Should a B2C Company Start Selling on Amazon?

Jul 15, 2020
9 min read

Welcome to E-tailing

E-tailing has changed the way businesses run today. All consumer based-business love to sell their products online as it is convenient with the least human interaction. Customers also love browsing and selecting their favorite products online from the comfort of their homes. It provides consumers the capability of selecting and buying items online at a better price from a wide variety of sellers.

According to the Census Bureau of the Department of Commerce, the estimate of U.S. retail e-commerce sales for the Q4 of 2019 was $187.3 billion. The Q4 2019 e-commerce estimate increased 16.7 % from Q4 2018, while total retail sales increased only by 3.8 percent in the same period. Total e-commerce sales for 2019 increased by 14.9% from 2018 and reached $601.7 billion.

What does online selling involve?

Businesses can enter the online market through two options:

  1. Own e-commerce websites
  2. Choosing to sell their products in an established online marketplace like Amazon, eBay, or Etsy

Setting up an e-commerce website might be easy, especially for well-established and big brands. But, it comes with more complex components such as payment gateways, search engines, inventory management, customer service, and order fulfillment. A good website must have the following traits:

User friendly: A website must be user-friendly and fast to load. Customers love sites where they quickly get the results for their search. The contents of the site should be simple, engaging, and informative. It should be able to generate website traffic and convert them into sales.

Mobile-optimized website: Mobile devices generate around half of the global website traffic (52.6%). Customers love easy browsing, and many find the use of smartphones more convenient. A business must have a mobile-optimized website to reach maximum customers.

SEO friendly: A successful e-commerce business needs a Search Engine Optimization (SEO) friendly website as it helps the website appear first on web search engine pages. SEO is the process of increasing the quantity and quality of website traffic by making the website visible on the first Search Engine Result Pages (SERP).

A logistic team is required to take care of on-time shipment, updated delivery, and to solve customer queries. Payment gateways, data breaches, and pay per click advertisement are other concerns to be considered. Undoubtedly, a business can purchase such services from different resources available in the market, but combining all will mean high overhead.

By choosing to sell on Amazon, a seller can comfortably enter the market. Amazon is the world’s largest online marketplace. It has 112 million Prime subscribers in America. Prime subscribers are the customers who pay Amazon a certain amount to enjoy particular services provided by Amazon prime like one-day, two-day delivery, Prime music, prime video, etc. Around 3.3 million third-party sellers have chosen Amazon for their business since 2017, and they account for 50% of all sales on Amazon. In its Q1 report for FY2020, Amazon announced that the third-party sellers sold more than 700 million items that were shipped with Prime Free One-Day Delivery or faster in the U.S. in 2019. With its enormous market and more than 20 years old data and logistic team, Amazon stands as a one-stop-shop for all its sellers.

Amazon- the Google of online shopping

According to a survey conducted by Bloomreach, Amazon has become the first place for product searches. About 55% of customers use it rather than search engines like Google. It had also reported that around 58% of customers had left a retailer’s website for Amazon after having a poor site experience, while only 30% left Amazon for other retailer’s sites. Salsify in February 2018 surveyed that around 41% of people searched and bought on Amazon, as compared to 28% who searched on Google and bought on Amazon.

Now shoppers are using Amazon as a product research resource where they can look at photos, compare prices, read reviews, questions, and answers, even when they are not there to buy anything.

Using Amazon as a distribution channel

PricewaterhouseCoopers (PWC), globally collected data records Amazon with a spending of $22.6 billion in 2018 in Resource and Development (R&d) as the largest investor globally. It’s one of the principal reasons behind the successful distribution channel of Amazon. A distribution channel is a set of steps through which a product reaches its buyer. Amazon’s delivery process is streamlined and straightforward, and that is why it is the first choice as a distribution channel for both B2B and B2C.

