Selling on Amazon

Top 5 Problems of Selling on Amazon and How to Deal with Them

By July 19, 2021 No Comments
 

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Amazon has changed a lot since I started selling on it in 2010. Sales were less than 10% compared to today. If you knew the right marketing strategies to rank and convert on Amazon, you could win with almost any product.

Times have changed. Today, Amazon dominates online retail, especially in the US. Last year alone, sales grew by $100 billion, three times more than total sales for the entire year when I started selling on Amazon. But, increased sales have attracted more people selling on Amazon. You can’t do basic marketing tactics from 2015 and expect to succeed anymore. You also need to face the realities of the platform today, not hide from them.

Succeeding on Amazon today requires persistence and hard work. If you want to make a bunch of money in thirty days, not have to continually learn, or don’t want to work through lots of problems until you succeed, this may not be the best business for you.

However, if you’re willing to put in the time and effort, the rewards today are much higher than when I started. I can point to multiple people I’ve taught who have sold businesses selling almost exclusively on Amazon for over $10 million each. Anker, the electronics accessories brand, started on Amazon. Today, Anker is a $1 billion dollar publicly traded company. There’s almost no limit to how big of a business you can build today with the power of Amazon.

I believe there are five core problems with selling on Amazon in 2021. A lot of people see these and never get started. Others see them later and give up. Though I’m a bit biased because I’m the CEO of a business that creates products to help you sell on Amazon, I think you can succeed with or without buying anything from us. Below are the five core problems and my proposed solutions.

#1: Competition from Chinese manufacturers

According to Marketplace Pulse, 75% of new sellers on Amazon are Chinese. In 2019, the Wall Street Journal reported Amazon’s “heavy recruitment” of Chinese manufacturers to sell directly on its platform. Two of Amazon’s main guiding principles since inception have been to offer the lowest prices and biggest selection possible. If Amazon can cut out the middlemen, brand owners like us sourcing products from China, and get the manufacturers to sell directly, Amazon’s customers should enjoy lower prices. This is why you see strange brand names with product listings written in bad English in almost every product category on Amazon today.

Does this mean the opportunity is gone and it’s time to give up and look elsewhere to build a business? I don’t think so. Remember, sales on Amazon today are ten times higher today than ten years ago. Higher competition is not a surprise. However, you can’t use the same tactics from ten, or even five, years ago and expect to win. You need to use your advantages to overcome theirs.

Solution: If you’re from the US, competing against Chinese manufacturers, you likely have a language advantage. You know English well and American culture. You can write better product listings and create better product packaging than Chinese-born sellers. So, make sure your product listing is top notch to increase your chances of winning.

Second, differentiate to maintain a healthy profit margin. If you sell the same product as a manufacturer who can get the product for $2.00 less than you, they can drop their price to a point where they’re profitable and you aren’t. So, differentiate your product. Don’t sell the same exact version everyone else sells. Add a new feature, add bonuses, improve something, tailor it to a specific market that seems to be buying competitors’ products. You can even differentiate with your story alone. Two members of ours are optometrists. They do charity work to help people with eye health issues around the world. They use their story about their mission to help people with their brand they sell on Amazon.

Third, sell products not manufactured in China. Nutritional supplements, beauty creams, food products, and some cleaning products are all often not manufactured in China. Therefore, Chinese manufacturers don’t have a cost advantage in those markets. I believe you can win with the two strategies above, but you can also sell products made in other areas of the world to completely bypass their advantages.

#2: Amazon won’t let you contact customers

You used to be able to send unlimited emails to people who bought from you on Amazon. You could send them coupons, tell them about your new products, and ask them for reviews. You also used to be able to download all the mailing addresses and phone numbers of your Amazon buyers. Today, that’s all changed. Amazon keeps reducing your communication with the people who buy your products. This means you’re missing out on building a direct relationship with your Amazon buyers. In many businesses, you make more money reselling to previous customers than you make on sales to new customers. Amazon is eliminating this ability.

Solution: You need a way to get your Amazon customers to become your customers you can contact anytime you want. The best way I know of is through package inserts. Amazon says you’re not supposed to market to any customers who buy from you on their platform outside of their communication channels. However, every single big brand out there has some sort of website or communication channel listed on their product packaging. If Amazon wants to remove all contact information from every product available on its website, it would likely lose 90% of its marketplace sales. So I think package inserts are a fairly sustainable long-term opportunity to get Amazon buyers on your contact list.

Add a package insert with every product you sell on Amazon. Include a compelling offer to get people to contact you such as a free product or free warranty registration. Use that information to build an email or text message list so that you now own that customer relationship.

