Why People Fail as Amazon Sellers

We’ve all read the stories. Someone tries selling on Amazon, it ends up being an epic failure and they take to the Internet to lament how there is no way you can be successful in the business. “You will go broke behind Amazon’s changing policies.” they say, “Amazon’s fees will suck away every ounce of profit.”, is also commonly heard. How about “it use to be profitable, but now there are too many competitors trying to do the same” Sound familiar?

It is what I read too, back when selling on Amazon wasn’t even on my radar. But after having been in this business for the last two years, I can also proudly proclaim you can indeed be successful as an Amazon seller, you just need to be smart, be strategic and at times, a bit savvy.

In this post, I will share a few of the most common reasons people fail at selling on Amazon and how to avoid similar mistakes.

• Selling what everyone else is selling – As a new Amazon Grocery seller, it’s tempting to flock towards familiar names like Kraft Mac and Cheese, Coca-Cola and Nestle, thinking snagging these big brand products at discount is a surefire win. But here’s the catch: you’ll likely be fighting for scraps with 15 or more other sellers who thought the same. The result is an army of sellers competing with each other and driving prices down to the point where profit practically vanishes. Instead, try thinking outside the box! Don’t be afraid to explore unfamiliar brands and products you’ve never heard of. Just because they’re not household names for you, doesn’t mean other buyers are not looking for that product on Amazon. By selling lesser-known products, you are more likely to be part of a very small pool of other sellers (less competition), which in turn will increase your product visibility and also all potentially command higher profits.

• Not considering Amazon fees and shipping costs when calculating profit – If you buy a product for $3 and sell for $15 on Amazon, that leaves you with $12 profit right? Wrong! Many new sellers lose their shirt with Amazon by not accounting for all costs associated with selling a product. Remember, to calculate profit correctly, you must also consider Amazon’s fees, as well as packing and shipping costs (if you are fulfilling the item yourself). If you want to get really specific, you could also factor in shipping supply costs as well as labor). That $12 profit may actually be closer to $5 or $6 once all costs are considered.

• Not having a profit margin in mind – Before you begin your Amazon selling journey, I highly recommend having a minimum profit margin in mind. What percentage profit do you want to realize for most of your sales (after subtracting fees and shipping costs)? For example, my minimum profit margin is 30% (ideally it is 50% or higher). Profit margins are subjective; many sellers target 15% or 20% profit margin, which is absolutely respectable. I’ve noticed most who are fine with this profit margin tend to have a large product category (selling 100+ items). I decided early on that I was fine having a smaller product category of high-profit margin products. Do what works best for you, but the main takeaway is to have a profit margin in mind before you even begin selling.

• Not using product research tools – If you plan to be a serious Amazon seller, using product research tools is a must. You cannot expect to compete without understanding product price history, sales history, and competing sellers’ activity. Not leveraging product research tools is leaving your product sales to luck and chance, which will not take you far in your sales journey.
  
  There are a lot of tools available at varying costs, but the only one I believe necessary to get started is Keepa. This tool is invaluable in understanding product demand and historical sales. The tool can be accessed via an app or web browser and there are free and paid versions (the paid version allows for more extensive research). There is a bit of a learning curve in getting familiar with the tool, but I promise it is worth the time and effort. Read my post Understanding Keepa – The Must Have Amazon Product Sourcing Tool to learn more about Keepa and how to use it as part of your product research strategy.

• Not balancing product sourcing and inventory management – Some sellers have an all-or-nothing approach to how they spend their time. Some spend most of their time hunting for new products while devoting little time to maintaining their existing catalog. Others primarily focus on managing their current stock, while making little effort to add new products to their inventory. To be successful in the long run, it is important to make time for both. Balancing product catalog maintenance with product catalog expansion is necessary if you plan to have consistent, reliable sales. What works for me is reviewing my product inventory 3-4 times a week to check stock levels and determine if pricing adjustments need to be made, and then dedicate 2-3 days a week strictly to product sourcing. Find a balance that works with your schedule and be consistent with it.

I hope you found this list helpful. As with any business venture, there will always be naysayers ready to share their failures and position them as truths. Instead of allowing their failures to discourage your efforts, see them as opportunities for you to learn from their mistakes and carry those lessons forward as you grow your business.