6 Common Challenges for Amazon Sellers

6 Common Challenges for Amazon Sellers

Amazon is not just the leading e-commerce company in the world but also provides the extraordinary opportunity for businesses and entrepreneurs to connect with millions of customers through its platform.

The majority of the sales on Amazon are done through third party sellers (source) This means that the earnings potential is extremely high.

There are a variety of ways to sell your products on Amazon. You can buy and sell products (referred by the term retail arbitrage) or employ a manufacturer to design products that are private labeled for you, or design and design your own custom product, sell and buy used items, or purchase products wholesale and sell them on Amazon.

The specifics of each model are different, however Amazon sellers will be faced with similar problems regardless of which business model they're employing.

1. Cashflow Amazon will pay third-party sellers each two weeks. The problem is that you'll need to release the cash to purchase inventory before you begin to earn revenue from the same inventory.

Many sellers contract manufacturers from China to make stock for them (especially private brand names). These manufacturers typically cost approximately 25% of the inventory up front before they start production. Based on the company and the quantity you're ordering, production could take between 1-2 months.

Once the production has been completed, when the production is complete, you'll be required to pay the portion of the inventory as well as shipping charges and it will be delivered to you.

Shipping (including clearance for customs) could be between a week and several months until it is delivered to Amazon's warehouse depending on whether you send it by sea or by air. It could be a few months before you begin to receive payment for the merchandise you purchase.

It's enough to be difficult with just only one product, but when you're dealing with multiple products, it gets more difficult. If you're trying to expand your business and introduce new products, it gets even more challenging because these new products aren't producing any cash flow.

Cashflow is without doubt one of the major issues that the majority of Amazon sellers confront (and in reality, it could be a problem for other businesses too). It's true that on paper you might make a good income, but you'll need to have cash in the bank in case you have to place an order for inventory.

The preparation for the holiday season or other peak seasons requires you to raise more money in order to have enough stock to meet the demand of higher sales.

2. Excessive Competition Amazon offers sellers an amazing opportunity and , as a result thousands of sellers have signed up to the platform. It can be extremely competitive as a lot of sellers are competing to be seen on results of searches.

The standard approach used by the majority of private label vendors is to search for low-competition items. However, low-competition items are getting extremely scarce and difficult to find.

A lot of competition makes it difficult for brands that are new to get noticed. Customers tend to prefer established brands with a name that is well-known and/or hundreds of reviews from customers over new items with a small number of reviews.

3. Price Wars The competition is so intense that it ends upwards, causing prices to fall. The most common response of sellers facing many competitors is to cut their prices.

Selling your product on Amazon and competing on price is not a good option because there's always people who are willing to sell at a lower price. This can result in a reduction of costs in manufacturing as well as lower-quality products, negative feedback from customers as well as a decrease in sales.

In general, price wars result in extremely low profit margins, which makes it tough to make ends meet. Some sellers will sell their products for the cost of losing money to gather reviews from customers and create sales speeds that lead to a higher rank on search engines and the possibility that they can increase the price later.

This isn't always the case However, it could mean that sellers are facing competition who will sell their goods at incredibly low prices.

4. Product Reviews and Seller Feedback Seller feedback and reviews of products are a major factor in the purchasing decision-making that are made by Amazon customers. A few buyers and new sellers might not be aware of the distinction between these two.

Reviews of products are meant to address issues that are directly connected to the product regardless of who you are selling it to.

Feedback from sellers should focus on issues with order fulfillment as well as customer service.

It does not need to address issues relating with the item.

If you're selling on Amazon FBA program (Fulfilled by Amazon) the majority of the problems that may arise due to feedback from sellers will be irrelevant for you because Amazon handles everything associated with the fulfillment process and delivery.

Amazon has also tightened rules for sellers who ask customers to review their purchases and send follow-up emails sent out to customers following the purchase.

The changes have made it harder for sellers to receive reviews for their new products, and gaining sales without reviews is almost impossible when you're competing with brands with very positive reviews.

Another problem is that a lot of customers do not make the effort to write reviews when they've had a bad impression of the service. In the past, sellers could try to encourage customers to

leave reviews. However, now they have to wait until customers decide whether or not to write reviews.

5. Customer Returns One reason Amazon is so successful is due to the fact that they are extremely friendly to customers. As a consumer, shopping with Amazon generally provides a pleasant experience.

Also, their returns policy on Amazon is much more accommodating to customers in comparison to other online stores.

The policy for returning items can differ according to the type of the item. Certain categories provide customers free returns however, as a third-party vendor you are the one who pays for the return.

The free return policy basically encourages consumers to purchase several products, select the one they like and then return the rest.

In addition, the products returned typically have been opened, and could have not been in the state which allows the resale. Being charged for returned items as well as losing revenue of the transaction, and losing the capacity to sell the item can be very frustrating for sellers.

Amazon will automatically repackage items that are in good condition that allows them to be sold. This may sound good to sellers but the issue is that it's entirely dependent on the discretion of an Amazon employee's discretion if the product is returned to the market.

The person who is working for you is probably not aware of the product, and may not be able to verify that everything is in the box.

They might resell an item that has missing pieces or buyers may believe that they received a second-hand product. A buyer may bring a claim against you for selling a secondhand product that is not new. Amazon might terminate your account.

There's a setting within the settings of your Amazon seller's account which permits you to specify that Amazon cannot re-package or offer to sell the inventory you returned and I would recommend you to use this option.

This means you'll be able to have the item you returned delivered in your direction (at the cost of your own) and then you'll be able to determine whether it is able to be sold again.

You might be able to pack it in a different way so that it isn't mistaken as a used item. This will cost you more as a retailer, but it can prevent negative experiences for your customers.

6. Category Restrictions Over time, Amazon has become increasingly strict with third-party sellers they permit to sell their products in specific categories. This is mostly to ensure the security of the buyers as well as a way to cut down on the quantity of counterfeit goods that are offered on Amazon.

Approval to sell within certain areas can be a challenge particularly for small sellers. In certain cases you'll need to purchase inventory to be able to provide the required documentation by Amazon in order to be approved to sell. This means that you'll have to pay for inventory and will not be able to sell if you aren't cleared.