Amazon is an incredible opportunity, but it comes with a lot of headaches. I didn’t always want to sell on Amazon, and I was actually against Amazon. I didn’t want to give them a commission, and I wanted everybody to come to the Pete & Pedro website so I had better margins.
I didn’t want to do FBA until …
I didn’t think that the company needed to be on Amazon. But then I saw a statistic that said that some people shop strictly on Amazon, and if your product’s not there, they won’t go to your website or purchase your products. Another factor that convinced me to sell on Amazon is that when I searched Pete & Pedro on Amazon, the search field auto-filled, which meant people were searching for it.
When we first set up Pete & Pedro’s Amazon store, we fulfilled the orders and charged $5 for shipping. Nowadays, people will only purchase on Amazon with Prime. Sales grew over time to about a million dollars worth of Pete & Pedro’s business.
Around September 2022, my marketing director proposed getting us into Prime and FBA. He said that we could make up our margins based on volume. He said we won’t care that margins have shrunk because we’ll do much more business. So we tested it, and sales for our test product went from an average of 60 to 250 a month. We tried the same test for other products, and the same increase happened. This was a light bulb moment.
Costs and benefits
Now let’s talk about margins. Off the website, the margins are around 26% after discounts and everything else. Now with Amazon, they take 36 cents on every dollar. It works out for a 20% margin for Pete & Pedro on Amazon FBA.
But the marketing is super easy, effective, and targeted, and it is the best bang for your advertising buck. Also, once reviews and ratings climb, sales will climb. People are organically finding your products and store.
One thing you have to do before shipping off your products to Amazon is to bag and label each product with a sticker. You can’t just ship products that you get from your vendor or manufacturer over to Amazon. You have to do a bit of legwork.
Setting up a successful Amazon store
Setting up an Amazon store is relatively easy, but to take the store to the next level, you need A+ content. We had a store on Amazon for a long time, and it was average. But when we decided to go heavy on Amazon, we invested time and resources in building the store, which was about 400 hours worth of work and money on an agency.
Amazon is all about ratings, but reviews and stars are difficult to get. Your products won’t show in search results until you have 20 to 30 reviews, which these reviews need to be good. And with Amazon, there’s no faking the reviews or even having your friends and family submit reviews.
If Amazon gives you a badge, sales will go through the freaking roof. You can get that badge for different search terms, but the downside is you can lose it without explanation. You’re basically competing against other competition in your space.
Poor seller customer support
Another important note is that Amazon doesn’t have good customer service for its sellers. And when I say they don’t have good customer service, I mean they have no customer service. Amazon doesn’t ask questions. They will kick you off if they think they have a reason to kick you off. Then it’s your job to prove that you weren’t doing XYZ or fix whatever it was.
Amazon can flag your product as hazardous or miss a classify it. At that point, you’re off Amazon. It’s incredibly challenging to sell on Amazon. Even if you think you have everything situated and are out of the woods, you’re not. These types of issues still happen weekly to Pete & Pedro. Bottom line: Amazon is a devil that you learn to dance with.
How to get started selling on Amazon
If you want to sell on Amazon, you could go to Alibaba after finding a product you want and get the desired version. Work with the manufacturer to design your logo and label to create your product. On Amazon, many people sell the exact product, just labeled and packaged differently.
The upside is that you can start an Amazon store reasonably quickly. However, I’m not a fan of selling exclusively on Amazon. One of the downsides to Amazon is that you have no access to customer data. For instance, you cannot build an email marketing list.
I recommend having two separate businesses. One is your.com, and one is Amazon. Think of it as a wholesale account. Amazon is like my wholesale account, with the margins being lower. The good news is the scale and growth are tremendous on Amazon. And if you have your.com, you can build your lists.
If you can build a successful Amazon store, there are a lot of people out there that would love to buy it. Tons of people are interested in purchasing successful FBA businesses.