Why read this? : We share why selling with Amazon can be a challenge. Learn how their customer obsession makes them push their suppliers really hard. How their shopping experience isn’t all it’s cracked up to be. And how tough and divisive their business approach is. Read this to prepare yourself for the challenge of selling with Amazon.
We’ve all got that job we keep putting off.
Taking your old clothes to the charity shop. Cleaning behind the fridge. Filling in your tax return.
The things you know you need to do. But you need to dig deep for the energy to start, because you know they’re not going to be pleasant.
In the world of e-Commerce, we put selling with Amazon on that to-do list.
For all their undoubted success as an online retailer, selling with Amazon isn’t easy.
Amazon’s customer obsession
Let’s start with Amazon’s customer obsession.
It’s widely reported Jeff Bezos claims this as the ‘secret sauce’ behind Amazon’s success.
They relentlessly focus on the needs of the customer.
Everything’s for the customer. They want to know everything about them.
That makes absolute sense as a way to grow your online sales, right?
And we understand that the widest range of products (the ‘everything store’ Amazon aspires to) and access to quick or free deliveries is a great deal for customers. And it drives a great deal of people to shop with Amazon.
But Amazon fuel that level of range and order to delivery support by being really tough on their suppliers. They don’t make it easy to sell with them, unless you buy into their way of working.
Selling with Amazon as a bigger business
For bigger, well-established business interested in selling with Amazon, be prepared for a long and drawn-out negotiation process.
We’ve worked with a couple of major Australian businesses who were in the negotiation phase with Amazon for over a year.
Part of the challenge is that Amazon see their huge US scale as a great starting point in the negotiation. But if you’re not planning to sell your goods in the US, you have to point out the US business isn’t relevant.
All the costs you pay selling with Amazon
Then there’s all the extra ‘services’ they offer. Which all come at a cost that consistently chips away at the margin you make selling with them.
Want to have a dedicated account manager at Amazon? YOU pay for that.
Want access to the data behind your sales, so you can make informed judgements about future activity? Yes, that’s an additional cost.
When you add in all the operational costs (freight charges, damages and returns) and advertising and innovation costs (display advertising, promotions, A+ content, events, paid search) you suddenly find that Amazon’s customer obsession is partly funded by you, as the supplier.
Amazon loves to squeeze every last cent out of their suppliers. That’s not good for your profit and loss.
It makes selling with Amazon more challenging for big businesses who want to protect their margins.
Selling with Amazon as a smaller business
What if you are a smaller business though, and want to start selling with Amazon?
That’s even more of a challenge.
They have a fixed fee structure with zero negotiation.
You pay a selling fee. Plus a referral fee. And sometimes also a closing fee.
Plus if you use Amazon for fulfilment (creatively called Fulfilment by Amazon – FBA), you have to pay an additional fulfilment fee.
And all these fees come out of your margin.
They do a great job of making Selling on Amazon sound reasonably priced. You can start with a flat $1 per unit sold fee (or a $50 monthly subscription). That’s your seller fee just to get on to the site as a seller.
But you’re then adding a 7% to 15% referral fee depending on your category. Your closing fee if you operate in certain categories is another $1. And if you use their fulfilment service, you need to cover anything from $1.32 (for say a mobile phone case) up to $14.57 for a large oversize item (like a computer monitor) per unit sold.
You also need to pay for the storage space your items use in their warehouse which can be between $19.40 and $26.50 per cubic metre.
And we haven’t even talked about the cost of advertising and media to get your products noticed on their site. Or the many strict clauses you have to sign up to in their seller agreement.
Head starting to spin?
Now you can start to see why selling with Amazon is challenging.
Solid grasp of your business commercials
Don’t get us wrong, there are people who make a good living selling with Amazon. But you do have to have a solid grasp of your business commercials to make sure your sales are profitable. You need to work out your online business model very carefully, when selling with Amazon.
This is the same business which introduced the simplicity of the 1 click buy button (in fact, who owned the ). But, setting up a commercial agreement with Amazon which suits you rather than suits them is about the least simple thing you can do in e-Commerce. They don’t deliver a great customer experience for suppliers.
Amazon’s shopping experience
Amazon’s shopping experience when you visit the site as a shopper has clearly been optimised to maximise conversions.
That’s no secret.
They have such huge amount of data, they clearly put things in front of you as a shopper which are most likely to make you buy.
But, if you spend time clicking around on Amazon, it’s not a particularly enjoyable experience.
There’s something quite soulless and clinical about the whole experience.
And we do wonder, if many people are put off by the overwhelming nature of the experience. And they only visit if there’s something specific they want.
Look at Amazon’s bewildering array of options for customers. Prime, Prime Now, Pantry, Go, Family, Fresh, Subscribe and Save, Whole Foods, Kindle, Alexa and Echo. (full range of services not available in all markets, but surely on the way everywhere?).
It’s choice overload for customers. It’s not great design. You see everything at once.
There’s not a lot of progressive disclosure or chunking goes on with the Amazon website. (see our article on design psychology for more on these design terms).
One of Amazon’s core principles is a passion for innovation. We understand each of these innovative services tries to solve a need for the customer. And, we understand that for every service a customer signs up to, they spend more with Amazon and become a more valuable customer.
But, when you as a customer go on to the Amazon site, isn’t there a lot of information to process?
So many categories. So many menu options. And, so much cross-selling. Audible. The Amazon Echo. Amazon business services.
It’s an overwhelming online shopping experience.
If you know what you want, it’s a great place to get in and out of. But as an online shopping experience, urgh. It can be really frustrating.
It’s not really where you as a shopper would want to spend any more time than you had to. And we can’t help wondering if many online shoppers stay away because of that.
Though, to be fair, Jeff Bezos probably isn’t losing too much sleep about it.
So, finally, we come to their actual working style when you interact with the people there
There’s something in their culture and approach which really brings out why selling with Amazon is a challenge. They’re relentless in what they do. And ruthlessly efficient.
In terms of e-Commerce personality style, they’re consistently competitive Extrovert Thinkers.
When you deal with them, the whole operation feels cold and humourless. They’re machine-like in how they go about their business. They hate to lose at anything.
Amazon news coverage
Then you see the frequent stories in the press about how poorly they treat their warehouse staff. And even amongst the more skilled staff, you don’t have to search far to find stories about how they have a toxic work culture where there’s little empathy for staff.
And infamously, when it comes to being competitive, when they can’t beat someone, they buy them out.
Like this list of over 100 acquisitions by Amazon since they launched.
Conclusion - Selling with Amazon
They’re a really interesting company to observe. We love their aversion to Powerpoint. The story of how they got their supply chain set-up is fascinating.
If you haven’t read The Everything Store* biography of Jeff Bezos, by Brad Stone, we recommend a read.
Because of their scale and innovation, it’s almost impossible to avoid Amazon in e-commerce.
We haven’t even talked about their web and data hosting side Amazon Web Services who are huge.
But like that job that has to be done, there’s a time when you need to knuckle down and just do it. And you’ll feel better once you get started on it.
* As an Amazon Affiliate, we earn from qualifying purchases (yes, we recognise the irony in the context of this article).