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Amazon has helped many people break free from monotonous office routines and embrace the path of entrepreneurship. Running an Amazon business offers not just an escape from the confines of office life, but also a truly global venture. Even if you reside in Australia and never set foot outside, you still have the ability to sell products to customers across the globe.
The main methods of selling on Amazon include online and retail arbitrage (you can find more information on their distinctions here), selling wholesale goods, dropshipping, and of course, establishing your own brand. Each of these approaches is unique and requires a different financial investment to start. However, with proper organization of your resources and time, any of these strategies can generate good profits. As a matter of fact, they have all proven to be winning business models. You can find success stories of Amazon sellers easily – both resellers and private-label owners – on the internet. Such stories of new millionaires serve as inspiration for individuals venturing into the world of Amazon sales.
If you find yourself in this ambitious group, remember that success in the field of e-commerce is possible, but not guaranteed. It’s crucial to be aware of the common pitfalls that new Amazon sellers often encounter. A single misstep can mean the difference between a prosperous business and a doomed endeavor. To ensure a successful journey, here are eight prevalent mistakes to avoid when embarking on your Amazon sales adventure.
Skipping the product research
For example, after reading stories about a profitable Amazon seller who made a fortune five years ago from selling baby bottles, many people tend to jump to the hasty conclusion that they should simply replicate that same path. Without conducting any additional research, they attempt to start reselling the same product. However, this approach is fundamentally flawed. Even if every word in that story was true, we still don’t know the current level of demand and how much competition has changed for that product, nor do we have insights into its present quality.
If you want to stay informed, you need to explore every potential factor for business success. Believe it or not, however, you don’t have to dedicate all your time to doing all of that. There is a way to automate these processes. That’s why Product research tools are especially important for beginners.
To help you find trending products and evaluate their potential profitability, it’s essential to equip yourself with a reliable Amazon product finder, such as AMZScout’s PRO Extension. With this tool, you can not only check specific products but also gain insight on the overall performance of any niche. Use this tool to compare historical sales data, analyze product ratings, and estimate potential profits. The AMZScout PRO Extension enables sellers to perform comprehensive analysis so you can make informed decisions.
Sourcing hazardous materials and gated products
Dealing with hazmat items can be challenging for novice Amazon sellers due to the additional certifications and regulations involved. The initial steps involved in selling on Amazon are already challenging enough for newcomers, so there’s no need to complicate things further with the need for additional approvals.
Selling products in gated categories presents another hurdle for aspiring sellers. Just like hazmat items, products from these categories require Amazon’s special approval, which you’ll need to request through the “Listing Restrictions Apply” section. The timeframe for this process can vary, but it will typically go faster if you promptly address any inquiries from Amazon support personnel during regular US business hours. There are already a considerable number of ungated products on Amazon, which means that obtaining approval is feasible, however, it’s better to postpone this hurdle until you gain sufficient experience on Amazon first.
Choosing the supplier with the lowest price
Generally, suppliers who offer the cheapest prices tend to produce products of lower quality.
These suppliers may engage in a race to the bottom by offering the lowest prices. Some of them won’t even hesitate to turn out poor-quality items in order to undercut their competitors. This likelihood of breakage or defects may result in negative reviews and ultimately, a decline in sales.
If you decide to work with these types of suppliers, you’ll need to monitor the quality of your products continuously. For instance, you can conduct selective product inspections from each batch.
Instead of focusing solely on the cheapest supplier, it’s a good idea to consider a few promising candidates who are likely to offer competitive prices and invest more heavily in quality to accommodate the demands of new partners.
Overestimating profits
Accurately estimating your profits per sale is crucial to the success of any business. While a small difference may seem insignificant at first glance, this can make a substantial impact on your earnings in the long run.
Profit calculation involves subtracting your expenses from your sales price. One common mistake made by new sellers is focusing solely on the cost paid to the supplier, neglecting other crucial expenses involved in each sale. Beginners often overlook the importance of analyzing and factoring in the following expense items with their calculations:
– Shipping expenses from your supplier to you/Amazon.
– Amazon’s referral fee, accounting for around 8-15% of the sale price.
– Fulfillment and storage fees (if you’re utilizing Amazon FBA), which vary depending on the item’s size.
– Advertising costs (if you’re utilizing Amazon ads), which can further impact your profit margins.
By properly accounting for all expenses, you can gain a realistic perspective and make more informed decisions to ensure the profitability of your Amazon venture.
Overspending on Amazon ads
Amazon ads provide an excellent opportunity to promote your products and boost sales. But it’s still important to avoid overspending on advertising without yielding satisfactory sales results.
Make sure that your keywords align with the product categories and their main characteristics; otherwise, your money will be wasted. Research both your market and competitors to find the best keywords for your products. When you launch your PPC campaigns, incorporate these targeted keywords in your ad copy and allocate your budget wisely to get the best results.
Instead of immediately spending all your funds on pay-per-click (PPC) advertising, start with a modest budget. Conduct experiments with different ads to find the most effective ones, and closely monitor the outcomes. Once you have gathered sufficient data, discontinue running underperforming ads, and use your money to cover the best-performing ones.
When your ads begin to bring conversions, you can gradually increase your advertising budget.
Stockouts
As an Amazon seller, it’s essential to manage your inventory effectively in order to avoid stockouts, which can result in a notable decline in rankings. In such instances, you risk losing potential sales to your top competitors.
To mitigate this risk, you need to develop a habit of regularly monitoring your inventory levels. Employing advanced inventory management software can aid in keeping track of your available units, ensuring timely restocking to sustain your listing’s rank. Maintaining a consistent stock presence also aligns favorably with Amazon SEO.
Mismanaged customer service
Customer service is a fundamental principle for any business, and the same applies to the Amazon marketplace.
If you sell your products on Amazon using FBA (Fulfillment by Amazon), customer service becomes mostly Amazon’s responsibility. Keep in mind that defective products will still be your responsibility, as well as addressing any customer complaints regarding the products, but packaging and shipping to the customer are handled by Amazon, alleviating your concerns in that regard.
If you fulfill your own orders, it’s important that you’re prepared to address any of your customers’ issues promptly and effectively. Time plays a crucial role here, and your ability to resolve problems swiftly will have a lasting impact on your customers.
Neglecting customers’ concerns may prompt them to seek a more positive experience from your competitors instead.
First you need to work on building your reputation, and then it works for you. It’s extremely important to pay attention to feedback from customers, and resolve any issues that arise.
Conclusion
Building a new Amazon business is a demanding endeavor. It’s essential to acquire the necessary knowledge and offer a quality product.
The most crucial areas to focus on are product research, quality suppliers, considerable advertising, and the best possible customer service. By addressing these areas proactively, you can prevent these common seller mistakes from occurring.
When you implement these types of best practices, you can navigate the Amazon marketplace with confidence and increase your chances of achieving long-term success as an Amazon seller.
