” button, and they get to jump right on top of all of your hard work. Oh and take a chunk of your buy box appearances and thus a chunk of your sales. Thanks Amazon!
Unfortunately, in our experience, a lot of those competitors aren’t fully furnished in the upstairs area. If ya know what I mean. They don’t understand how the buy box works, and are mostly cursed with the eBay low-baller mindset. By that I mean that they think low balling the price is the only way to win. So they do crazy things, like cutting their price in half to try grabbing all of the sales! That doesn’t accomplish anything except slash the potential profit away from the product detail page. YAY!!! They could have accomplished the same thing by reducing their price by a simple penny. But remember, they aren’t too blessed on their upper floor. And you will suffer for it as they single handedly cut the torso off your product profit machine and hurt everyone, including themselves in the process.
And speaking of competitors. Remember back when you found these products to sell and set up your wholesale relationship? That was all of your scouting labor. Do you know who is doing Amazon’s product scouting? You guessed it! You! All of that sales data that you’ve been generating on that product detail page is providing information back to the marketplace. And then one day, all of a sudden, guess who you are competing with for that buy box. Yes! Amazon! After all of your hard work of scouting and photographing and describing and fulfilling, they use that data to determine that they should be sourcing the product themselves and competing directly with the likes of YOU! Now try selling all of those items from that last truck you just unloaded into your warehouse.
So you think you can just liquidate them on other marketplaces now? Don’t price them any lower than Amazon. As a seller you are restricted from selling your items on any other marketplaces at a lower price. What? They made it so you can’t compete with them on price too? Yep! Right there in their terms of service.
If you had set your business up around Amazon you would now be out of business. Once again you see why we don’t encourage setting up your business on marketplaces that you don’t control. Building your own business on your own property with your own customers is the only way that you will remain in full control and not end up getting your heart ripped out.