5 Mistakes Ecommerce Business Owners Make When Selling on Amazon
The growth and size of Amazon is nothing short of amazing. It has a firm chokehold on the entire ecommerce industry and rarely shows any signs of loosening its grip. Research shows that Amazon has more than 300 million active users, while nearly half of all online shoppers start with Amazon when conducting a search for a product. During the months of November and December – the busiest shopping season of the year – 51 percent of online shoppers do “most” of their shopping on Amazon. What does this mean for you as a business owner? If you’re not selling on Amazon, you’re missing out on a lot of sales.
Amazon is also doing an awesome job of encouraging repeat purchasing, both through standard marketing and its popular Prime membership program. The average Amazon user spends roughly $700 per year on the site, while the average Prime member spends $1,300 annually.
Clearly, these numbers are enticing, which is why businesses and entrepreneurs across many different industries choose to use it as one of their primary sales channels.
The Problem With Amazon
Amazon is a gift in many senses. From a consumer perspective, it makes it easy to find whatever you need and have it shipped to your house within just a few days – and even on the same day in certain situations. It’s made shopping far more convenient and budget-friendly.
From a business perspective, Amazon gives anyone with a product access to millions of people with very few barriers to entry. The platform is easy to use and all of the built-in tools make it possible to perform complex actions with minimal effort. But the simplicity – and the fact that the foundation is already there – means many inexperienced entrepreneurs lack the basic understanding of what it takes to be successful.
See, for all that Amazon does well, it actually does a disservice to many people. A typical entrepreneur usually has to learn the ropes, develop their own business model, and work through successes and failures. All this before finally developing a sustainable business. Amazon lets people bypass all of the foundational elements of building a business.
Selling on Amazon is like taking the express lane on the interstate when everyone else is sitting in bumper-to-bumper traffic. There’s nothing wrong with taking the express lane if you have access to it. In fact, it would be foolish to sit in the traffic when you have a pass to enter the fast lane. But you aren’t going to learn about how to drive in traffic when you’re circumventing it.
The point of the story is this:
The current ecommerce landscape has very few barriers to entry – largely thanks to Amazon. As a result, a lot of entrepreneurs find themselves with varying levels of success, despite the fact that they have a very limited understanding of what it takes to run a successful business.
The 5 Mistakes You Need to Stop Making When Selling on Amazon
When you see an entrepreneur struggling to gain traction on Amazon, or watch a successful seller’s business come crashing down, it can almost always be directly tied back to a handful of common mistakes. If you want to remain successful, you’ll need to avoid the following blunders.
One of the absolute worst things you can do is oversell inventory. Not only does overselling cause a logistical nightmare on your end, but it’s also quite frustrating for the customer. The best-case scenario is that you have a patient customer who waits for you to figure out the problem. The worst-case scenario is a canceled order, lost customer, and bad reputation online.
Thankfully, Amazon’s fulfillment system means it’s nearly impossible to oversell. But if you’re doing some of your own fulfillment, then these same safeguards don’t exist. In fact, if you sell products via multiple channels and platforms, it’s actually pretty easy to fall into the trap of overselling.
The easiest solution to overselling is to use an inventory management software that automatically syncs available inventory to your various sales channels to prevent selling of items that are out of stock. Once you have the right metrics in place, the software makes it nearly impossible to oversell without directly telling the system to do it.
Failing to Acquire Reviews when selling on Amazon
When the average buyer clicks on a product listing on Amazon, one of the first things they look at is the “star rating.” This rating is an average of the reviews and ratings customers have provided. The next thing most buyers do is browse reviews left by customers.
Reviews matter for two major reasons. First off, reviews are a form of social proof and are helpful in putting customers at ease. Secondly, while not explicitly stated by Amazon, it’s pretty clear that reviews are involved in the algorithm. These same algorithms determine how products rank in search results.
If you don’t already have a strategy for acquiring reviews, you need to create one as soon as possible. While it was once possible to purchase reviews or directly incentivize customers with free products, this is no longer considered a viable practice. Amazon has cracked down on what they call “fake” reviews and has even sued a couple of sellers.
You need to work on developing an organic review acquisition strategy. There are plenty of white hat ways of gathering reviews. One of the best I’ve found is putting little thank you notes inside your products that ask for honest feedback. Find a method that works for you.
Not Optimizing Listings
It’s amazing how many sellers think they can just list a product on Amazon and start selling with minimal effort. Amazon doesn’t work this way. Just as you have to optimize a blog post if you want to rank on Google, you need to show your listing some TLC in order to rank in the Amazon search results.
Amazon is a conversion-based platform that uses structured data to rank listings. This means that success is based on measuring revenue per search, as opposed to metrics like click-through-rates and average time on page. It also means that Amazon has a specific formula it wants sellers to follow.
There are a number of different elements you need to focus on when optimizing an Amazon listing: product images, the listing title, a description, product information, and keywords. You can read more about what an in-depth listing audit looks like in this article.
Failing to Respond to Customers
The fourth big mistake Amazon sellers frequently make is often rooted in laziness. When a customer sends you a question or provides feedback, you can’t just ignore them and hope it goes away. Failing to respond to customers is a sign of disrespect and a sure-fire way to lose future sales.
Even if a customer isn’t directly asking for something, responding can improve your overall level of service. For example, keep an eye on your reviews and pull out the one- and two-star reviews. Instead of just accepting the poor feedback as part of doing business, contact these sellers and ask them how you can make the product better. This proactive approach will pay major dividends.
Choosing the Wrong Fulfillment Strategy
Amazon offers a couple of different fulfillment strategies. One is their Fulfillment by Amazon platform – also known as FBA. The other option allows sellers to fulfill their own orders. Each method comes with its own pros and cons.
The major benefit of using FBA is that you don’t have to worry about a thing. Amazon stores your inventory and does all of the picking, packing, and shipping. They also provide tracking numbers, handle returns, and deal with customer correspondence. The downside is that you have to pay for this service, which can eat away at your profits.
The benefit of fulfilling orders yourself is that you’re in control and profit margins remain fat. The negative is that it’s easy to lose track of something and mess up an order, which all falls back on you.
Spend some time thinking about the resources you have – both financially and logistically. Then choose the fulfillment strategy that will benefit you the most. In many cases, FBA is the way to go.
Establish a Strong Business Foundation when Selling on Amazon
Everyone knows that the foundation is the most important element of a house. You can construct the most beautiful piece of architecture in the world. It’s ultimately going to come crashing down if it’s built on sand. The same is true in the business world. You might be doing well right now, selling thousands of units per day. That sort of success isn’t sustainable if your foundation is weak.
Amazon is a fantastic platform, offering businesses like yours the chance to put products in front of millions of potential customers. But don’t let the simplicity of the platform encourage you to cut corners. Do your due diligence, learn the basics, and avoid making the mistakes that set so many talented entrepreneurs back. If you avoid these mistakes and make the right choices, your potential could be nearly limitless.