According to TJI Research, the number of exclusive brands on Amazon increased tremendously in 2018, with 434 exclusive brands active on the site, and now it is around 640. Amazon places such exclusive brands along with its private-label brands under “Our Brands” and handles their marketing and fulfillment. The profit here for such brands is that Amazon markets such products for free, and they get preferential treatment in search results. These brands also enjoy special ad privileges as Amazon promotes “Our Brands” ads at the top of search results for commonly searched terms in categories like CPG, personal care, and apparel. Data related to customers’ priorities regarding the product, price expectations, etc. are some of the additional perks that these brands get from Amazon.

Amazon’s exclusive over-the-counter (OTC) medication’s brand- Basic Care, for example, is manufactured and owned by Perrigo. Perrigo uses Amazon as a distribution channel for this product and sells it only on Amazon. If we go by success data, then the Basic Care’s sales came way higher than the share of Perrigo’s existing brand Good Sense for the FY2018.

Optimizing your listings on Amazon

The most important thing a seller should do on Amazon is to optimize their listing on the site. Optimization listing on Amazon is the process of customizing product pages to improve the product’s search visibility, click-through rate (CTR), and conversion rate (CR) to generate more sales. Conversion rate is the percentage of visitors who liked your offers and were able to get it; out of the total visitors. The process requires keyword discovery, optimized listing text and image content, and an increased number of reviews.

A product to appear on Amazon Search Engine Result Pages (SERP) must include all the relevant keywords on the product page. The most important fact to note here is that most of the shopping on Amazon happens on the first SERP and most probably within the first three results.

Wellapath’s Zen stress support formula, for example, in its product listing page on Amazon, has a description with almost all possible Search Engine Optimized (SEO) words. It goes as ‘Zen Anxiety and Stress Relief Supplement, natural herbal formula supporting calm, positive mood, with Ashwagandha, L-theanine, Rhodiola Rosea – 60 vegetarian capsules’. So, if someone searches a product with any of the above keywords, like anxiety, calm, or stress, the product to appear first on the search page, after the paid-ads, will be Zen Anxiety and Stress Relief Supplement.

Buying ads on Amazon

Amazon has a platform for advertising on similar lines of Google search, or as the ads go on Facebook. The user enters a search query for a product, and Amazon displays the relevant product’s ads. Q1 for FY2020 reports Amazon’s ‘other’ category that includes its business through advertisement was up 44% to $3.91 billion in revenue.

A seller who wants more clarity for their products on Amazon can pay for the ads by bidding on specific keywords that make their products eligible to be listed to higher visibility in the Amazon SERPs. The seller has to pay when a prospective buyer clicks on the ad. Adopting this platform requires spending more money. But, considering its customer base and the data it has on buyer’s behavior, Amazon is an effective way to get the first few sales and reviews and move the products. Amazon provides three main types of ads that one can configure- Sponsored product ads, headline search ads, and product display ads. Sponsored product ads appear on the SERPs and product relevant pages. Display ads appear not only on, but also on Amazon-owned and operated sites, Amazon network, and Amazon devices.

There are remarkable retailers like Burberry, who use Amazon only for advertisements plainly to get the attention of the millions of buyers who visit Amazon daily. Such is the market of Amazon.

Pricing yourself for success on Amazon

Wrong pricing is considered a deadly blow on sites like Amazon. Higher price prohibits Conversion rate (CR), whereas pricing the product less will create suspicion and will also be a complete loss for the seller. Ideally, the pricing of the product should be simple that strikes the right chords of the buyers.

The priority while pricing should be the product to appear on the first Search Engine Result Page. When a customer types specific keywords on search engines, the first page that appears with the search-related results is called SERP. Before pricing, a seller must take into account all the costs to be borne by the seller like shipping, customs, product wiring, Amazon commission, customer return fees, etc., to determine price floor. The next thing to consider is the price of similar items by rivalries. Many buyers use online price comparison websites before buying a product, and sellers should consider this fact before pricing their product. Exclusive discounts on new product launches, Black Friday, Cyber Monday, or other holidays will positively help the seller to build a market on Amazon. The seller must keep the price stable for a lengthier period to build a sustainable long-term brand on Amazon and gain customer trust.

