Want to sell on Amazon? Businesses must weigh pros, cons
NEW YORK (AP) — While many small manufacturers and retailers believe Amazon is the place to be, Lyris Autran is forgoing the opportunity.
Autran wants to keep the prices on her leashes, bowls and other products for dogs competitive. It costs money to sell on Amazon.com — a 15% fee on each sale and additional charges for shipping — and that would force her to raise prices. So she sells solely on her website, Dylan & Rainey.
“Our margins are smaller, which makes selling on Amazon cost prohibitive," says Autran, whose company is based in Gastonia, North Carolina. She also includes dog treats and hand-written notes in her shipments, a personal touch not available on packages Amazon handles.
Small business owners selling online must weigh the pros and cons of listing their products on Amazon. For many, there's no question — the company provides small businesses instant access to hundreds of millions of consumers worldwide. Companies without shipping departments can turn over packing and mailing to Amazon. And selling on Amazon can help a company place high in Google and other online search results. But the costs can be hard for small companies to absorb. Another downside for some business owners is they don't have direct access with customers who buy through Amazon.
The research firm eMarketer estimates Amazon's share of the online U.S. retail market at nearly 38%, a statistic that influenced Paul Cunningham's decision to become an Amazon seller.
“It’s sort of necessary to have a presence there for legitimacy," says Cunningham, owner of Leather Head Sports, a Glen Rock, New Jersey-based manufacturer of custom-made baseballs, footballs and other balls. “It is where people first look when they want to shop."
But Cunningham has learned that listing a product doesn't automatically generate strong sales — he needs to advertise on Amazon to help his products be more visible.
While many companies want Amazon to help them get established, older businesses want to increase sales. Lisa Levin, who sells soap, shampoo and other products found in hotel bathrooms, began selling them on Amazon a year ago because her company, Pharmacopia, didn't have facilities to ship directly to consumers.
“We felt it would be the fastest way to get our products out,” says Levin, whose company is based in Mill Valley, California.
Levin sees another plus. She's able to determine from Amazon's data collection and analysis that her customers come to Amazon specifically for her products. She also is pleased with the rating system that helps drive more sales.
But Amazon isn't always the best way for businesses to reach customers, particularly if they sell very specific merchandise. They may find a greater number of customers on online marketplaces that focus on just one retail category — for example, Reverb for guitars and other musical instruments and accessories, or Newegg for electronics and components. Similarly, Etsy attracts buyers looking for crafts, vintage items, clothing and home furnishings.
Lucy Kelly sells handmade jewelry on Etsy and Amazon under the label Bel Monili and her own website. Kelly, who lives in Pittsburgh, says Etsy and Amazon are well-established marketplaces that consumers trust, a benefit to a seller. But she finds that Amazon, which places a premium on fast delivery, may not be the best place for some of her work.
“Many Amazon buyers do not understand the nature of handmade businesses and longer turnaround times on handmade items," she says.
Amazon may not be the right sales channel for many small businesses, says Will Haire, CEO of BellaVix, a consulting firm that helps companies develop online selling strategies. First, Amazon may not accept the products being sold. And if they're very low priced items, a small business isn't likely to make much money.
“Your margins should be 50% to 100% compared to your price," Haire says. Companies should be prepared to advertise on Amazon to help themselves stand out, he says.
Companies must also be ready to comply with the rules on any marketplace, not just Amazon. For example, not contacting customers to advertise or market a seller's merchandise. That can be frustrating for sellers who want to follow up on a sale in hopes of getting repeat business. When business owners make sales on their own website, they have buyers' email addresses — not so with online marketplaces that want their cut of a transaction.
It's a trade-off. Erica Swallow gets customers who search on Amazon for her Entrepreneur Kids book series but, “we have no idea who our customers/readers are, because they are Amazon's customers."
The hope for many owners is that consumers shopping on Amazon will do a broader online search and find sellers' own websites. Selling books on Amazon makes Swallow's merchandise easier to find elsewhere.
“These listings push us higher in Google search result rankings and introduce us to new customers," says Swallow, who's located in Springfield, Massachusetts.
While many owners understandably want sales from their own website, where they're not paying fees, they're not losing sales to Amazon, Haire says. Many shoppers, especially younger ones, prefer sites like Amazon.
“They’re less like to go to somebody’s website and more likely to go to the marketplace,” he says.
Artist Marian Nixon of Chicago finds its easier for her prints, clothes and sketch books to be seen on Amazon rather than on her own website. But selling online presents challenges that can be hard, even impossible to overcome. She gets good reviews for her designs, but she's had bad reviews when something has gone wrong with shipping, which is out of her control.
“Customers don’t care who packaged your product — they blame you if it arrives damaged or late," says Nixon.
Nixon finds that counterfeiters are quick to find designs and sell them as their own creations — a problem throughout the retail business, and not just with luxury brands. She's had designs stolen on Amazon and Etsy.
On one occasion, she listed T-shirts that had a unique design.
“The next day, a copy was up — with almost the same font," she says.
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