If you’ve started your business on Amazon and are looking to increase your profits, you may have considered checking out other sales channels like Shopify, BigCommerce, or even through your own Wix or Squarespace website. While Amazon bills itself as a one-stop shop for all things e-commerce, there might be some benefits to diversifying your sales channels to include off-Amazon options.
The Pros and Cons of Selling on Amazon
Amazon has long set the standard for e-commerce sales platforms by consolidating multiple services into one site, but as it’s grown in size, it has also taken advantage of its influence in the e-commerce market.
One of the biggest complaints among Amazon sellers is the fee percentage Amazon charges for use of the platform. Depending on the item category, Amazon charges a referral fee of between 8% and 15% on average, with some categories as high as 45%.
On top of the per-item referral charge, Amazon charges extra for using their Fulfilled By Amazon (FBA) services. In total, the average Amazon seller who uses FBA can lose about 35% of their profits to Amazon fees.
Despite charges from the platform, many sellers still find the pros of selling on Amazon to outweigh the cons. Perhaps the biggest draw is its accessibility to all demographics and wide reach of warehouses and distribution centers. 45.8% of Gen Z internet users reported Amazon as one of their most visited sites even when they didn’t plan to buy something, largely due to ease of browsing and the promise of quick shipping in the event of a purchase.
Amazon also makes selling more accessible to business owners through their FBA service, which provides in-house packaging, shipping, returns, and customer service.
Many e-commerce sellers either don’t have the space or manpower to facilitate these services, and FBA allows them to outsource the responsibility and keep track of their metrics on one convenient seller dashboard. This includes ad spending, which happens largely within Amazon itself, and which can have a huge impact on product visibility within your niche.
Why Not Both?
The purpose of this article isn’t to convince you to take sales off of Amazon completely but rather to help you decide whether or not it’s worth it to add additional sales channels to your arsenal.
One big argument for having off-Amazon options for your products is the growing number of younger shoppers who would rather support a small business directly than through Amazon.
According to a study done by commerce agency Wunderman Thompson, shoppers aged 16-24 (Gen Z) were “least convinced that the e-commerce giant is best for customer service, returns and brand selection, and more apt than older consumers to prefer shopping with retailers and brand websites.” As this generation gains more spending power, it is important to consider whether it is worth it for your business to cater to their tendency to shop off of Amazon.
Is It Worth It to Diversify Off of Amazon?
While we’ve talked about the fees associated with selling on Amazon, one of the biggest benefits to off-Amazon channels is a possible increase in profitability associated with lower selling costs. Since most e-commerce platforms exist only as a place to display product information and take payment, they don’t charge a referral fee or per-item fee to sell products like Amazon does.
While paying less fees may lower your overhead spending, it is important to remember that selling without Amazon FBA will mean being responsible for your own shipping and warehouse storage, or for outsourcing both. If you’re not careful, you could spend as much on these services as you already pay for Amazon FBA. You’ll also be responsible for your own customer service and returns, something many sellers find daunting.
However, there are also a few important freedoms that selling off of Amazon affords. If you’re a business that is extremely brand conscious and wants to customize the look and “feel” of your online store, many e-commerce platforms (Wix, Weebly) offer extensive customization, and some (Squarespace) even use a drag-and-drop model that requires very little web design knowledge.
Work With Us
Amazon is the most sophisticated e-commerce platform in the world, but that doesn’t mean it’s the only option for e-commerce sellers. Whether you’ve sold on Amazon for years or have recently decided to open a Shopify site and need someone to manage your newly-complicated Amazon accounting, we’d love to hear from you.
Contact us for a free 15-minute discovery call today.