There are two big downsides to this strategy. First, this is an added cost to your product. You may spend $0.50 per unit to get the package insert printed and added to every product you sell. This cost can add up, but I think it’s well worth it. Second, you won’t get 100% of your Amazon customers on your email list. If you create an irresistible offer, you may get 30%. Most people will only get 5-10%. I encourage you to keep testing different package insert offers until you get above 20%.

#3: Shady competitors

Amazon has become a lot better at policing shady sellers. However, some competitors will still try to boost their business by bringing yours down. The usual tactic is to leave negative reviews on your product so your conversion rate and rankings drop and their rankings increase. Some sellers also try to “hijack” your listing and sell counterfeit products claiming to be your brand on your product listing.

Solution: Get Brand Registry. This gives you a level of protection against shady competitors. If you don’t already have a trademark for your brand, the easiest way to get one and to get Brand Registry is to use Amazon’s IP Accelerator program. It’s a fantastic program I’ve used for two brands now that accelerates the Brand Registry process by giving you the benefits of the program while your trademark is being processed. This can speed up your time to get Brand Registry from 6-12 months to less than two weeks.

Overcoming competitors leaving negative reviews can be one of the most frustrating aspects of selling on Amazon. There’s little you have control over except to report the reviews to Amazon. You also want to make sure you get as many compliant reviews as possible. First, use the Request a Review feature now available on past orders. A tool like Zoof (zoof.com)* can automate this for you. (*We have a partnership with Zoof, so we’re biased. You can also use other tools like X and X to do the same.) Second, use the Amazon Vine Program. Third, follow up with past buyers who give you their information via package inserts to ask them to write reviews.

Stay above-board and do the right thing on Amazon. Eventually, the bad actors will get suspended. It may take months or years, but you will win in the long-term.

#4: Terrible Amazon seller support

My wife sells on both Amazon and Etsy. She loves to tell me how much more pleasant selling on Etsy is compared to Amazon. The interface is simpler and more intuitive and the support is actually helpful. She’s right. The Amazon seller interface has become bloated and confusing. Amazon seller support is terrible – it never was good, but it’s gotten even worse. Often you send in a seller support request to fix something clearly wrong, such as an incorrect brand name on one of your products, and you’ll get back a generic, unhelpful response that often doesn’t even address what you asked. Unfortunately, there’s not much you can do about it.

Solution: Expect bad support as an Amazon seller. It’s not your platform you’re selling on, it’s Amazon’s. Their focus is on providing the best prices, selection, and experience for Amazon buyers. Sellers are a means to an end. Don’t take it personally. Be persistent. Roll with the punches. You’re not here to be friends with Amazon, you’re here to use their platform to achieve your personal goals.

#5: Increasing Amazon costs

A long time ago, the only cost you had to worry about on Amazon was their referral fee, usually 15%. Today, if you use Fulfillment by Amazon, or FBA, which is highly recommended, you now also have FBA fees. Amazon also has started spreading advertising placements all over search pages and category pages, forcing sellers to run ads to get traffic. However, you can still run a highly profitable business on Amazon even with these increased costs. Most buyers of Amazon-focused brands only buy profitable businesses. Almost everyone we know who has sold an Amazon-native brand has had to produce a healthy, consistent bottom-line profit to do so. So it is possible and likely if you’re diligent.

Solution: Calculate all your costs upfront. One of the biggest mistakes I’ve seen new Amazon sellers make is doing all the work to find, source, brand, and launch a product only to find the product isn’t profitable at current selling prices in the market. What a waste. Do the extra work to calculate all the costs you’ll incur. This article gives you the total cost to sell on Amazon.

Expect to not take any money out of the business for the first six months and your likelihood of success goes through the roof. Be diligent about calculating your cash flow needs and true costs. Remember, the size of the opportunity has increased and so have the stakes. You need to do the work to realize the true potential of this business today.

Conclusion

I recently asked one of our long-standing Mentors who has sold millions on Amazon this question: “What’s different now than when you started?”

She said, “There was nobody doing ASM-style* marketing in my product categories. I was the only one.”

*ASM, or Amazing Selling Machine, is our main program to help people build ecommerce brands with Amazon. We were one of the first to teach how to do real marketing on Amazon to rank products and beat big brands.

If you included keywords in your product title back in 2014, you were likely the only person to do so in your product category. Today, that’s a basic requirement to succeed. That’s the general story of selling on Amazon today. Sales are much higher and so is the need to treat this like a real business.

If you do the work to differentiate your product, build a customer list, get consistent reviews, and know your true numbers, you can win. When you win, the rewards are huge. Over a billion dollars has been raised so far just to buy Amazon-focused brands. If you prepare for these five problems and apply the solutions, you can build a profitable, long-lasting brand worth a life-changing amount of money.

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