Amazon had lately re-worked on its search algorithm to arrange and display profitable products that sell before the relevant or trendy products that make less money.

Using Amazon for your shipping

Delivering through Amazon is quite simple and easy. Amazon provides two options to its sellers for shipping:

1. Fulfillment by Amazon (FBA)

2. Fulfillment by Seller

With FBA, the seller needs to send the product to an Amazon fulfillment center. They can also use Amazon Partnered Carrier Options to do so. The packaging, shipping, customer service, and return are all handled by Amazon. The FBA products also become eligible for unlimited free one-day or two-day delivery options with Amazon Prime. FBA also provides flexible rate structures, and sellers need to pay only for the services they use. It’s very cost-effective and helps sellers reach more customers.

But, if a seller has a logistic team or the products aren’t eligible for FBA like hazardous goods or seasonal products, then the seller can opt for fulfillment by the seller.

Sellers can choose Amazon’s drop shipping method as well, where they can use third-party to fulfill the orders. However, Amazon has specific policies for this option that a seller must serve.

Amazon selling checklist

Amazon starts analyzing the sellers and their monthly performance metrics as soon as they get themselves registered. Mismanagement, false data, missing papers, etc., are only going to earn negative points. So, a business must be prepared with the checklist beforehand.

  • Ready and updated Paperwork: The seller must be equipped with all their paperwork like business name, credit card, Tax Id and state tax, etc.
  • Well Planned Budget: Apart from paying to have a professional selling account, other expenses like commissions, advertisements, shipments, etc., are also to be borne. A seller must have a budget of projected sales in advance.
  • Logistics: The seller should be well equipped with the logistics like the return process, and distribution channels (if not choosing FBA).
  • Business plan: The next step is to have a clear business plan like whether they are going to sell the same product or change it, how are they going to source the product, who are the competitors, etc.

Marketing: A seller must have a strategy about how to market the product, how to promote it, and through what channels, keywords to be used in the product listing, data of competitive market selling the same product.

Amazon is being used by many brands to sell their products online. Third-party sellers love to be a part of the platform because of its services and its reach to more than hundreds of millions of customers worldwide. Many brands choose to sell their product on Amazon despite having their distribution channels.

Apple, for example, has started selling its newly launched products on Amazon. Earlier, Amazon had sold Apple products that were mostly refurbished products from third-party sellers. The prices used to vary from the official Apple prices. In the new agreement, Amazon decided not to interfere with Apple’s pricing of its product. Apple, in return, agreed to sell its newly launched products on Amazon.

However, some brands had disappointing experiences on Amazon. Nike, for example, stopped selling its product on Amazon (not the re-sellers). Nike decided to sell directly to Amazon. In return, Nike asked Amazon to check unauthorized third-party sellers of Nike products and remove fake Nike items. Nike wanted to have more control over what and how to sell and list Nike products on Amazon. But that partnership failed because of Amazon’s favor towards well-reviewed Nike products that were sold by third-party vendors. Another Big brand that left the Amazon platform for similar reasons is Ikea.

Before deciding to sell on Amazon, the seller must go through Amazon’s policies and understand the market. The more control you have on your market, the better it is.

Choosing to sell on Amazon can bring profit to small businesses and entrepreneurs. According to David Heacock, CEO of FilterBuy, starting your business on Amazon is much simpler than establishing up your website and warehouse base. He loves selling on Amazon as it makes it easy to reach consumers on a larger scale by providing the required tools and infrastructure. With logistics, marketing, and inventory being taken care of by Amazon, sellers can concentrate more on their product and customer service. Amazon, as a brand, has tremendous reach and influence on the essential part of any market- the customers. And you get exposure to the international market as well. The only thing you have to do is to create your product listing, send inventory to an FBA warehouse, and your business is live.

Happy Selling!